UPDATED 7/22/2020: Although a number of city and county eviction moratoriums were set to expire this summer, Governor Newsom signed Executive Order N-71-20 to give localities authority to halt evictions through September 30. The Governor’s Order is available here. And as a result, many local leaders have voted to extend their respective moratoriums. Residential and commercial landlords and tenants should carefully review city and county ordinances to determine what provisions are applicable in their area.
UPDATED March 30, 2020
On March 27, Governor Newsom enacted a new eviction-related order banning all evictions statewide through May 31. The new order applies provided a tenant has paid rent in the past, and if a tenant declares in writing that they are unable to pay due to the COVID-19 outbreak. Tenants are also required to retain documentation, such as a pay stub or medical bill, to justify assertions of inability to pay rent. This order took effect Friday afternoon.
The order does not appear to apply to commercial properties, nor does Newsom’s accompanying press release refer to commercial spaces. It only incorporates language about evictions from a “residence” or “dwelling unit.”
However, this order only supersedes the previous order “to the extent that there is any conflict.” That means that Newsom’s recommendations to local governments regarding commercial evictions, as well as foreclosures on commercial properties, are still in place. This week Newsom also secured support from Citigroup, JPMorgan Chase, U.S. Bank, and Wells Fargo and nearly 200 state-chartered banks, credit unions, and servicers to offer 90-day grace periods for mortgage payments. This does not appear to exclude commercial properties. Although the announcement has not been distilled into an order, details about these forbearances are here.
Local governments continue to adopt their own measures for evictions and foreclosures. In addition to those previously listed, Anaheim (commercial and residential), Santa Ana (commercial and residential), West Hollywood (residential only), Rancho Cucamonga (commercial and residential), Pasadena (commercial and residential), Glendale (commercial and residential), Redlands (commercial and residential), and Burbank (commercial and residential) have put bans in place. Guidance about each city’s provisions, and copies of the orders where available, are linked below.
Concurrently, Congress approved the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on Friday. There are numerous provisions for businesses, employers, and employees [Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), Title II of The CARES Act Includes Various Tax Relief Provisions for Businesses, The CARES Act Affects Emergency Paid Leave, Unemployment Insurance, ERISA]. The Act includes a foreclosure moratorium and a consumer right to request forbearance, generally prohibiting foreclosures on federally backed mortgage loans for 60-days beginning on March 18, and providing up to a year of forbearance for borrowers suffering from COVID-related hardships. The legislation further creates a 120-day moratorium on eviction filings for some properties—including those with a federally backed mortgage loan (i.e., purchased or securitized by Fannie Mae or Freddie Mac and insured by the Federal Housing Administration or the U.S. Department of Veterans Affairs). This appears to only apply to some, but not all, residential properties.
These actions build on Governor Gavin Newsom’s existing Executive Order authorizing local governments to halt evictions and foreclosures, as well as prohibit utility shutoffs related to the same. Any provision of state law that would otherwise restrict local governments' ability to impose such limitations is now suspended. These protections are in place through May 31, 2020, but that date is subject to change or extension.
Although Governor Newson's order suggests that local governments can impose substantive limitations on commercial evictions and foreclosures by holders of home or commercial mortgages, it does not act as a statewide moratorium on any evictions or foreclosures --- including residential. The order instead delegates that authority to local governments, specifically stating that local jurisdictions "may" determine to put such measures in place.
The statewide order authorizes local governments to impose substantive limitations on "commercial evictions" when: (1) the basis is nonpayment of rent arising out of a substantial decrease in "business income" caused by "a reduction in opening hours or consumer demand," and (2) the decrease in "business income" was "caused by the COVID-19 pandemic, or by any local, state, or federal government response to COVID-19, and is documented."
The order further suggests that financial institutions holding commercial mortgages "to implement an immediate moratorium on foreclosures and related evictions when the foreclosure or foreclosure-related eviction arises out of a substantial decrease in household or business income, or substantial out-of-pocket medical expenses, which were caused by the COVID-19 pandemic, or by any local, state, or federal government response to COVID-19." Some lenders like Bank of America and Ally Financial (Ally Bank) have plans in place for residential properties and payment deferral. Wells Fargo is dispersing communications inviting customers to discuss options for consumer lending and small businesses.
In practice, not all local governments have imposed moratoriums for commercial properties. Los Angeles' "Eviction Moratorium" applies exclusively to evicting residential tenants and is silent on foreclosures, similar to the orders in Culver City, Santa Monica, El Monte, and San Francisco. The same is true for Ventura County cities Ojai and Thousand Oaks.
However, ordinances in several Southern California cities, including Oxnard and Camarillo, do protect commercial properties from eviction. Moorpark and Simi Valley protect from both eviction and foreclosures. In Northern California, Fresno's moratorium applies to commercial tenants as well-both for eviction and foreclosure.
According to news releases, these cities and counties are "considering" bans:
It is possible more local governments (even the ones with moratoriums already in place for residential tenants) will adopt Newsom's guidance and expand moratoriums to commercial properties. We will do our best to provide updates as more information arises.
Even if your locale has placed a moratorium on evictions or foreclosures, tenants are generally still required to pay the back rent or mortgage bills. Some locales provide six months to make outstanding payments, while others do not specify a time period. Please check your specific order for details. And even if there is not an order in place where you operate, it is a good idea to talk with landlords or tenants about these issues and work out a plan in the absence of an operative moratorium. Some businesses are already implementing such plans. For example, commercial and retail landlord the Irvine Company in Orange County is deferring tenants' rent for up to 90 days, and allowing repayment interest-free starting in January 2021.
Links to the orders currently in place are below for easy reference.
All of Payne & Fears' resources about COVID-19 are here for your convenience: PAYNE & FEARS LLP - COVID-19 RESOURCE CENTER >>