California courts will start hearing eviction lawsuits for commercial and residential properties on September 2, 2020. The Courts’ stay on unlawful detainer cases (i.e., eviction proceedings), in place since April 2020, will end on September 1, 2020. Barring last-minute laws enacted by the California legislature to protect Tenants, the state may see widespread evictions of commercial and residential Tenants.
In an eviction lawsuit, Tenants will owe Landlords all rents not paid as of date. Tenants may also owe other lease-related costs, fees, charges, interest, penalties, late fees and/or attorney fees. Landlords will require Tenants to comply with and perform on other terms of their leases. Failure to pay or comply can result in a money judgment against the Tenant, negatively impacting credit scores and future ability to lease premises. Court judgments can be enforced against the Tenant for decades, putting Tenants in a tight spot.
However, Landlords are in a tight spot as well. Vacancy rates are at an all-time high due to the economic devastation of Covid-19. Tenants who can pay Landlords the full or majority of the rents on time are dwindling as lockdowns continue. Landlords have to consider the impact of vacancies and rent gaps on their mortgages and lenders. Eviction lawsuits cost money and can be time-consuming, especially given the current COVID-related backlog of eviction cases. This means Tenants can continue in place while the unlawful detainers are pending in Court. Even if the Landlord wins the eviction case, the Tenant may not afford to pay on the judgment, and the Landlord is now out of pocket even more cash paid for the lawsuit with only a future hope of collecting from the Tenant.
So, what practical steps can landlords and tenants take to limit losses and maximize returns? Here are tips for Landlords and Tenants to handle evictions effectively during Covid-19.
Landlords should consider consulting with a lawyer on ordinances and laws before filing an eviction and explore non-eviction remedies, and Tenants should seek advice from a lawyer to understand their options before approaching the Landlord.
How can Landlords effectively handle evictions?
How Can Tenants Effectively Handle Evictions?
AlvaradoSmith assists commercial Landlords and Tenants in rent and lease negotiations. We represent Landlords in drafting rent deferral payment plans, lease restructuring, lease terminations, and other Tenant arrangements.
Monisha Coelho represents clients – from startups to multinational corporations – resolve business and real estate disputes in state and federal court litigation. She has particular expertise handling a wide range of real estate issues involving landlords, traditional and hard money lenders, and developers. She is licensed to practice law in India and advises clients on cross-border US-India business transactions and litigation.
DISCLAIMER: The information contained herein is intended for informational purposes only and should not be construed as professional counsel or legal advice. Seek legal counsel for advice with respect to any legal matter. The information in this document may not reflect the most current developments as the subject matter is extremely fluid and may change daily. The content and interpretation of the issues addressed herein are subject to change.