San Francisco Rent Increase Moratorium:
Last week, the Board of Supervisors unanimously passed an emergency ordinance that would temporarily prohibit rent increases otherwise permitted by the Rent Ordinance.
Initially introduced by Supervisor Peskin, the ordinance is based on a finding that prohibiting rent increases will reduce risk of displacement, “which is essential for public health . . . and will help ameliorate the broader economic effects of the [COVID-19] emergency.”
The legislation is backdated to an effective date of April 7, temporarily suspending a landlord’s right to impose rent increases that are otherwise permissible under Administrative Code Section 37.3(a). This means that for units covered by the Rent Ordinance, landlords will not be able to impose even those rent increases that the Rent Ordinance generally allows—including annual rent increases, banked increases, and capital improvement increases.
Once the moratorium on rent increases is lifted, a landlord will be able to reinstate a rent increase that was deferred by the moratorium—i.e. if a landlord sent notice about a permissible annual rent increase that would have taken effect May 1 but is now deferred by the moratorium, that increase could be reinstated when the moratorium is lifted. Reinstating a deferred increase will require tenant notice. Once the moratorium is lifted, rent increases will apply prospectively from the date of the notice, without an allowance for additional amounts that the landlord could have imposed earlier had the moratorium not applied.
The ordinance would expire after 60 days, unless re-enacted by the Board. The ordinance can be reviewed here.
Proposed Statewide Unlawful Detainer Moratorium – AB 828:
Assemblymember Phil Ting’s state proposal goes even further than San Francisco’s ordinance. In addition to prohibiting foreclosure of residential property until 15 days after a state or local COVID-related state of emergency ends, AB 828 would also prohibit rental evictions and allow a court to order a 25% rental reduction for defendants in unlawful detainer actions.
The 25% rent reduction could be granted by a court as part of an unlawful detainer action that includes a cause of action for a person continuing in possession without permission of their landlord. More specifically, the bill would allow a defendant to an unlawful detainer action to submit a notice and request for an order pursuant to this provision. Following that notice, if the court determines that a tenant’s inability to pay rent is attributable to COVID-19—and that the rent reduction would not be a material economic hardship on the landlord—the court would be required to issue an order allowing the tenant to remain in the subject property, reducing the subject rent by 25% for the next year, and requiring the tenant to make the reduced rent payments beginning the next calendar month.
The tenant would have the burden of showing that the inability to pay rent is the result of increased costs for household necessities or decreased earnings due to COVID-19. However, any such increased costs or decreased earnings that occurred between March 4, 2020 and March 4, 2021 will be presumed to be a result of COVID-19.
If the court finds that the tenant’s inability to pay rent is a result of COVID-19, the landlord will have an opportunity to show that a rent reduction would result in “material economic hardship.” The bill defines “material economic hardship” as having “to limit spending on household necessities.” “Reduction in savings, profit margins, discretionary spending, or nonessential assets” would not qualify.
For owners of 1-2 rental units, the court will presume such a hardship; but for owners of 10 or more rental units, the court will not presume a hardship. In considering whether an order under this section would constitute a material economic hardship for the landlord, the bill directs the court to keep in mind “that the common economic hardship resulting from the COVID-19 virus is not the fault of any one person or group of people and so must ordinarily be born by both landlords and tenants.”
If passed, the unlawful detainer moratorium and rent reduction provisions would remain effective until 15 days after a state or local COVID-related state of emergency ends. The full bill can be reviewed here.
Authored by Reuben, Junius & Rose, LLP Attorney Chloe Angelis
The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.