California  Armageddon for Landlords?

These are very unprecedented times that we are going through. Most of America is experiencing quite a bit of fear that’s induced mostly by the media. If that wasn’t enough, huge numbers of Americans are on unemployment and many are fearful, and rightly so, that when this is all over, they won’t have a job to return to.

But in the midst of all of this, here in California, I really hate to see our city and State politicians expressing empathy for the situation and then saying they have a way to relieve some of the stress. Sure, that sounds good, but it’s not the whole story at least as far as it pertains to rental real estate in California. As far as the eviction ban, the state of California is using, not their resources for the majority of this, but, the landlords rights and money is being compromised!

I’m sure most Californians already know that the governor instituted a moratorium on evictions and rent payments with an executive order that is supposed to and on May 31. I read this executive order, and right after the May 31 date, there are two additional words, and they are: unless extended.

California Armageddon for Landlords

I wrote about this before, when it was first enacted, so I’m not going to go over all those details again, but, I will put a link at the bottom of this to that prior posting which you may want to read. To briefly summarize what I said in that prior post, was that neither the State government or any city officials where this moratorium has been enacted, have made any provision for the landlords to recover lost rent. About the only thing they say, is that the tenant is not relieved from paying this rent and they still owe it. This whole thing should’ve been set up differently, where if tenants were facing a hardship they could apply to the State to get a voucher that would ensure the landlord gets full rent payments from the State and the tenant would owe this amount of back rent to the State and the State could make a payment plan with them, instead of putting the burden of collection on the landlord.

In an article that came out just the other day it was shown that over one third of the renters did not make their April rent payment! Now you might be thinking that while these big landlords of multi-story apartment houses can just absorb any losses that they don’t recover. But, why should they have to, if they are California has barred them from enforcing their legal rights of eviction?

Sure, the tenant still going owe the full non-paid rent, but the tenant may just move out, and good luck tracking them down, and hiring an attorney to try to recover money from someone who may not even be working, or has actually moved out of the state! Sure, there is always risk of rent nonpayment on any rental, but should this happen most landlords within a few days or a week or so, start eviction proceedings. The quicker these proceedings are started the less income the landlord could potentially lose.

You should keep in mind that many single-family home rentals are homes that the current landlord originally lived in before they moved on to a more suitable property. They kept their original property as an investment and a way to help pay off the mortgage on that property. Now, a number of mortgage lenders have said that they will cooperate with waving late fees and extending time for the normal monthly mortgage payments. But with that said, I have not read anywhere where a mortgage lender said they are going to forgive those payments!

Maybe a mom-and-pop residential property landlord was hoping they could get through this, if it just ran until May 31 as the Gov.’s Executive Order stated. But just the other day, the the Judicial Council of California, I never heard of them before, but looked them up, and they make the rules that  govern the courts in California. This council issued an emergency order that affects all landlords in California.

I’m not going to get into all the details, but basically what the emergency order says, is that it prohibits summons for unlawful detainers, prohibits default judgments and postpones all trials for 60 days from the initial date of the trial and that no trial may be set any earlier than 60 days after the request for a trial is made! So I’m sure you’re thinking now, this is just part of the governor’s executive order that expires on May 31 unless extended. But, if you’re thinking that, you’re entirely wrong!

Okay, here it comes, and this is verbatim from the order: “The emergency order remains in effect for at least 90 days after the governor list the state of emergency or until amended by the judicial Council. The judicial Council order will likely be in effect through August.”

I think this is pretty easy to interpret, but please understand that I am certainly not an attorney and before taking any action on any of this information, one should definitely consult with their own legal and financial advisors. Okay, with that out of the way, it seems to me that even if Gov. Newsom lets his executive order prohibiting evictions and foreclosures, expire as stated on May 31, California landlords would still have to wait a minimum of 60 days to try to get an unlawful detainer.

In my area of San Diego many of the single-family homes easily reat for $2,000 or more per month. So, assuming that one’s tenant doesn’t make a payment starting in April, and the moratorium by the Governor is lifted on May 31, the landlord would have to wait an additional 60 days before they can file for an unlawful detainer. Keep in mind   that 60 days is just for filing of the unlawful detainer, and as the Judicial Council of California states in their emergency order, no trial may be set any earlier than 60 days after the request for trial is made. So, this seems to me, that for some landlords who did receive any payments from their tenant starting in April, they would be four months behind before they could even file for the unlawful detainer, and if they had to go to trial to get the tenant out, that would be a minimum of another 60 days. In reality, it could very well end up being that the tenant lives rent-free for five or six months or more and ends up owing the landlord over $12,000!

Like I said before, this is just my interpretation, and I could be wrong so one should again do their own investigation and talk with their own legal professional. What I’m going to do is post part of this notice that appeared on the California Association of Realtors website below, so fellow Realtors can review it &  I have posted the link to the full order, so you can draw their own conclusions.

At one time, I actually had three or four rentals here in San Diego. I’m sure glad with what’s happening now, that I don’t own any rental properties! Actually, I’m hoping that my interpretation of this new emergency order is also totally wrong, because if not, this is sure going to be a terrific blow for all the mom-and-pop single-family home landlords  as well as all landlords throughout the state of California!

Here is part of the original post with a hyper-link to a pdf to the Judicial Council of California’s April 6th order.

The Judicial Council of California, acting under broad authority granted by Governor Newsom, halted all eviction lawsuits — otherwise known as “unlawful detainer” lawsuits — statewide. The Council’s emergency order:

• Prohibits any summons for unlawful detainer, even if a complaint had already been filed.
• Prohibits any default judgment, even where the tenant remains in the property.
• Postpones all trials for 60 days from the initial date of trial. No trial may be set any earlier than 60 days after the request for a trial is made.

The emergency order remains in effect for at least 90 days after the governor lifts the state of emergency — declared by Governor Newsom on March 4, 2020 — or until amended by the Judicial Council. The Judicial Council order will likely be in effect through August.

Here is the hyper-link to my prior post on this topic: California eviction ban

California Armageddon for Landlords

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