Rental Assistance Programs Extended - Gupta Evans and Ayres

On June 30, 2020, the San Diego City Council (the “City Council”) voted to extend the moratorium on commercial and residential evictions through September 30, 2020, and approved a $15.1 million rental assistance program that will provide qualified households with a one-time payment to pay for past-due or upcoming rent.

Extension of Moratorium on Commercial and Residential Evictions

At the outset of the novel Coronavirus, the City Council issued a city-wide moratorium on commercial and residential evictions (the “Order”). The Order essentially provides that if a residential or commercial tenant is unable to pay rent due to the effects of COVID-19, then landlords cannot take any action to evict the tenant for non-payment of rent that was due on or after Mach 12, 2020. Landlord actions prohibited by the Order are broad in scope and not only prohibit filing or prosecuting unlawful detainer actions, but also prohibits simply serving a 3-Day Notice to Pay or Quit.

This initial Order was set to be effective through May 31, 2020; however, with the pandemic continuing to affect commercial and residential tenants, the City Council has previously extended the effective date of the Order. Now, as the Order was set to expire at the end of June 2020, the City Council again extended the effective date of the Order through September 30, 2020.

The City Council’s election to extend the Order did not change or alter any of the requirements that commercial and residential tenants must satisfy to defer rental payments. The three requirements that tenants must satisfy are explained below.

First, the tenant must be unable to pay rent due to the “financial impacts” “related to COVID-19.”

The term “financial impacts” is defined as a substantial decrease in household income for a residential tenant, or business income for a commercial tenant, due to business closure, loss of compensable hours of work or wages, layoffs, or substantial out-of-pocket medical expenses.
A financial impact is “related to COVID-19” if: it is caused by the COVID-19 pandemic or any governmental response to the COVID-19 pandemic, including complying with any public health orders or recommended guidance related to COVID-19 from local, state, or federal governmental authorities.

Second, the tenant must notify the landlord of its inability to pay rent due to the financial impacts of COVID-19 and must do so on or before the day rent is due. The tenant’s notice must be in writing, which can be in the form of an email, letter, or even a text message. The San Diego Housing Commission has provided a sample letter that tenants can use, which can be accessed here: Sample Letter.

Third, within a week of providing notice to the landlord, the tenant must then give the landlord “objectionably verifiable information” that shows how COVID-19 and the related governmental responses have negatively impacted the tenant’s financial condition. Common examples of “objectionably verifiable information” are:

pay stubs that show a decrease in wages or hours;
a letter from a past or current employer that states the tenant was laid off or his/her hours were reduced;
bank statements that illustrate a decrease in income; or
any other reliable documentation that shows the effects of COVID-19 has negatively impacted the tenant’s income or stream of revenue.

Tenants that satisfy the three requirements above are relieved from paying rent for the duration of the Order. However, tenants must pay all past rent owed six months after the Order is no longer in effect or the withdrawal of Governor Newsom’s Executive Order N-28-20, whichever occurs first. Tenants that vacate their property while Order is in effect must pay all past rent owed upon moving out.

Moreover, landlords cannot evict a tenant for a “no fault” cause if the tenant has satisfied the three requirements outlined above. A “no-fault” cause is an eviction that is not based or caused by the tenant’s actions. Common examples of “no-fault” evictions is when the landlord evicts the tenant because the landlord decides to sell or renovate the property or allows a close family member to move into the property. This subtle wrinkle prevents a potential work-around of the Order.

Last, the Judicial Council of California, Emergency Rule One, which remains in effect until 90 days after Governor Newsom lifts the State of Emergency Declaration, prohibits all California Courts from issuing a summons for any unlawful detainer proceeding. The Judicial Council of California, the policymaking body of all California Courts, enacted Emergency Rule One in response to the economic effects of COVID-19.

Although the extension of the Order and Emergency Rule One protect tenants during this uncertain time, there is nothing preventing landlords and tenants from discussing deferred rental payment options, lease addendums, or any other mutual agreement that benefits both parties involved. Tenants should always explore these options, before invoking the protections afforded under the Order.

San Diego’s Rental Assistance Program

In addition to extending the moratorium on evictions, the City Council also approved the COVID-19 Emergency Rental Assistance Program (the “Program”). The Program provides a one-time payment of up to $4,000 to qualified residential tenants to pay for any past-owed or upcoming rent. The Program is not available to commercial tenants.

To qualify for assistance under the Program, the following requirements must be satisfied:

the tenant’s primary residence must be located in the City of San Diego;
the household income as of January 1, 2020, must be no more than 60% of the median income in San Diego;
the household must not have enough money in a savings account to meet their financial obligations;
the household has eligible immigration status;
the tenant must not be a tenant of a property owned or managed by the San Diego Housing Commission; and
the household must be experiencing a financial hardship that is directly related to the effects of COVID-19.

The San Diego Housing Commission (the “SDHC”), which is in charge of administering the Program, has stated that tenants may begin applying for rental assistance payments under the Program “no later than July 20, 2020.” The SDHC will employ a “random-selection” system that prioritizes households with children and people 62 and older to determine what applicants receive rental assistance. If an applicant is chosen, then the SDHC will contact the tenant and coordinate with their landlord to disburse the rental payment directly to the landlord.

The City Council allocated $15.1 million to fund the Program, and projects that over 3,500 households will receive a rental assistance payment under the Program.

The Program, coupled with the extension of the Order, provides much needed relief to commercial and residential tenants that are struggling to pay rent during the COVID-19 pandemic. If you or your company is distressed due to the economic impacts of COVID-19 and have questions about the above, then contact a California attorney.

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