Landlords and lenders with California projects continue to feel the impact of COVID-19, and additionally have seen their remedies for tenant payment defaults significantly limited as a patchwork of municipalities enact various (and sometimes conflicting) eviction moratoria throughout the state. Many such moratoria were scheduled to expire at the end of May 2020, and while some have been extended, others have not.
On March 16, 2020, California Governor Gavin Newsom issued Executive Order N-28-20 which allowed local governments to impose limitations on commercial and residential evictions based upon defaults for the non-payment of rent. Shortly thereafter, various cities and counties within California enacted eviction moratoria, often with dramatically different requirements (and in some cases almost no requirements on the part of tenants). Largely, the moratoria went into effect in March 2020 to expire May 31, 2020, unless extended.
Below are examples which demonstrate the myriad differences in such moratoria.
In 2019, Los Angeles County saw the highest volume of commercial real estate sales in the country, at approximately $28 billion, with hotel and multifamily (two industries hit very hard by COVID) accounting for more than $10 billion. L.A. County's eviction moratoria was enacted on March 19, 2020, and originally applied only to unincorporated areas of the county, but was later expanded to include all jurisdictions county wide unless they had adopted their own moratoria. Some cities within the county have their own moratoria, such as Los Angeles, Long Beach, Pasadena, and Culver City, among others. The L.A. County moratorium was to expire May 31, 2020, but has been extended through June 30, 2020.
Under L.A. County's moratoria, tenants must provide notice to landlords within seven days after rent is due; landlords must accept tenant self-certifications of the facts; and tenants have 12 months to pay delinquent rent from the date the moratorium ends. Importantly, on May 21, 2020, the moratorium was amended to exclude certain larger organizations.
In San Francisco, the mayor issued an executive order on March 13, 2020 implementing an eviction moratorium for residential and certain "qualified" commercial properties (e.g., qualified business must be registered to do business in the city, and have gross receipts below $25MM). Tenants have six months to pay delinquent rent. The San Francisco moratorium has been extended to June 16, 2020 with respect to commercial properties.
In San Diego, the city enacted its eviction moratorium March 25, 2020, which was to expire May 31, 2020. Under the City of San Diego's moratorium, a tenant must give notice to its landlord of its inability to pay due to COVID on or prior to the date rent is due, must provide objectively verifiable evidence of its inability to pay, and unpaid rents must be repaid within six months of March 25, 2020. The City of San Diego's eviction moratorium has been extended to June 30, 2020.
San Diego County has a similar moratorium applicable to unincorporated areas of the county, but there are significant differences, such as a 15-day window to provide notice, a larger window to provide supporting evidence, but with only three months (subject to a one-time extension) to repay delinquent rent.
In Orange County, there is no county-wide eviction moratoria, but several cities within the county have enacted moratoria.
For example, Anaheim enacted its eviction moratorium on March 24, 2020, to expire May 31, 2020. Tenants are required to provide notice and evidence to their landlord within seven days of the date rent is due, and tenants shall repay rent in four equal monthly installments starting July 31, 2020. Anaheim's moratorium has been extended to June 30, 2020.
In nearby Santa Ana, its moratorium is scheduled to expire on May 31, unless the Governor of California extends his Executive Order, which as of the date this advisory was drafted, has not been extended. Under Santa Ana's moratorium, a commercial tenant has 30 days after rent is due to provide notice to its landlord, and residential tenants have seven days. Unless Executive Order N-28-20 is extended, Santa Ana's moratorium should expire on May 31, 2020.
In some cases, such as the City of Oakland and Alameda County, there are conflicting moratoria. The City of Oakland enacted a moratorium on March 27, 2020, which applies to residential and some commercial evictions (small businesses and non-profit organizations only). Under Oakland's moratorium, there is no affirmative duty to provide notice to the landlord, and there is no deadline for the payment of delinquent rent, just an encouragement for landlords to work with renters and local agencies and a note that subsequent rules for repayment may be forthcoming. Oakland's moratorium was scheduled to expire May 31, but has been extended to August 31, 2020.
Alameda County (in which Oakland is located), enacted its moratorium on March 24, 2020 for unincorporated areas, but updated the ordinance on March 31 to require all cities located therein to comply (unless the city has more beneficial protections in place for renters than are set forth in the Alameda County moratorium). Alameda's moratorium on commercial evictions is not limited to small businesses and non-profits, and, similar to Oakland, contains no affirmative duty for tenants to provide notice to landlords. Alameda County allows for 12 months to pay delinquent rent after the moratorium expires. Alameda County's moratorium is scheduled to run through July 21, 2020.
While these moratoria can be vexing for landlords and lenders, there remain actions which can be taken in compliance with applicable law. For example, some municipalities (e.g., Oakland) allow for civil judgments for the non-payment of rent and select methods for enforcement, despite prohibiting evictions. There are alternative remedies, but they must be handled with care so as not to run afoul of these dynamic moratoria.
As demonstrated above, there is a patchwork of moratoria throughout California with different rules and timelines, some expiring and others being extended. Landlords and their lenders are strongly encouraged to discuss issues around COVID-related payment defaults and remedies with California counsel to address issues such as reservation of rights, and alternative remedies, and to get updates on the timing and applicability of the various moratoria.