Covid-19 Eviction Moratoriums Expired: What Now?

The hefty COVID-19 eviction moratoriums have recently expired at the state level. Does this mean evictions are back to “business as usual?” Not exactly; the old rules for eviction actions, called unlawful detainers (“UDs”), have been replaced by new ones along the way. And while some residential and commercial landlords now may immediately proceed with UD actions against defaulting tenants, others may not. In all cases, residential and commercial landlords need to be wary of the new procedural and substantive hurdles in place, and potential tenant defenses that await.

Residential Evictions

California’s residential eviction moratorium under AB 832 (the most recent iteration of the COVID-19 Tenant Relief Act (CTRA)) expired on October 1, 2021. In addition to providing COVID-19 related eviction protections to complying residential tenants, AB 832 expanded California’s COVID-19 Rent Relief program, which permits landlords to recover up to 100% of unpaid rents and other expenses. Residential landlords may now move to evict defaulting tenants under certain circumstances, but must exhaust the potential for recovery of rent through this program before doing so. Relief under this program is still available, notwithstanding the expiration of the moratorium.

For those landlords with non-paying tenants who have not applied for, or will not cooperate with the landlord in applying for, Rent Relief program funds, evictions for non-payment of rent are now possible for the first time in a year and a half. However, there are some new prerequisites. The court will only issue a summons (the official document that submits a defendant to the jurisdiction of the court) if the tenant has not applied for rent relief, the landlord has applied and first waits twenty days from a submitted application, or the application was denied. Landlords can also evict for non-payment of rent due on or after October 1, 2021, and can finally use a three-day notice again to do it.

Even after a landlord commences the UD process, tenants may still avoid a judgment on several grounds. First, as with pre-pandemic unlawful detainers, a tenant will win the lawsuit if they can show they actually paid the rent – although, now this only requires payment of 25% of the contract rent due from September 1, 2020, through September 30, 2021. The other 75% is still due, but cannot be the basis of a UD action. Second, even if a tenant hasn’t paid their 25%, they may submit an approved application for rental assistance under the Rent Relief program any time before the landlord recovers possession, and the court must permit the tenant to stay.

The CTRA also includes language meant to eliminate most local authorities from imposing COVID-19 eviction moratoriums on other bases for eviction through March of 2022. This provision has allowed San Francisco landlords to prosecute evictions notwithstanding San Francisco’s repeated extensions of its broad eviction moratoria, but other jurisdictions, like Oakland, that have applied continuously, without the need for extension, remain untouched. Presumably, San Francisco is poised to enact further limitations starting in April 2022, so stay tuned.

Commercial Evictions

The rules are different on the commercial side. AB 832 does not apply to commercial tenancies. However, San Francisco passed its own moratorium on commercial evictions, which also expired on September 30, 2021. Under these rules, a commercial landlord’s current ability to file a UD complaint against a defaulting tenant is directly dependent on whether that tenant qualifies for a forbearance period under the moratorium.

San Francisco’s Commercial Eviction Moratorium categorizes, by “Tier,” “Covered Commercial Tenants” and designates certain “Forbearance Periods” to those Tiers. A Covered Commercial Tenant is generally one who (1) is legally registered to do business in San Francisco, and (2) has combined worldwide gross receipts 2019 equal to or below $25 million. Some small property landlords may be exempt altogether from the moratorium. A Covered Commercial Tenant’s “Tier” number is based upon the tenant’s number of full-time employees (“FTE”) as of November 1, 2020. And the Forbearance Period is the grace period in which back-rents must be repaid after the COVID-19 eviction moratoriums.

In brief, the more FTE a Covered Commercial Tenant has, the shorter the Forbearance Period is. The Forbearance Period for each Tier is as follows: (1) Tier 1 (tenants with fewer than 10 FTE)—24 months; (2) Tier 2 (tenants with between 10-24 FTE)—18 months; (3) Tier 3 (tenants with between 25-49 FTE)—12 months; (4) Tier 4 (tenants with between 50-99 FTE)—6 months: (5) Tier 5 (tenants with more than 100 FTE)—upon expiration of the moratorium. Back-rent payments may either be made in installments, or lump sums prior to the expiration of the tenants’ forbearance period. Tier 1 tenants also have the option of terminating their leases without some of the usual penalties, but remain responsible for any rent incurred prior to then.

If a Covered Commercial Tenant fails to pay back rent prior to the end of their Forbearance Period, the landlord may move to recover possession once that period expires. However, if a landlord brings a UD action based upon non-payment of rent during a time when the business was legally prohibited from opening, it is the landlord’s burden to show that, notwithstanding the shutdown, the tenant could still perform under the lease. (Conventionally, defendants have the burden to prove their own defenses, and this rule is the subject of a lawsuit that the requirement is preempted by the State’s Evidence Code.)

In sum, while local eviction prohibitions have loosened after the expiration of the moratoriums, they have not been done away with completely. Instead, both moratoriums have been replaced with new procedural hurdles that landlords must navigate prior to regaining possession of their property. Landlords should therefore analyze each individual situation carefully prior to filing a UD complaint against a defaulting tenant.

If Zacks & Freedman, PC can assist you with this or any other real property matters, please feel free to contact us.