COVID-19 - Tenant Rent Questions Clarified
Many of our clients who have income property in Los Angeles -- residential and commercial -- have reached out to us amidst the coronavirus (COVID-19) pandemic with questions about what to do if tenants stop paying rent. Many tenants are not going to pay rent. Some can't and others may calculate that they don't have to pay rent because there is an eviction moratorium in Los Angeles.
So what exactly does the eviction moratorium mean? Tenants ARE still required to pay rent. HOWEVER, tenants cannot be evicted if they are unable to pay rent because of the COVID-19 pandemic.They will have to prove that the pandemic caused their inability to pay rent. If so, those tenants will have up to six months following the end of the moratorium to pay any back due rent.
So effectively, the moratorium provides a temporary grace period to those tenants who are unable to pay their rent due to financial circumstances related to the pandemic.
Landlords CAN file eviction proceedings during the moratorium (once the Courts re-open). BUT when those eviction lawsuits come to trial, if the tenant can show that they lost income due to the pandemic, the eviction proceeding may not succeed. For residential tenants, examples of documentation may include a letter from the employer citing COVID-19 as a reason for reduced work hours or termination, employer paycheck stubs, etc. Commercial tenants also must be able to document that their monetary default is related to COVID-19 (i.e., there has been a “substantial decrease in business income caused by a reduction in opening hours or consumer demand…caused by the COVID-19 pandemic, or by any local, state, or federal government response to COVID-19.”)
As a landlord, it may be best to reach out to tenants now, provide them with contact information for emergency repairs if your maintenance procedures have changed due to the pandemic, and ask them to contact you if they are experiencing financial hardship. If they do not do so, you may be able to use that fact if you need to evict them later on and they try to defend based on financial hardship.
The moratorium is not the only obstacle landlords are likely to encounter. As a practical matter, evictions are going to be difficult for the next six months. There will be substantial delays in our court system for the foreseeable future, as courts are currently closed and will be backlogged when they re-open. So -- in many cases, it is likely that a landlord’s interests will be best served by reaching out to affected tenants to discuss payment plans or other creative options as an alternative to eviction proceedings.
Landlords may also need to review their lease agreements, as some leases may contain provisions known as "force majeure" clauses, which may potentially limit tenants’ obligations to pay rent under situations such as these.
Lastly, some landlords may want to reach out to their banks to discuss potential loan modification programs which the banks will likely have to put into effect. We have not yet heard that banks are announcing these, but we would imagine that some "new normal" modification programs will be needed to avoid significant unnecessary upheaval in the world of real estate loans. If you need help strategizing and/or talking to your banks, please feel free to give us a call. We have experience representing both banks and borrowers in workout situations, and we believe our knowledge could be put to good use.
We want our clients to know that we are here to help find answers to questions and guide them through these difficult and unprecedented times. Please don’t hesitate to contact us if you need anything.
From The Lawyers You Trust,
Ellen Kaufman Wolf and y our Wolf Wallenstein Team
Office: (310) 622-1000
Cell: (310) 883-8239t Rent Questions Clarified