Dollars and Rents Feb2021

DoLLARS

and

Rents

written by
Clifford E. Fried

When can rental property owners
enforce their leases and collect rent?
Read on for answers.

The past 11 months have been difficult for many tenants and landlords. The COVID-19 landscape has impacted the lives of people in ways we never imagined.

Some tenants have moved out of San Francisco because of job losses or the ability work remotely and from anywhere. Other tenants are clinging to their rent-controlled apartments by scraping together rent each month. And there are some tenants who remain in place without paying rent knowing the courts will not process eviction cases.

According to SFAA polls, most tenants are doing what they can to pay rent. However, the landlords of these non-paying tenants are not in good legal or financial positions. Federal, State, and City moratoria prohibit landlords from evicting tenants or enforcing rental agreements where tenants cannot pay rent due to COVID-19 financial distress.

Some landlords cannot afford to wait much longer to receive their rents. They have been waiting patiently for the various moratoria to expire so they can begin enforcing their leases and, where necessary, evict defaulting tenants. This is especially true for landlords who signed forbearance agreements with tenants.

As this article is being written, there is talk about the rent collection and eviction moratoria being extended.
The extensions may be anywhere from a couple of months to the rest of 2021. While this may give many tenants (some who don’t deserve it) a free pass on paying rent, it could be the death knell to some landlords.

Assuming the moratoria ends, what’s next? When can landlords take action to enforce their leases, and collect back rent, or pursue an eviction for nonpayment of rent if they are forced to? This article explores these questions.

What to Consider Before Moving Forward
Landlords must first decide what they want. If they have a good relationship with the non-paying tenant and want the tenant to remain, they should negotiate a deal with the tenant to continue the tenancy. But if the landlord wants the rent or possession, read on.

The ability to evict will depend on WHEN the tenant defaulted on paying rent. Was it before March 1, 2020? Was it between March 1, 2020 and August 31, 2020? Was it between September 1, 2020 and January 31, 2021? These dates will determine whether the landlord can recover possession.

There are also some landlords waiting to evict for reasons unrelated to the payment of rent. Owner move-in, non-monetary breaches, temporary evictions for repairs, etc., have also been abated during the pandemic. There are different eviction rules for these cases.

Obtaining Unpaid Rent
The traditional method for demanding rent from a tenant is by serving a three-day notice to pay or quit followed by the filing of an unlawful detainer action. There are now several overlapping laws that impact a landlord’s ability to evict during the pandemic, whether based on non-payment of rent or otherwise.

The COVID-19 Tenant Relief Act (AB 3088), passed by the State Legislature late last year, prohibits evictions for nonpayment of rent until February 1, 2021, unless the tenant was unlawfully detaining the premises prior to March 1, 2020, or fails to supply a Declaration of COVID-19 claim after being served with a 15-day notice.

The Mayor of San Francisco has issued several orders enacting a temporary “Eviction Moratorium” due to the COVID-19 pandemic. The Mayor’s Moratorium provides an extension on rent payments for tenants who have been financially impacted by COVID-19, and temporarily bans most other residential evictions. The Mayor’s restriction on evictions runs until March 1, 2021 except for evictions for nonpayment of rent; based on rules of preemption, nonpayment of rent evictions are subject to AB3088, which allows those evictions to commence on February 1.

The San Francisco Board of Supervisors passed Ordinance No. 93-20, which permanently protects tenants from eviction for non-payment of rent that was unpaid due to COVID-19 if the rent became due between March 16, 2020 and September 30, 2020 and the inability to pay is documented.

None of the eviction moratoria prevent a landlord from demanding unpaid rent and then enforcing monetary lease obligations by going to court and filing a lawsuit to collect the debt. While a landlord’s eviction remedy for nonpayment is severely limited, the collection of debt remedy remains viable. And while landlords may not be able to recover possession for nonpayment, they might be entitled to a money judgment. A landlord may or may not recover the unpaid debt depending on the tenant’s true financial situation.

Small Claims Court
A tenant still owes unpaid rent even after signing and returning a Declaration of COVID-19 claim to the landlord and can be sued for the money in small claims court (SCC).

AB3088 permits a landlord to seek payment of all unpaid rent in SCC starting on March 1, 2021. The law has always permitted a landlord to sue for rent in SCC, but landlords previously chose not to use SCC because the unlawful detainer and eviction remedy was faster, better, and easier. But AB3088 changes the rules to make SCC an attractive remedy for landlords seeking to enforce rental obligations.

SCC is a special court where disputes are resolved quickly and inexpensively. The rules are simple and informal. There is plenty of free information available on the internet and the website for the San Francisco Superior Court explaining the SCC system (sfsuperiorcourt.org), where you’ll find all the necessary SCC forms.

In some instances, the general rules for SCC have been changed to accommodate landlords seeking back rent.

In general, you cannot ask for more than $10,000 in SCC if you are filing as a “natural person” or $5,000 if you are filing as a business entity (corporation, limited partnership, limited liability company, etc.). You can file as many claims as you want for up to $2,500 each in a year. But you can only file two claims a year that demand more than $2,500. Under AB3088, there is no dollar limit on your demand for COVID-19 rental debt, and there is no restriction on how many of these cases you can file.

In non-SCC, you must follow all rules and procedures required in "regular" civil cases. It can get very complicated and be time-consuming, even for practicing attorneys. The rules and procedures are informal and simpler in SCC.

Do not use any of the UD forms when filing a claim for back rent. Instead, use the Plaintiff’s Claim and Order (Form SC-100). This is the same form that any creditor would use to sue a debtor for an unpaid bill.

Lawyers are not allowed in SCC. You will have to act as your lawyer and will have to know the laws and court procedures. The court cannot help you or give you a break just because you are not a lawyer and do not know the law. If you do not follow the many court rules and laws governing litigation, you could get fined by the court and you could even lose important rights or your entire case.

But it is possible to represent yourself in SCC. Litigants have been doing it for decades. The judges understand that the parties are not lawyers and despite the warnings about how the court won’t help non-attorneys, the court tends to go easy on the litigants in SCC. It is also anticipated that many of the usual eviction attorneys, this one included, will be advising landlords on how to prepare a rent case for SCC. Where the amount of unpaid rent is huge, get some legal advice.

Do not forget the other advantages to using SCC. Filing fees are much cheaper than regular court and cases are decided more quickly—generally within three months after filing, although the timeline could change with many landlords opting to use SCC.

There are also disadvantages to using SCC. The plaintiff (landlord) cannot appeal the court's decision. But the defendant (tenant) can. In a non-SCC action, either side can appeal the court's decision. Also, SCC requires you to be able to serve the defendant in California. If not, you cannot pursue your claim in SCC. Some tenants have left California and are living in places like Texas. If Elon Musk skipped out without paying rent, his landlord could not sue him in SCC. In a non-SCC action, you can serve a defendant outside of California.

In San Francisco, at least, landlords may be required to use SCC and not regular court to collect unpaid rent. There was a recent ruling from the San Francisco Superior Court that prohibited the landlord from suing for unpaid rent. The judge said that actions for the recovery of COVID-19 debts shall be filed no earlier than March 1, 2021 and will be handled by the SCC. This ruling delays the filing of lawsuits to collect on a rent debt. It also restricts landlords to SCC. While state law does not say any of this, apparently the person in the black robe gets to make up the rules in a pandemic.

If you decide to go to SCC on March 1, 2021, take into consideration that there will be pent up demand for judicial relief and the lines will be longer than the toilet paper line at Costco. In general, follow these steps (courts.ca.gov):

Figure out how to name the defendant
Ask for payment
Find the right court to file your claim
Fill out your court forms
File your claim
Serve your claim
Go to court and get judgment for rent owed

If you would like to know more about SCC, consider attending SFAA’s upcoming class on COVID-19 and Collecting Rent, or consult with a landlord attorney.

Recovering Possession
Where the tenant doesn’t have the rent money, it is possible to evict. First, consider exhausting all other options, such as doing a buyout; this option may be quicker, more certain, and easier than battling an eviction where the laws are new, complicated, and uncertain, and where judges will be doing everything possible to keep tenants in possession during the pandemic.

Where neither AB3088 nor San Francisco’s moratoria apply, landlords may serve eviction notices and file unlawful detainer actions NOW. But these situations are rare, and landlords should consult with a knowledgeable attorney before serving ANY eviction notices.

Under San Francisco law, evictions will resume on April 1, 2021, unless AB3088 applies (tenant fails to return a Declaration of COVID claim or pay at least 25% of the rent due between September 1, 2020 and January 31, 2021), in which case evictions could resume on February 1, 2021.

If an eviction is not related to nonpayment of rent and the pandemic, State and Federal law are permitting evictions at this time. However, San Francisco rent laws are preventing evictions from going forward. On November 30, 2020, the Board of Supervisors passed Ordinance No. 216-20, which prohibits evictions of residential tenants before April 1, 2021, unless the eviction is based on the nonpayment of rent (in which case the State law applies), the Ellis Act, or is necessary due to violence-related issues or health and safety issues.

AB3088 restricts how and when landlords may demand unpaid rent from residential tenants. The Act does not apply to rents that became due, but were unpaid, through March 1, 2020. However, San Francisco’s law prevents the filing of an unlawful detainer action to collect such rents until April 1, 2021.

Predicting the Future
Because of the nature of the pandemic and the certainty of how politicians have been acting, we can make some predictions without the use of a crystal ball. There are likely to be more electric cars on the road. More of us will be working from home and will be talking to people in little square boxes on our computers. And we will have a new president.

Addressing the pandemic and collecting rents, we believe that the health of our people and economy will improve in 2021—Dr. Fauci has said so. Eviction moratoria will likely be extended to keep tenants in place. And most unfortunately, landlords will be forced to bear the burden of tenants not being able to pay rent due to COVID-19 related reasons.

The information contained in this column is general in nature. Consult the advice of an attorney for any specific problem. Clifford E. Fried is with Fried & Williams, LLP and can be contacted at 415-421-0100.