The California legislature recently enacted the sweeping COVID-19 Tenant Relief Act of 2020 to generally protect nonpaying residential tenants (who are natural persons) from eviction until February 1, 2021, unless the law is extended. Tenants, however, still owe the full amount of rent.

The new law, effective September 1, 2020, is comprehensive and complicated. The new requirements may be superseded by federal or local laws, including the CDC COVID Order dated September 4, 2020 generally halting evictions nationwide until December 31, 2020 (see below), and local eviction moratoriums and rent control laws.

Here are the key provisions of the new COVID-19 Tenant Relief Act: 

• Limited Lifting of Eviction Moratorium: Effective September 1, 2020, the statewide eviction moratorium for residential landlords has been slightly lifted to allow for certain tenant-caused evictions other than the nonpayment of rent. Residential landlords can, upon proper service of applicable notices, pursue an eviction action if a residential tenant refuses to allow entry for showings, causes a nuisance, or other enumerated reasons. Starting October 5, 2020, the eviction moratorium will also be lifted for residential nonpayment of rent that came due before March 1, 2020 and other limited circumstances. As for commercial properties, starting September 1, 2020, commercial landlords can commence eviction proceedings, including nonpayment of rent, but subject to any applicable local laws.

• New Landlord Disclosure Requirement for Nonpaying Tenants: Before September 30, 2020, a residential landlord must provide a notice to existing tenants who, as of September 1, 2020, have not paid one or more rental payments that came due between March 1, 2020 and August 31, 2020. The new notice explains the tenants’ rights against eviction if they have failed to pay rent. C.A.R. has released a new standard-form Notice to Tenant of COVID-19 Tenant Relief Act of 2020 (C.A.R. Form NTRA) for landlords to comply with this new requirement.

• New 15-Day Notice to Pay or Quit: Before filing an eviction or unlawful detainer action for the nonpayment of COVID rental debt, a residential landlord must first serve the tenant with a 15-day notice to pay or quit (instead of a 3-day notice), excluding Saturdays, Sundays, and judicial holidays. The 15-day notice must, among other things, advise the tenant that eviction is generally prohibited if the tenant delivers a Declaration of COVID-19 Related Financial Distress (Form DCFD) signed under penalty of perjury. The landlord is generally prohibited from requiring verification of the tenant’s COVID-related loss of income or increase in expenses, except for high-income tenants as specified below. C.A.R. intends to release the 15-day notices (Forms PRQ-CPP and PRQ-TP), DCFD, and other related forms by September 30, 2020.

• Proof of Financial Distress For “High-Income Tenants:” If, before serving a 15-day notice, a landlord already has possession of the tenant’s stated income on a rental application or other proof that a tenant is a “high-income tenant” as defined, the landlord can require the tenant to submit, along with the completed DCFD, objectively verifiable documentation supporting the tenant’s COVID-related financial distress. A “high-income tenant” is defined as a tenant with an annual household income of at least $100,000, and at least 130% of the county’s median income as published by the Department of Housing and Community Development’s Official State Income Limits for 2020.

• Legal Effect of Tenant’s DCFD Declaration: If a landlord serves a 15-day notice for rent that came due during the “protected time period” between March 1, 2020 and August 31, 2020, a tenant who delivers a completed DCFD shall not then nor thereafter be deemed to be in default of that COVID rental debt for purposes of the landlord’s filing of an eviction action. If a landlord serves a separate 15-day notice for rent that comes due during the “transition time period” between September 1, 2020 and January 31, 2021, a tenant who delivers a completed DCFD shall also not be deemed to be in default of that COVID rental debt for the filing of an eviction action, provided that the tenant pays at least 25% of any rent that comes due during that transition time period. The deadline, however, for the tenant to pay that 25% rent to avoid eviction is January 31, 2021 (and not when the rent regularly comes due).

• Just-Cause Eviction Extended to All Residential Landlords: In addition to the above tenant protections, residential landlords are generally prohibited from terminating a tenancy before February 1, 2021, except for a “just cause” reason as specified. As background, starting January 1, 2020, California’s Statewide Rent Control law generally prohibits residential landlords from terminating a tenancy except for a “just cause” reason, although certain exemptions apply. The most notable exemptions are for owners of single-family residences, condominiums, newer properties, and owner-occupied duplexes, and for tenancies less than 12 months. The new law has eliminated all these exemptions until February 1, 2021. A residential landlord who intends to terminate a tenancy must generally have an acceptable “just cause” reason, such as one of 11 enumerated “at-fault” reasons (e.g. breach of lease) or 4 enumerated “no-fault” reasons (e.g. landlord’s intent to owner-occupy). The “no-fault” reason that allows a landlord to evict to substantially remodel the property can only be used if the remodeling is needed to meet basic habitability standards. Landlords who are exempt from the Statewide Rent Control law as mentioned above are not required to pay a relocation fee for a just-cause eviction.

• Possible Exemption for Contract for Sale: In addition to “just cause” reasons, another possibly valid reason to terminate a tenancy under the new California law is if an owner has entered into a contract for sale with a buyer who intends to occupy the property. This rule only applies to single-family homes and condos if: (1) the owner is not an REIT, corporation, or an LLC with a corporate member; and (2) the tenant has been given a notice of exemption (C.A.R. Form RCJC). Unfortunately, however, it is not clear if this provision has been preempted by the federal CDC COVID Order halting evictions nationwide until December 31, 2020 to protect tenants with an annual income of $99,000 or less (or $198,000 if filing a joint tax return) as discussed below.

• Collection of COVID Rental Debt in Small Claims Court: Except for the 25% rent discussed above, a landlord is generally precluded from collecting unpaid COVID rental debt as part of an unlawful detainer action. Starting March 1, 2021, however, a landlord has the option of filing a lawsuit against a tenant in small claims court to recover as a personal debt any unpaid COVID rental debt (including unpaid rent and other financial obligations), that came due between March 1, 2020 and January 31, 2021. Such claims can be brought in small claims court regardless of the amount demanded, and shall not be limited to $10,000 maximum or 2 claims of $2,500 or more per year. The option to sue in small claims court will expire on February 1, 2025.

• Cash For Keys and Other Landlord-Tenant Agreements: Starting September 1, 2020, any lease agreement, settlement agreement, or other agreement that purports to waive the requirements of this law is prohibited and void as contrary to public policy. C.A.R. is in the process of drafting for release before September 30, 2020, a new standard-form Coronavirus Rent Forgiveness, Termination of Tenancy and Possession of Premises Agreement (Form CRFP) and a new Coronavirus Unpaid Rent Repayment Agreement (Form CRRA).

• Federal CDC COVID Order Halting Evictions: Effective September 4, 2020, the federal Center for Disease Control and Prevention (CDC) issued a nationwide order generally halting evictions of residential tenants until December 31, 2020. The CDC Order does not apply in any State or local area with a moratorium with the same or greater public-health protection. To halt an eviction under the CDC Order, a tenant must provide the landlord with a CDC COVID-19 Tenant Declaration (C.A.R. Form CDC-TD) stating under penalty of perjury that the tenant cannot pay the full rent due to income loss or extraordinary medical expenses, and the tenant does not expect to earn more than $99,000 in 2020 (or $198,000 if filing a joint tax return). A violation of the CDC Order is punishable by a fine up to $100,000 plus one-year imprisonment if the violation does not result in a death, and a fine up to $250,000 plus one-year imprisonment if the violation results in a death. Click here for the full text of the CDC Order.

Resources: The full text of the COVID-19 Tenant Relief Act of 2020 (Assembly Bill 3088) is set forth at the California Legislative Information website. More information is also available from C.A.R.’s legal Q&A on the COVID-19 Tenant Relief Act of 2020 (password-protected for C.A.R. members only).

Copyright© 2020 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of September 14, 2020. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.