What is the New California Eviction Moratorium Law 2021?
- SB – 91 a new California law extending the eviction moratorium law through June 30, 2021;
- Allocated $2.6 billion in federal funds for a new California Rental Assistance Program to help struggling tenants and small property landlords; and
- Helping landlords owning one or two units whose income allows them to make ends meet.
On January 29, 2021, Governor Newsom signed legislation extending the California Eviction Moratorium Law to June 30, 2021, called SB 91.
This protects millions of California renters from the COVID-19 pandemic economic hardships. Governor Newsom proclaimed “California is leading the way by enacting the strongest eviction protections in the nation”. The governor also claimed the extension was possible due to a $2.6 billion in federal stimulus funding.
Last year, the state enacted the original statewide eviction moratorium law under AB 3088 set to expire at the end of January 2021.
What Does the New California Eviction Moratorium Extension Mean for San Diego Landlords?
SB 91 differs from the California Rent Control laws. We published a blog post explaining the California Rent Control Laws.
With all the news media chatter about protecting tenants who can’t pay rent, what about the landlords?
Do San Diego landlords just write off unpaid rents over the past year with no way to collect them?
Not quite, here’s why:
Feds Assist Some California Landlords with Mortgage Payments
The federal stimulus funding also assists “small property owners in need of assistance to pay for mortgages”. The governor declared that this stimulus “supports mom and pop landlords” to help pay for their mortgages.
Thus, qualified small property landlords can seek help to pay their mortgages when renters stop paying rents.
Stimulus funding also helps “income-qualified tenants” considered “most at-risk” with unpaid back rent. These qualified tenants get funding to pay back rents for all California landlords.
Help for Landlords Agreeing to Waive 20 Percent of Unpaid Rent
Landlords agreeing to waive 20 percent of the unpaid rent receive 80 percent in rent reimbursements. This reimburses unpaid back rents between April 1, 2020, and March 31, 2021.
So, the new law extending the evictions moratorium sweetens the deal for landlords. If they agree to waive 20% of the unpaid rents to get reimbursed by the government for 80% of the remainder during one year.
Here’s how the California Apartment Association (CAA) explains the 20% waiver: “A landlord who accepts the money will have to forgive the remaining unpaid rent for that period. If the landlord refuses this arrangement, the maximum subsidy drops to 25%.”
Therefore, you as a landlord must agree to waive 20% owed in unpaid back rents from April 1, 2020, to get 80% reimbursement from federal funds. This also means landlords can’t sue or evict their tenants. If you refuse, you only qualify for a 25% maximum subsidy.
How Much is Available from the Feds for California Landlords?
Not every landlord gets reimbursed.
SB 91 allows the state to administer $1.5 billion of the stimulus funds. Using “contracted entities” and local governments agreeing to “join forces with the state”. Otherwise, local governments may choose to administer their own programs.
Around $150 million of the federal stimulus remains reserved for tenants living in counties with populations less than 200,000. The other funds reserved for counties with populations over 200,000.
The California Rental Assistance Program begins accepting applications from landlords for assistance in March.
Also, California created a new “Housing is Key” program in “vulnerable” communities to connect property owners with renters for resources and helpful information.
How California Landlords Qualify for the Federal Dollars
The CAA claims the new law qualifies landlords whose unpaid rental tenants “who earned less than 80% of the area median income (AMI) in 2020 or at the time of application”. Furthermore, the state prioritizes the dollars for the lowest income tenants, earning up to 50% of the AMI.
IMPORTANT: SB 91 set a February 28 deadline for landlords to give a “specific informational notice“ to their renters who fell behind in their rents since February 1, 2020.
Contact us for help preparing this notice for your tenants before the February 28 deadline.
Assignment or Sale of Rent Debt Prohibited
SB 91 prohibits assigning or selling rental debt accrued from March 1, 2020, until June 30, 2021. This attempts to prevent debt accrual investors from profiting.
But this prohibition remains permanent for rental debts of tenants at or below 80 percent of the local Area Median Income meeting the Rental Assistance Program qualifications.
The New Law Prohibits Using COVID-19 Debt as a Negative Factor for Housing Applications
SB 91 also prohibits landlords from taking into account COVID-19 related debt as a basis for refusing to rent to qualified housing applicants.
History of the California Tenant Eviction Moratorium Law
California’s Tenant Eviction Moratorium Law attempted to reduce the havoc on the state’s economy caused by the COVID-19 pandemic. The pandemic forced statewide stay-at-home curfews resulting in millions of workers losing their jobs. The loss of income put many at risk of evictions.
In 2020, California enacted the COVID-19 Tenant Relief Act of 2020 or AB 3088 which expired on January 31, 2021. This law required tenants to pay 25% of their rent each month starting September 1, 2020, or face evictions by the January 31 deadline. It also allowed landlords to collect unpaid rents through the courts.
SB 91 extended that deadline to June 30, 2021. Tenants need to know they must still pay 25% of the unpaid rent by June 30.
Tenants could pay the full amount immediately or agree to pay fully with month-by-month payments. Failure to do either results in an eviction process. Learn more about how to deal with California tenants payments:
- Read our blog post explaining What to do when your California tenants pay rent late;
- Also, check out our blog post, “How to Evict a Problem Tenant in California”; and
- You may find our blog post “How to Collect Rent Payments” useful.
What Is Not Covered by SB 91?
Two important situations are not covered in the SB 91 law:
- The new law failed to address the situation when a tenant refuses to cooperate; and
- SB 91 won’t help landlords where the tenant with unpaid rent makes more than 80% of the AMI.
The CAA asked the state to help landlords in those situations with new policies and funds.
The new California Eviction Moratorium Law of 2021 made significant changes:
1. California’s SB 91 extends the eviction moratorium law through June 30, 2021. Signed into law just two days before the original COVID-19 Tenant Relief Act of 2020 expired. This saved millions of Californians from evictions.
2. Also, SB 91 uses $2.6 billion in federal funds to create a new state Rental Assistance Program to help struggling tenants. And small property landlords depending upon one- or two-unit income to survive.
3. But not every California landlord qualifies. Only tenants earning less than 80% of the Area Median Income qualify as poor enough due to the pandemic business closures. Priority goes to those earning up to 50% of the AMI.
4. SB 91 also gives qualified landlords the option to waive 20% of the unpaid back rents from April 1, 2020. This qualifies them for an 80% reimbursement from the federal funds. In return, landlords agree not to evict or file lawsuits to collect the waived 20%.
5. Qualified landlords refusing this option only receive 25% reimbursement of the unpaid back rents.
Warning: When these funds run out the program ends.
Need help with your “specific informational notice“ due by February 28?
Contact us immediately so we can help you with this important notice before the deadline expires.
Steven Rich, MBA – Guest Blogger
This article conveys information and does not provide legal advice. You should not consider any information in this article to be legal advice. Readers should consider obtaining specific legal advice from an attorney concerning any decision or course of action contemplated.
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