Emergency Bans on Foreclosures and Evictions Repealed in California

(CN) — By a vote of 19-1 on Thursday, the Judicial Council repealed emergency orders suspending foreclosure and unlawful detainer actions in California’s courts, leaving lawmakers just a few weeks to enact legal protections to avert an impending flood of evictions for unpaid rent when the moratorium is officially lifted on Sept. 1.

The seal of the Judicial Council of California, the policymaking body of the California courts. (Photo the Judicial Council of California via YouTube)

“This is good news. It gives us just enough time to pass a bill so there’s not a gap in eviction protections. We can breathe a very brief sigh of relief,” Assemblymember David Chiu, D-San Francisco, said just after the council’s vote Thursday. “But the work is far from over. Potentially millions of Californians are facing eviction.”

Governor Gavin Newsom gave Chief Justice Tani Cantil-Sakauye and the council she chairs unprecedented authority in March to adopt emergency rules in response to the Covid-19 pandemic. Among other rules it passed in April, the council voted to stay all pending judicial foreclosure actions and prohibit courts from entering default entries or issuing summonses to tenants in unlawful detainer cases — effectively stopping evictions from moving through the court system.

But this week, Cantil-Sakauye made it clear that the time has come to turn that responsibility over to the other two branches of government.

“The judicial branch cannot usurp the responsibility of the other two branches on a long-term basis to deal with the myriad impacts of the pandemic,” she said. “The duty of the judicial branch is to resolve disputes under the law and not to legislate. I urge our sister branches to act expeditiously to resolve this looming crisis.”

While that crisis is not unique — a recent nationwide report says 30-40 million Americans are at risk of eviction — it is particularly acute in California, a state already burdened with rampant homelessness and dearth of affordable housing.

A study by the Terner Center for Housing Innovation at UC Berkeley notes that as of June, 1 million renter households in California have suffered a job loss because of the pandemic’s resulting economic downturn. A model developed by the Aspen Institute predicts that 3.6 million Californians will be at risk of eviction by the end of September, more than any other state in the country.

Another particularly sobering study by a team of UCLA researchers led by law professor emeritus Gary Blasi estimated that with no income, 365,000 renter households in Los Angeles County alone are in immediate danger of eviction. “No one can say when the tsunami of evictions will arrive,” the researchers wrote. “We can say that it is coming.”

In an interview, anti-poverty lawyer and USC Gould School of Law professor Clare Pastore said the “greatest dislocation of families since the Great Depression” is looming.

“It’s truly frightening, and everyone is grappling with what to do about it,” Pastore said. “The pressure is really on the Legislature to act.”

Pastore said the state’s looming eviction crisis is bound up in many factors: a chronic housing shortage, a vast number of people already devoting more of than 30% of their monthly income on rent, and the recent lapse of federal unemployment benefits that had helped renters nationwide make their rent payments in April, May, and June.

“It’s disgraceful that Congress has not acted to prolong expanded unemployment benefits,” she said.

As congressional infighting over another round of pandemic relief drags on, California lawmakers are desperate to ease the financial burden on both tenants and landlords.

Two bills are currently being debated in the state Assembly and Senate. Chiu is the author of Assembly Bill 1436, which bans landlords from evicting tenants for unpaid rent until April 1, 2021, or 90 days after the Covid-19 state of emergency ends, whichever happens first. 

Chiu said AB 1436 encourages landlords and tenants to negotiate payment agreements, and while it also prohibits late fees or the application of security deposits to rental debt, property owners will be allowed to sue tenants for unpaid rent in 2022.

“Eviction isn’t a useful way to resolve the issue of unpaid back rent,” he said. “Unlawful detainers really exist to return property back to landlords. The bill says tenants shouldn’t be evicted simply because they can’t immediately pay back rent. We want to give tenants a period of time to earn and save the money to pay it back, but remove eviction as a remedy. The long-term remedy is civil actions.”

The bill also allows property owners to request 12 months of mortgage forbearance for single-family homes and buildings under four units, similar to the 12 months offered by the federal CARES Act. Owners of larger properties can request six months of forbearance. 

“We have heard from struggling landlords who would be impacted by their tenants’ inability to pay rent that they were facing mortgage foreclosures,” Chiu said, noting the CARES Act only applies to federally backed mortgages while AB 1436 will authorize all California property owners to seek forbearance. “We think our mortgage forbearance provisions would squarely assist smaller property owners.”

But Chiu’s measure faces resistance from landlord groups who say it doesn’t do enough to help small property owners facing foreclosure. 

Debra Carlton, the California Apartment Association’s executive vice president for state public affairs, said AB 1436 does not require tenants to submit any declaration of financial hardship caused by Covid-19. “It encourages people not to pay rent,” she said.

Chiu said it was true that the initial bill did not have a proof of hardship requirement. It has since been amended, he said, to require renters to attest to financial distress from the pandemic.

Carlton said landlords would agree that evictions are not the best way to recover unpaid rent, but many will not be able to wait years to sue tenants in civil court. 

“It’s in nobody’s interest for there to be evictions going forward. The landlord isn’t going to get the money, and it’s expensive and time consuming. she said. “What we would rather see is some sort of financing structure system so landlords and tenants can have the money to pay the rent.”

Under AB 1436, she said, landlords would not be able to evict nonpaying tenants until 2022. “That means landlords will go without money for two years. A rational person can see that won’t work,” Carlton said.

Another proposal authored by state Senator Anna Caballero, D-Salinas, will give landlords sellable tax credits to cover rent losses while offering tenants more time to repay rental debt and ask for rent reduction or forgiveness depending on their income. Senate Bill 1410 also suspends evictions for tenants who have signed a “Covid-19 eviction relief agreement” with their landlord. 

Critics have said that allowing the sale of tax credits to third parties doesn’t guarantee enough income to alleviate the financial stress on small landlords, who would also be unable to redeem the credits until 2024

The Assembly Judiciary Committee took up Caballero’s bill Wednesday, but legislators still have quite a few wrinkles to iron out regarding the tenant repayment structure, the enforcement of landlord-tenant agreements, and the bill’s various tax implications. 

The Apartment Association does not back the bill but is asking for major amendments. But it is the only bill they say that provides dollars for landlords, so they are working with the Senate. 

“While larger owners may be able to last until 2024, for small owners who have less than 16 units there’s no way they’ll be able to make it until 2024,” Carlton said. “You lose half of your rent and you’re doomed, especially if you have a mortgage. We’re getting calls from people in their 70s and 80s. This is their retirement. They’re living on this money.”

Carlton said the Apartment Association would like legislation that includes direct financial relief for small landlords. “If there were provisions that gave money to small owners for whom there’s no way they can make it much longer, that would certainly be something we could support,” she said. “It’s just about where’s the money going to come from.”

But Chiu said the state is in dire financial straits.

“The problem is our state has a $54 billion budget deficit and we are required to balance our budget” Chiu said. “So we literally have no money in our piggy bank.” He said it makes more sense to give monetary relief to tenants so they can pay their landlords.

Pastore agreed landlords face immense pressure. “I’m not unsympathetic to the plight of landlords,” she said. “This is landlords’ income too. Lots of people like to think of big, bad, greedy landlords but there are many mom-and-pop landlords facing desperate times without income from tenants. This dwarfs the 2008 recession.” 

But she said landlords would be more immediately helped by legislation to help tenants pay rent rather than through unlawful detainer actions that simply free a property to be rented to someone else.

“Particularly in a pandemic, it is important to protect the landlords’ ability to receive some income if possible or receive it at a later date, but I don’t know that allowing the landlords to evict people is so important because where are they going to get other tenants?” Pastore said. “It’s not clear that the number of tenants displaced by Covid can be replaced by tenants who can pay. We need rent relief and we need a restoration of that federal unemployment extra benefit.”

Pointing out another complication, Pastore said tenants will likely need lawyers to help them navigate new proposed rules on evictions. 

She said despite commendable government actions to protect tenants, “They’re often very complicated and not at all straightforward about what to do. We have a desperate need for lawyers to help more people in the housing context.”

Chiu said he is also concerned about the lack of legal representation for tenants trying to negotiate repayment agreements with landlords.

“One of the issues I’m considering is how to ensure that whatever likely complicated new rules that are put in place under which tenants and landlords work things out, we want to make sure that tenants have the ability to understand and defend their rights.”

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