A little over a year away from the onset of the COVID-19 pandemic, the state of California and Governor Gavin Newsom have once again shown a willingness to neglect the rights of income property owners.
What is Senate Bill 91?
Passed in 2020, The Tenant Relief Act implemented a number of new protections from eviction for tenants, including prohibitions on evicting tenants who fail to make certain rental payments. These protections were set to expire on February 1, 2021, and a standard 3-Day Notice to Pay Rent or Quit could be served thereafter.
However, with the signing into law of Senate Bill 91 on Jan. 29 of this year, days before the Tenant Relief Act was set to expire, the protections were extended by Newsom and the Sacramento legislature. This allowed tenants to legally withhold rent owed from March 1, 2020 through June 30, 2021.
But with SB 91, it is not all doom and gloom. In fact, within the recent legislation there are a total of four alternatives that provide options for landlords looking to ensure their investment in their property.
Four Options Available to Income Property Owners
1. Protected Time Period
SB 91 reestablished that the Protected Time Period enacted in The Tenant Relief Act would stay the same, consisting of the rent owed from March 1, 2020 through August 31, 2020. If a Declaration of Financial Hardship was signed by the tenant and returned to the landlord within 15 days of the notice to pay rent or quit, this rental obligation is now considered a “civil debt.”
This money owed can only be collected through civil or small claims court (not through unlawful detainer), and these court filings cannot be brought until August 1, 2021.
2. Transition Time Period
The Transition Time Period has also been extended, requiring those who have filed a Declaration of Financial Hardship to pay 25% of the rent owed between September 1, 2020 through June 30, 2021.
This money will now need to be paid as of June 30, 2021 and if this portion cannot be paid, then it may be taken in for an unlawful detainer. The remaining 75% can only be brought to civil and small claims court, and those filings cannot be made until August 1, 2020.
3. State Required Form
For those tenants that still owe rent, this NEW FORM must be served to the resident by February 28, 2021 if they owe a backlog of rent between the period of March 1, 2020 through February 28, 2021.
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4. Compensation to Landlords for Lost Rent
The redeeming feature under SB 91 — and something that has become a ray of hope for many California landlords who are seeking to reaffirm their rights — is the Compensation for Lost Rent policy.
This process results in a positive outcome for landlords under SB 91, allowing landlords to be compensated upwards of 80% for the rent not paid between March 1, 2020 and April 31, 2021.
The procedures for this compensation have not been fully decided on as of the publication of this article, however its preliminary establishment indicates that at least some positive steps are being taken toward giving landlords positive options for the future.
With the introduction of new processes to ensure landlords get the rent that is owed, in addition to the Federal Reserve kept its benchmark interest rate anchored near zero, the demand to create and fill new housing has never been higher.
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Benjamin Donel, CEO