Legal Alerts

COVID-19 Response: Commercial Eviction Moratoriums for California, Cities and Counties of Los Angeles and San Francisco, and HUD

Los Angeles, Calif. (March 30, 2020) - This memo summarizes and analyzes commercial rent and eviction moratoriums implemented in March 2020 in the State of California, and the Cities and Counties of Los Angeles and San Francisco, as a result of the global COVID-19 pandemic, and discusses the scope of any federal eviction moratoriums such as recent rules implemented by the U.S. Department of Housing and Urban Development (HUD). Some of these emergency moratoriums are being updated, and changes to these moratoriums may occur. Generally, local orders are not preempted by state orders if they expand or compliment a state order. Notably, the moratoriums below only preclude evictions for the non-payment of rent, and do not prohibit evictions based on other lease violations.

State of California – Commercial Rental / Eviction Moratorium

On March 16, 2020, California's Governor issued an Executive Order (N-28-20), which removed state law restrictions (e.g., Civil Code Sec. 1940 et. seq or 1954 et. seq.) on local government's ability to impose limitations on commercial evictions when the grounds for eviction is non-payment of rent due to a documented substantial decrease in income or increase in expenditures due to COVID-19, or government emergency orders related to COVID-19. This is significant since this Order invites local authorities throughout the State to effectively implement rules barring commercial and residential evictions that would otherwise be prohibited and preempted by California law. Indeed, numerous local jurisdictions are actively implementing commercial and residential eviction bans.

The Executive Order provides that it does not relieve the tenant of the obligation to pay rent.

County of Los Angeles – Commercial Rental / Eviction Moratorium

On March 19, 2020, the Los Angeles County Board of Supervisors issued a moratorium on residential and commercial evictions, retroactive to March 4, and effective through May 31, 2020. Importantly, the moratorium applies only to unincorporated areas of Los Angeles County (e.g., Malibu, Ladera Heights), and not to incorporated cites within Los Angeles County (e.g., Beverly Hills, Santa Monica, Burbank and Pasadena) although many incorporated cities have implemented eviction moratoriums. A map and list of the unincorporated areas of Los Angeles County can be found here

In order for a tenant to be eligible for the moratorium, the tenant must be able to demonstrate an inability to pay rent due to financial impacts related to COVID-19, the state or emergency caused by COVID-19, and must provide the landlord with 7 days notice after the date the rent is due (although extenuating circumstances will forgive this notice requirement). A “financial impact” is defined as COVID-19 related if the tenant can prove (1) a family or household member is diagnosed with COVID-19, (2) layoffs, loss of hours, or other income reduction from business closure caused by COVID-19, (3) compliance with stay-at-home orders during the state of emergency, (4) extraordinary expenses incurred related to diagnosis, testing, or treatment of COVID-19 or (5) child care needs arising from school closures related to COVID-19. The moratorium also bans non-fault evictions (e.g., landlord's election to terminate the lease under a 30-day notice provision where tenant has paid rent).

The moratorium provides eligible tenants up to 6 months following the expiration of the emergency period to repay any back rent due. Nothing in this order relieves the tenant of the obligation to pay rent, or restricts the ability of the landlord to recover rent due, but does prevent the landlord from being able to pursue eviction if the tenant qualifies for relief under the eviction moratorium. Further, nothing in this Order prohibits an eviction where the tenant is not eligible for relief under the stated criteria.

City of Los Angeles – Commercial Rental / Eviction Moratorium

On March 15, 2020, the Mayor of Los Angeles issued an Emergency Order which implemented a temporary moratorium on evictions for tenants who are unable to pay rent due to COVID-19. This emergency order applies to both residential and commercial leases. The grounds for non-payment include, for example, (1) loss of income due to workplace closure or reduced hours due to COVID-19, (2) loss of income due to school closures, (3) healthcare or other reasonable expenditures of the tenant caused by COVID-19 or related government emergency orders.

The emergency moratorium lasts until March 31, 2020, but will likely be extended. Failure to abide by the Order may be punished by prosecution under the City of Los Angeles Administrative Code 8.77, which provides for a fine up to $1,000 or imprisonment up to six months.

The moratorium provides eligible tenants up to 3 months following the expiration of the emergency period to repay any back rent due. Nothing in this order relieves the tenant of the obligation to pay rent, or restricts the ability of the landlord to recover rent due, but does prevent the landlord from being able to pursue eviction if the tenant qualifies for relief under the eviction moratorium. Further, nothing in this Order prohibits an eviction where the tenant is not eligible for relief under the stated criteria.

City of San Francisco – Commercial Rental / Eviction Moratorium

On March 18, 2020, the Mayor of San Francisco issued an Emergency Order which implemented a temporary moratorium on evictions for tenants who are unable to pay rent due to COVID-19. This emergency order applies to certain commercial leases, and supplements an earlier eviction moratorium for residential tenants. The grounds for non-payment include, for example, loss of income due to business closure or reduced hours or reduced customer demand caused by COVID-19 or related government emergency orders. Notably, however, the Order only applies to commercial tenants with gross receipts of $25 million or less in 2019. 

The moratorium provides eligible tenants up to 6 months following the expiration of the emergency period to repay any back rent due. Nothing in this order relieves the tenant of the obligation to pay rent, or restricts the ability of the landlord to recover rent due, but does prevent the landlord from being able to pursue eviction if the tenant qualifies for relief under the eviction moratorium. Further, nothing in this Order prohibits an eviction where the tenant is not eligible for relief under the stated criteria.

Federal or HUD – Rental / Eviction Moratorium Not Applicable to Commercial Leases

While it is reported that some commercial tenant groups are lobbying congress for a national eviction moratorium, as of the preparation of this memo, there have not yet been any laws passed providing for a national moratoriums on commercial evictions, and the terms of the $2 trillion congressional stimulus package are still being determined but do not appear to offer any moratoriums on evictions for commercial tenants.

On March 18, 2020, HUD authorized the Federal Housing Administration (FHA) to implement an immediate 60-day eviction and foreclosure moratorium that applies to eligible single-family homeowners with mortgages issued by Fannie Mae, Freddie Mac, or FHA. The HUD moratorium is limited in jurisdiction and scope, and does not apply to commercial mortgages.

For more information on these orders, contact the author of this alert. Lewis Brisbois has formed a COVID-19 Attorney Response Team to help your business with the myriad legal issues arising from the outbreak. Visit our COVID-19 Response Resource Center to find an attorney in your area.

Author:

Craig Holden, Partner

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