California COVID-19 New Foreclosure and Eviction Rule

AB 3088, the Tenant, Homeowner and Small Landlord Relief and Stabilization Act of 2020

California lawmakers have already identified a $54 billion budget hole created by the pandemic’s economic slowdown. California Governor Gavin Newson, lawmakers, and those supporting the measure call for federal government financial support to alleviate the $54 billion budget hole created by the economic slowdown during the pandemic.

Governor Gavin Newsom signed AB 3088 to protect millions of tenants from eviction and property owners from foreclosure due to the economic impacts of COVID-19. Protections apply to tenants declaring an inability to pay all or part of the rent due to a COVID-related reason

The new emergency measure provides some statewide eviction protection through January but got mixed reviews and protests demanding more aid for the state’s most vulnerable renters.

The proposal bans evictions based on unpaid rent between March and August and requires tenants to pay 25 percent of their rents between September 1, 2020, and January 31, 2021, to prevent court-ordered displacement. The law does not wipe out unpaid rent, and landlords can pursue the debt in civil court. By February 2021, any outstanding rent can be the cause of eviction.

Under the new law, no tenant can be evicted before February 1, 2021, as a result of rent owed due to a COVID-19 related hardship accrued between March 4 – August 31, 2020, if the tenant provides a declaration of hardship according to the legislation’s timelines. For a COVID-19 related hardship that accrues between September 1, 2020 – January 31, 2021, tenants must also pay at least 25 percent of the rent due to avoid eviction after February 1, 2021, for the unpaid rent.

Tenants are still responsible for paying unpaid amounts to landlords, but those outstanding amounts cannot be the eviction foundation. Landlords may begin to recover this debt on March 1, 2021. Small claims court jurisdictions are temporarily allowing landlords to recover these amounts. Landlords who do not follow the court evictions process will face increased penalties under the Act.

Covid-19 has considerably. changed the housing and, the rental market, Today, many California tenants struggle to make monthly payments forcing landlords to double their incentives for new customers.

According to Zillow, 30.4% of the rental listings on Zillow’s online apartment-hunting service advertised some form of concession in July versus. 16.2% in February before the pandemic. Besides, the advertising also offers incentives such as free months’ rent or parking to gift cards, to no deposit.

The massive job losses put renters in challenging financial situations, and Government eviction moratoriums made collecting rents even more complicated. All together makes landlord business more complicated.

The current market situation forces employed people into two main scenarios; to remain in the same place and renew the lease or buying a new home to gain more space and housing stability, resulting in fewer apartment seekers and the landlord’s urging to discount. See below the discount rates by location, according to Zillow.

• San Francisco: From 16.4% in February to 41% discount.
• San Jose: From 21% in February to 40% discount.
• San Diego: From 17% in February to 30% discount.
• Los Angeles and Orange counties: From 19% to 36% discount.
• Sacramento: From 9% in February to 23% discount.
• Inland Empire: From 10% in February to 21% discount.

California landlords are also lowering the monthly rents they are charging.

This August, the median rent in California for a two-bedroom unit averaged $1,845 a month. Positioning California as the second-highest nationwide.

Only Washington D.C., Massachusetts, and New Jersey had more significant six-month rent drops.