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California’s Eviction Compromise – what’s in it & what’s not

September 11, 2020

California’s Eviction Compromise – what’s in it & what’s not

California renters financially hurt by the pandemic will be protected from eviction until at least next February, while small landlords will be offered some foreclosure protections, under a measure approved by lawmakers and signed by Gov. Newsom late Monday night.

The deal was passed by super majorities in both state legislative chambers, with Democrats and a handful of Republican lawmakers supporting the bill.

A two-thirds vote of lawmakers was necessary for it to become law immediately upon being signed by the governor.

A pause on California eviction court proceedings, put in place by the state Judicial Council, was set to expire Sept. 2.

The emergency measure, is the product of contentious negotiations between tenant groups, landlord interests, &  bankers over who will be left bearing the financial brunt of missed rent payments caused by the virus.

But while tenants, landlords and banking groups urged lawmakers to approve the bill, the compromise’s specifics have left some parties disappointed.

Here’s how tenants, landlords and bankers made out in the deal.

Tenants:

What’s in it

Renters can’t be evicted for payments they missed from March, when the pandemic first struck, through Aug. 31.

From September through Jan. 31, if renters come up with 25% of the rent they owe, they will also be protected from eviction. Renters can pay that 25% at any time before Jan. 31.

Starting Feb. 1, eviction rules go back to normal.

Miss your Feb. 1 rent? You can be evicted, regardless of Covid.

Unable to come up with that 25% of missed rent between September and January 31? You can also be evicted.

How can renters prove they’ve been financially impacted by COVID?

For renters below 130% of area median income, they have to fill out legal paperwork under penalty of perjury that says they’ve suffered a decline in earnings or increased expenditures because of the virus.

That paperwork must be provided by landlords when they serve initial eviction papers to renters, and renters have 15 days to fill it out.

No documentation of decreased income / increased spending is required.

Renters making ABOVE 130% AMI, need to provide some documentation for their financial hardship. Statewide median household income is $87,000.

Any evictions that occurred between March 2020 and February 2021 will not be made public, to protect renters’ ability to find new homes.

Any rental debt accrued because COVID-related financial hardship won’t show up on tenants’ credit reports.

What’s not: 

Tenant groups really don’t have a ton of leverage in state politics.

Despite renters comprising roughly 40% of the state, pro-tenant bills have had a tough time getting through the Legislature.

Tenant groups are most upset that evictions unrelated to financial hardship from coronavirus will be allowed to resume in the next few days.

They worry landlords will use any lease violation — people living in the apartment not on a lease, or creating a nuisance for neighbors — as a pretext to get rid of tenants who have fallen behind on their rent.

In court, the burden will be on tenants to prove landlords are using these lease violations in bad faith. The vast majority of tenants in eviction courts do not have legal representation.

Rent forgiveness or cancellation is also missing in the bill, and tenants don’t have much time to pay back what they owe.

While some missed rent may not be used as the basis for evictions in February, renters will have to pay back everything they owe by March, 2021.

That’s when landlords can begin pursuing missed rent payments in small claims court.

It is possible that a renter owing thousands of dollars to their landlord could legally stay in their unit while being sued by their landlord for missed rents while their case is waiting to be heard by the courts.

Landlords:

What’s in it

Small landlords” who own between 1-4 units receive additional foreclosure protections.

The proposal extends the 2013 “California Homeowner Bill of Rights,” passed in the wake of the late 2000’s foreclosure crisis, to small, non-corporate landlords who own up to 4 units.

Those “rights” include specific guidelines mortgage servicers:

1) must obey in notifying and communicating with borrowers, as well as a prohibition against “dual track” foreclosures where lenders are allowed to pursue foreclosures while simultaneously negotiating loan modifications.

What’s not:  

The California Apartment Association, which supports the compromise, is one of the more powerful interest groups in the Capitol, and donates heavily to Democratic and Republican candidates.

But the political power landlords wield still couldn’t deliver what they say would make this problem much easier to solve: Money.

A proposal backed by Senate leader Toni Atkins, (D) San Diego, tried to work around the state’s depleted coffers by offering sellable tax credits to landlords for the amount of rent they missed.

Landlords tentatively supported the proposal, but no such compensation was included in the final bill.

Without money coming from the state, small landlords may wonder how they expect to meet their mortgage payments if they can’t evict renters and re-rent apartments until next year.

Banks 

What’s in it: 

As previously mentioned, some additional requirements when lenders are preparing to foreclose on a property.

The bill also would force lenders to provide an “explanation” as to why they denied a forbearance request.

What’s not: 

Banks and credit unions are also a powerful force in the Capitol.

But their leverage on the eviction issue in particular was amplified by the constitutional limits of state law, and the threat of legal action.

Both landlord and banking groups were skeptical that any type of compulsory mortgage forbearance would survive legal challenge.

Both the state and federal constitutions have “contract clauses” that limit government interference with private contracts like mortgages.

California is also preempted from regulating certain banking activities in the federal government’s purview.

Image: https://www.ksro.com/2020/06/10/californias-judicial-council-to-review-emergency-eviction-protections/

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