COVID-19: Emergency Ordinance and Executive Orders – A Crash Course

Written by Apartment Management Magazine on . Posted in Blog

By Gary Ganchrow

There have been several layers of emergency executive orders and local ordinances affecting property ownership since the COVID-19 pandemic began.  These executive orders and local ordinances have seemingly come out at dizzying speeds but have not necessarily been fully consistent with each other. Some (many) have protected renters, while relatively few others were designed to benefit property owners.  The one constant has been that they are hard to keep track of.

Below I discuss a few of the rights and protections the government has provided, but I start with two disclaimers. First, I provide an overview only, and second, because of the speed at which ne rules are created, some of the dates and laws discussed below may have already changed by the time you read this.

  • The CARES Act:  Relief for Property Owners

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) allows borrowers with federally backed mortgages (typically Fannie Mae and Freddie Mac) to obtain a loan forbearance. How?  Simply by requesting one from your loan servicer and affirming that you are experiencing financial hardship directly or indirectly related to COVID-19. 

1 to 4 Unit Properties.  For properties with 1-4 units, a borrower may obtain a 180-day loan forbearance (plus up to 180 additional days upon request). During the forbearance, no fees, penalties, or interest accrue beyond those that would have accrued anyway (assuming you had made the regularly scheduled payments).  A servicer of this type of loan may not initiate any type of foreclosure process for at least 60 days starting March 18, 2020 – regardless of whether a borrower requests a forbearance.

Multi-Unit Properties (5+ Units).  By contrast, borrowers with Federally backed mortgages on multi-unit properties (5 or more families) can obtain a loan forbearance ending either on the termination date of the national emergency or December 31, 2020 – whichever is sooner.  The forbearance lasts up to 30 days initially but can be extended for two more 30-day periods if the borrower timely requests.  

For multi-unit borrowers, however, the CARES Act contains some fine print. First, to qualify, loan payments needed to have been current as of February 1, 2020. In addition, you may not, for the duration of the forbearance, evict or initiate eviction of any tenant for nonpayment of rent, or charge any late fees or penalties for late payment of rent. You also cannot require a tenant to vacate (for any reason) until at least 30 days after providing the tenant with notice to vacate, and you may not issue such notice during the forbearance period.  Also, note a potential trap for the unwary: your request to extend the forbearance must be made at least 15 days before the end of the existing forbearance period.

Parenthetically, and unrelated to the CARES Act, Governor Newsom’s March 16, 2020 Order “requests” that all financial institutions in California holding home or commercial mortgages – whether federally backed or otherwise (i.e., whether or not the CARES Act would apply to them) – implement “an immediate moratorium on foreclosures and related evictions” that relate to Covid-19. This request does not appear to prohibit foreclosures outright.  Arguably, it places some pressure on lenders when deciding whether to proceed with a foreclosure but offers no guarantees. 

  • The CARES Act Relief for Tenants

The CARES Act protects tenants also  Apart from the limit on evictions mentioned above in connection with multi-unit properties, the CARES Act prohibits all owners with federally backed mortgages receiving forbearance from initiating legal action between March 27, 2020 and July 25, 2020 to recover possession from a tenant for nonpayment (and from charging fees or penalties related to nonpayment of rent). 

Tenant Protections at the State and Local LevelsOf course, in Los Angeles and elsewhere in California, the CARES Act’s tenant protections are superfluous. Unrelated to the CARES Act, Governor Newsom’s Executive Order N-37-20 independently mandates that, through May 31, 2020, tenants receive sixty days to respond to an eviction lawsuit based on nonpayment of rent, as long as the tenant previously was current with his rent and notifies the landlord in writing before the rent is due (or within 7 days after) of COVID-19- related financial difficulties.  

Similarly, on March 30, 2020, the City of Los Angeles enacted an Ordinance that, generally speaking, prohibits owners during the “Local Emergency Period” from engaging in any no-fault evictions and evictions of residential tenants for non-payment of rent if the tenant cannot pay rent due to COVID-19-related circumstances.  The Ordinance also prohibits owners from engaging in any no-fault evictions during the Local Emergency Period and gives tenants up to twelve (12) months after this period to repay past due rent. 

In addition, as of March 30, 2020, although owners of property covered by the Rent Stabilization Ordinance could issue notices of a legal rent increase, they cannot collect increased rent until 60 days after the local emergency period expires.

Lastly, on April 6, 2020, the California Judicial Council, the California courts’ policymaking body, adopted an emergency court rule that effectively stops all evictions – whether based on missed rent or some other reason (other than those needed to protect public health and safety).  The rule – which will apply until 90 days after the Governor lifts the state of emergency– applies to all courts and all eviction cases. Therefore, as a practical matter, a property owner cannot at this time and for the foreseeable future evict a tenant – for any reason.  The Judicial Council rule also postpones the legal deadlines for filing – and extends the period for exercising any rights in – a foreclosure case.

Employee Protections.  Although a bit off-topic, there exists one more point you may need to consider: property owners and management companies with employees (including a resident manager – yes, a resident manager is an employee) should be aware that the Families First Coronavirus Response Act (“FFCRA”) likely applies to them. 

The FFCRA requires employers to provide paid sick time to the extent an employee cannot work (or telework) due to a need for leave because the employee: (1) is subject to a quarantine or isolation order or caring for someone who is; (2) has been advised by a health care provider to self-quarantine or caring for someone who is; (3) is experiencing COVID–19 symptoms and seeking a medical diagnosis; or (4) is caring for a child for whom school or child care has been closed. In addition, some employees may also be eligible for up to 10 additional weeks of paid family leave to care for a child.  Covered employers qualify for a credit against employer Social Security tax liability equal to 100 percent of the qualified sick leave wages paid by the employer, subject to the limits of payments that must be made under the FFCRA.

Conclusion.  Clearly, there are a lot of moving parts in all these emergency laws, and I suspect their ramifications will be felt and debated long after the emergency periods expire.  But don’t feel bad if you have not yet committed to memory all the rules described above.  Law firms have teams of people working overtime to keep abreast of it all.  At the very least, though, you should have a sense of the overall landscape to ensure you can comply with – and take advantage of – those rules that apply to you. 

Gary Ganchrow is a shareholder at the 107-year old firm of Parker Milliken Clark O’Hara and Samuelian, an Adjunct Professor at the USC School of Law, and a frequent contributor to AAGLA’s Apartment Age.  He regularly advises on, litigates and writes about a variety of employment, property management, and business matters, and can be reached at (213) 683-6535 and gganchrow@pmcos.com. This article is for informational purposes only and should not be considered legal advice or establishing an attorney-client relationship.

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