Simply Multifamily Episode 4: SB 91 Update for California Apartment Property Owners
Updated: Oct 5, 2021
Join us for a discussion between attorney Anthony Marinaccio of Marinaccio Law and Kiran Dhillon, Broker-Associate at KW Commercial regarding SB 91, California's new eviction moratorium law. Topics covered include: the extension of AB 3088's requirements, the new notice requirement under SB 91, and answers to FAQs.
***Following the recording of this interview, the Los Angeles County Board of Supervisors extended the Los Angeles County Eviction Moratorium to June 30, 2021. Click here for more information.
Kiran Dhillon, SIG Commercial (00:01):
Welcome to our series, "Simply Multifamily." My name is Kiran Dhillon, I am a Broker-Associate at Keller Williams Commercial, specializing in multifamily sales. The purpose of this series is to highlight issues that affect owners of multifamily properties via market updates, investment insights, and interviews with trusted professionals. Today we're going to be talking with attorney Anthony Marinaccio of Marinaccio Law regarding SB 91, the updated law on residential eviction moratoriums in California. Welcome back, Anthony. Thank you for being here today.
Anthony Marinaccio, Marinaccio Law (00:36):
Hi Kiran, thank you for having me.
Kiran Dhillon, SIG Commercial (00:39):
Of course. The last time that you were here, we talked about AB 3088, California's statewide eviction moratorium law. For listeners who are not familiar with AB 3088 or who need a quick refresher, can you provide a recap?
Anthony Marinaccio, Marinaccio Law (00:53):
So AB 3088 essentially is the state's way to address COVID rent and tenants who aren't able to pay rent during this time. Essentially, what it did was it created two types of debt, one for rent from March through August of 2020, and the second from September of 2020 to present. Essentially, it requires all landlords, if a tenant does owe money, to use a 15-Day Notice, and included with that 15-Day Notice to Pay Rent or Quit, a Declaration of Financial Hardship. And if a tenant returns that Declaration of Financial Hardship, there are two different time periods: for the rent that's due from March through August of 2020, a tenant returns the Declaration of Financial Hardship and does not owe that rent until, currently, June 30th of 2021. And even if they do not pay, they cannot be evicted. It causes it to be a consumer debt which a landlord would have to sue for. The second time period is September of 2020 to present. For that period, a tenant would owe 25% of the rent on or before June 30th of 2021.
Kiran Dhillon, SIG Commercial (02:18):
Got it. And AB 3088 expired on January 31st of this year, right?
Anthony Marinaccio, Marinaccio Law (02:26):
Kiran Dhillon, SIG Commercial (02:26):
So now we have a new law commonly referred to as SB 91. How does the SB 91 affect AB 3088?
Anthony Marinaccio, Marinaccio Law (02:34):
Well, I've kind of incorporated AB 3088 when I was discussing it first, so SB 91 essentially continued it, extended all the protections through June 30, 2021. If it had expired on January 30th [31st], we could have seen the small claims lawsuits starting in March and we would have also seen evictions starting in February for rent that was due between September and January. However, now all tenants get some reprieve, meaning that they would owe 25% of the rent from September through June on or before June 30th in order to avoid eviction. And it's important to note that that doesn't mean that the 75% is waived, but the landlord will then have to sue the tenant for the 75% balance.
Kiran Dhillon, SIG Commercial (03:22):
I also read about SB 91 bringing in [California's Statewide Rent Control Law] AB 1482's Just Cause Eviction requirement under its wing. Is that right?
Anthony Marinaccio, Marinaccio Law (03:36):
Correct. So generally single family homes are exempt from the protections of the statewide rent control and eviction control ordinances [under AB 1482]. However, right now due to COVID, single family residences and condos are under the same requirements as apartment buildings, meaning that a landlord cannot evict for a no-fault reason, even if the tenant resides in a single family dwelling.
Kiran Dhillon, SIG Commercial (04:05):
Are there any new notice requirements under SB 91?
Anthony Marinaccio, Marinaccio Law (04:06):
There is a notice that has to be provided to all tenants that owe any money for this period on or before February 28th, and the landlord has to provide that notice before that time. It's essentially a notice that's disclosing to tenants that the protections of the COVID moratorium are extended through June 30th.
Kiran Dhillon, SIG Commercial (04:30):
So it's like an informational notice?
Anthony Marinaccio, Marinaccio Law (04:32):
Kiran Dhillon, SIG Commercial (04:33):
Do landlords still need to give the 15-day Notice and Declaration that they had to under AB 3088 if they have a tenant who is not paying rent?
Anthony Marinaccio, Marinaccio Law (04:41):
Correct. A landlord would still have to serve a 15-Day Notice to Pay Rent or Quit, and it's important to know that the 15 days are actually court days, meaning business days.
Kiran Dhillon, SIG Commercial (04:57):
Are there any situations where it would not be a good idea to serve that 15-Day Notice and Declaration?
Anthony Marinaccio, Marinaccio Law (05:03):
If the tenant owes money for any period from September through the present, under most situations I would suggest to serve the Notice and then the tenant has the obligation to return the Declaration of Financial Hardship.
Kiran Dhillon, SIG Commercial (05:23):
So moving forward on a rolling basis, if a tenant doesn't pay rent in March and then April, May, and June, should the landlord serve that 15-Day notice every month?
Anthony Marinaccio, Marinaccio Law (05:38):
So there's two lines of thought on this. One would be to serve it monthly, but the issue will be that in June a landlord is going to have to serve one final notice because that would encompass all of the rent that is owed from September 2020 through June of 2021.
Kiran Dhillon, SIG Commercial (06:02):
So are you saying that landlords could either serve [the 15-Day Notice] every month or they could wait and just serve one in June?
Anthony Marinaccio, Marinaccio Law (06:09):
They could do either of those two, yes.
Kiran Dhillon, SIG Commercial (06:11):
And that new notice under SB 91 that currently needs to be served by February 28th of 2021, what if your tenants are paying rent now but they stop in April, would you have to give that SB 91 notice then?
Anthony Marinaccio, Marinaccio Law (06:28):
You should still give a copy of that Notice then. And I am suggesting that when you serve a 15-day Notice to also provide a copy of that Notice whenever you do serve one of those new notices.
Kiran Dhillon, SIG Commercial (06:41):
Does SB 91 address rent increases?
Anthony Marinaccio, Marinaccio Law (06:46):
It does not, but there are a number of moratoriums with regards to rent increases in the county and in the city of Los Angeles.
Kiran Dhillon, SIG Commercial (06:56):
So property owners should be vigilant about being familiar with their local ordinances and not just relying on the fact that the statewide law doesn't address rent increases.
Anthony Marinaccio, Marinaccio Law (07:07):
They should be. The county of Los Angeles and the city of LA have more stringent requirements, both for evictions and for the rent increases currently.
Kiran Dhillon, SIG Commercial (07:15):
You did mention this before, but just for clarification, under SB 91 tenants can wait to pay that 25% of the rent that's owed every month, add it all up, and pay it by June 30th, right? They don't have to pay the 25% every month?
Anthony Marinaccio, Marinaccio Law (07:33):
Correct, the 25% is not owed monthly. It's on or before June 30th that the entire sum of that 25% is owed. It's also important to note if you have a tenant, for example, that has paid 50% of the rent for this month in February, for example, you can still serve a 15-day notice, but they've already paid the 25%. It's not 25% of what is owed, it's 25% of the rent.
Kiran Dhillon, SIG Commercial (08:04):
So it's every month the 25% of rent for that particular month?
Anthony Marinaccio, Marinaccio Law (08:07):
Of the entire amount of rent. Correct.
Kiran Dhillon, SIG Commercial (08:10):
Okay, and then that remaining 75% you had mentioned, it would be turned into consumer debt and landlords would have to go to a small claims court for that?
Anthony Marinaccio, Marinaccio Law (08:20):
Kiran Dhillon, SIG Commercial (08:22):
And do you know when landlords will be permitted to do that?
Anthony Marinaccio, Marinaccio Law (08:26):
They should be after July 1, 2021. However, and it's also important to note that there's not going to be a jurisdictional limit, so if a tenant owes a landlord $25,000 or $30,000, that landlord can still file in small claims court as opposed to in an unlimited jurisdiction court.
Kiran Dhillon, SIG Commercial (08:48):
If a tenant does not return the Declaration of Financial Hardship under AB 3088, can the landlord then move forward with the unlawful detainer action? And if so, when?
Anthony Marinaccio, Marinaccio Law (09:02):
Technically, a landlord can immediately start an unlawful detainer after the 15-Day Notice expires and no Declaration has been provided. However, the state law allows a tenant to actually provide the [Declaration] after the 15-day notice period up through the date of trial, if not even after, and all the tenant would have to show is excusable neglect or a mistake that they didn't actually provide it earlier.
Kiran Dhillon, SIG Commercial (09:33):
It would be in the judge's discretion whether or not to allow the tenant to turn in the Declaration later, right?
Anthony Marinaccio, Marinaccio Law (09:39):
Correct. A judge would decide that.
Kiran Dhillon, SIG Commercial (09:41):
And then how does SB 91 intersect with the Los Angeles county eviction moratorium that last I heard had been extended to February 28th?
Anthony Marinaccio, Marinaccio Law (09:50):
So the countywide eviction moratorium in particular applies particularly to commercial tenancies. Right now, the county ordinance does not allow for commercial evictions due to non-payment if the commercial tenant fits certain categories and also provided notice that it was due to COVID that they are unable to pay. That's probably the biggest overlap. The county also has a ban on rent increases in unincorporated parts of Los Angeles, and there's also an eviction freeze for the county of Los Angeles, except for nuisance or breach of contract cases.
[***Following the recording of this interview, the Los Angeles County Board of Supervisors extended the Los Angeles County Eviction Moratorium to June 30, 2021. Click here for more information.]
Kiran Dhillon, SIG Commercial (10:35):
The CDC's eviction moratorium has also been extended to March 31, 2021. Is there any more clarity on whether or not that applies in California? Because I know some people seem to think because California's laws are more restrictive, it doesn't apply, but I was just wondering if there's any more information on that.
Anthony Marinaccio, Marinaccio Law (10:54):
There have been a number of arguments made to the courts that the CDC moratorium does not apply to tenants in the state of California. However, most judges in Los Angeles county have found that it does apply and so they basically put a stay on the eviction all the way through March 30th of 2021, as long as the tenant provides a declaration under the CDC. However, just to note, the CDC moratorium also does not apply to nuisance cases generally and breach of contract.
Kiran Dhillon, SIG Commercial (11:30):
And that's a separate declaration that you're talking about, right? There's a separate CDC declaration.
Anthony Marinaccio, Marinaccio Law (11:34):
The CDC declaration is a separate declaration than the Declaration of Financial Hardship under California law. This would be under the federal law.
Kiran Dhillon, SIG Commercial (11:46):
The last time we spoke you had mentioned that any rent that was collected could arguably be applied retroactively to missing rent payments rather than the month that the payment was actually made in. Has that changed under SB 91?
Anthony Marinaccio, Marinaccio Law (12:00):
Yes. So now the way accounting works for rent deposits is: if a tenant pays a landlord this month, that rent has to be for this month, even if a tenant owes for prior months. So generally accounting used to work that any money that was paid by a tenant would go towards the oldest month of rent that was owed. However, now it's almost the opposite. It's basically the opposite, where it's going to be to the most current month of rent that is owed. So I've been advising clients to keep very good records as to what is owed and what has been received, particularly if it's partial payments, because it's going to be towards the current month and not towards the prior months.
Kiran Dhillon, SIG Commercial (12:51):
So in a hypothetical situation, let's say you had a tenant who didn't pay rent in December, January, and February, but starting in March all the way through June, they're paying full rent. What would the landlord's options be in that scenario to recover for those three months of rent, December, January, and February?
Anthony Marinaccio, Marinaccio Law (13:13):
So technically, if the tenant started to pay the rent for February, but the tenant owes for the month of December, January, and February, the landlord could give a 15-Day Notice toPay Rent or Quit. However, by June 30th, the amount of rent that was paid for that period, it sounds like it would probably be in excess of the 25%, meaning that for those months now that landlord will have to go out and go to small claims court to recover those two months.
Kiran Dhillon, SIG Commercial (13:45):
And they wouldn't be able to evict that tenant for having missed those three months in between.
Anthony Marinaccio, Marinaccio Law (13:51):
Correct, not for missing those three months in between. You'd have to go to small claims court.
Kiran Dhillon, SIG Commercial (13:56):
So one of the things that stands out about SB 91 is the $2.6 billion in rental assistance that California will be getting. What can you tell us about this and how landlords and tenants who need that assistance can get it?
Anthony Marinaccio, Marinaccio Law (14:09):
So the counties are supposed to administer those programs and we have not received full guidance as to how those programs are going to be administered. Generally speaking, a landlord will be compensated for a tenant's debt, however, only 80% of that debt would be paid and essentially the landlord would have to forgive the 20%.
Kiran Dhillon, SIG Commercial (14:35):
And I'm assuming the decision for a landlord to participate would have to be done on a case by case basis.
Anthony Marinaccio, Marinaccio Law (14:44):
Correct. A landlord is not required to participate in any government programs to receive rent. This will be similar to, or in a way, kind of similar to what the county of Los Angeles and the city of LA administered earlier last year. A landlord was under no obligation to receive that money.
Kiran Dhillon, SIG Commercial (15:02):
Got it. So I know we covered a lot today and there are a lot of intersecting levels, the local, the county, and the statewide level, and I'm sure some of our listeners will have follow up questions for you with particulars of their case. What's the best way for people to get in touch with you?
Anthony Marinaccio, Marinaccio Law (15:23):
So the best way to get in touch with me is to call my office at 818-839-5220.
Kiran Dhillon, SIG Commercial (15:31):
Okay, great. Do you have anything else that you would like to add?
Anthony Marinaccio, Marinaccio Law (15:37):
Due to SB 91, many of the COVID protections have been extended through June 30th. I know some landlords are frustrated with that issue, but hopefully it does not get extended again. In the meanwhile, I would recommend working with your tenants as best you can in order to try to recover whatever money can be owed.
Kiran Dhillon, SIG Commercial (16:00):
That's great advice. Well, thank you, Anthony, so much for walking us through this kind of complicated landscape. I really appreciate it.
Anthony Marinaccio, Marinaccio Law (16:09):
Thank you, Kiran.