The COVID-19 pandemic has put unprecedented strain on virtually all businesses. Restaurants and retailers have few patrons, and many office buildings are nearly empty as their former occupants work from home. Meanwhile, rent payments on these properties continue to come due each month.

California has enacted emergency rules aimed at preventing a tidal wave of evictions that could have further exacerbated the economic pain caused by the pandemic. Both landlords and tenants need to know how to navigate these new measures – and should be aware that they delay, rather than eradicate, rent payment.

The state’s new rules separate unpaid rent into two time periods:  March 1 through August 31 of 2020, and September 1 of this year through January 31 of 2021.

During the first period, a tenant cannot be evicted for unpaid rent, provided the tenant completes and signs a “financial distress form” that the landlord must provide, and returns it to the landlord within 15 business days.

For rents due during the second time period, the landlord can issue a “notice to pay or quit” for each month, but must also give the tenant a financial distress form. If the tenant completes and returns that form within 15 business days AND pays 25% of the delinquent rent for each month, the tenant cannot be evicted for failing to pay the full rent.

Once authorities declare the local emergency period is over, commercial tenants have up to three months to repay past-due rent.

The statute setting forth these requirements does not expire until January 31, 2025 – a full four years after the end of the second time period noted above.

Evictions not based on delinquent rent are still allowed, but the landlord must give the tenant a warning before issuing a notice of eviction.

While the statute assumes that tenants will make good on the rent they were unable to pay during the emergency period, as a practical matter it is unlikely that landlords will be able to recover all late charges and fees owed by tenants who qualify for relief from their rent payment obligations.

Some California cities and counties have issued forms with titles like “notice to landlord of inability to pay rent,” but these generally are aimed at residential renters. Both landlords and tenants of commercial properties should consult legal counsel to get the required financial distress form, and understand their legal rights and obligations during and after the emergency period.

By Robert C. Weiss