Real Property Law
Judicial Council Votes to End Emergency Rules 1 & 2
On August 13, 2020, the Judicial Council of California voted 19-1 to end Emergency Rules 1 and 2. Emergency Rule 1 prohibited the courts from issuing a summons or entering a default in unlawful detainer eviction actions unless the case involved public health or safety issues. It also required that unlawful detainer trials be set 60 days after a request for trial (as opposed to the 20 day rule under Civil Procedure Section 1170.5). Emergency Rule 2 stayed all pending judicial foreclosure actions other than those involving issues of public health and safety. It also tolled the statute of limitations for filing judicial foreclosure actions, and extended the deadlines for election or exercise of rights relating to such actions (contrary to Civil Procedure Section 725a). These Emergency Rules were enacted on April 6, 2020 pursuant to Governor Newsom’s Executive Order N-38-20 passed on March 27, 2020 which gave the Judicial Council authority to take necessary action to respond to the state of emergency due to COVID-19.
This vote by the Judicial Council was postponed twice, on June 10, and again on July 24. In the Circulating Order Memorandum it stated “because Governor Gavin Newsom and the Legislature are working on legislation relating to unlawful detainer actions and foreclosures, and to ensure the absolute integrity and fairness of the court system as an independent arbiter of law in the adjudication of unlawful detainer and judicial foreclosure cases, the chairs of the Judicial Council’s six internal committees propose that the council amend emergency rules 1 and 2 to sunset on September 1, 2020.”
The Chief Justice noted in the Memorandum the “the remedies sought for all the affected parties on unlawful detainer actions and judicial foreclosures are best left to the legislative and executive branches of government for open and transparent opportunities to be heard and for permanent measures and permanent solutions.”
This vote enacted a sunset date of September 1, 2020 for both Emergency Rules 1 and 2, which means that unlawful detainer actions that are unrelated to COVID-19 could potentially resume after September 1. However, Senate Bill 1410 and Assembly Bill 1436 are both currently pending as possible legislation that could be enacted in response to this sunset date for unlawful detainer actions and judicial foreclosure actions.
SB 1410 adds Section 1947.20 to the Civil Code, adds Sections 1161.05 and 1179.1 to the Code of Civil Procedure, and adds section 19535 to the Revenue and Tax Code. This bill would allow landlords and tenants to enter into a “COVID-19 Eviction Relief Agreement” which would allow the tenant to defer any unpaid rent accrued during the state of emergency and for a period of time thereafter; prohibit the owner from serving a notice to terminate the tenancy, file a complaint for unlawful detainer, take action regarding a pending unlawful detainer suit, commence an action to recover possession of the property, or request the sheriff execute a writ of possession for any deferred rent that is unpaid so long as the tenant has not destroyed the property or engaged in behavior that is a threat to public health or safety. The deferred rent will not be paid back by the tenant, but instead will be offered as a tax credit to the landlord by the California Franchise Tax Board. The tenant will then be required to pay the Franchise Tax Board the unpaid rent in the COVID-19 agreement in annual equal installments over a 10 year period. It also provides that tenants who are not able to make the annual installment payments may be eligible for a reduction or cancellation of that payment. Failure of the tenant to respond to the offer within 30 days will render it rejected. If the landlord violates the terms of the COVID-19 agreement, the landlord will be required to repay the entire tax credit to the Franchise Tax Board plus interest. The proposed amendment to Section 1161.05 of the Code of Civil Procedure states that it would apply retroactively and “any demand for payment of unpaid rent accrued during a state of emergency, and for a period thereafter, and any notice terminating a tenancy…is void if served during the state of emergency…” This would mean any notice terminating a tenancy for ANY reason served during the state of emergency would be void and would have to be re-served once the state of emergency is lifted. There is a proposed committee hearing date on this Bill scheduled on August 18, 2020. The text of the proposed SB 1410 can be found here.
Under Assembly Bill 1436 would be known as the “COVID-19 Small Landlord and Homeowner Relief Act of 2020” and would authorize a borrower to request a forbearance during the effective time (from date the statute is enacted through 90 days after the state of emergency is lifted or April 1, 2021, whichever is earlier) from any mortgage obligation by submitting a request to the mortgage servicer affirming that the borrower is experiencing financial hardship directly or indirectly related to COVID-19 and cannot make the payments on the mortgage. The bill would further authorize a mobile home owner who is a borrower on a security agreement relating to a loan or conditional sale the right to request the forbearance. Borrowers seeking forbearance would be entitled to an initial 180 days to pay plus any extensions, but not more than 12 months. There is a proposed committee hearing date on this Bill scheduled on August 18, 2020. The text of proposed AB 1436 can be found here.
We will have to wait and see what the legislature does to enact legislation in response to this rapidly approaching sunset date of September 1, 2020. The ball is in their court.
Ashley M. Peterson, Esq. is an attorney at the Law Office of Ashley M. Peterson in San Diego.