Page 99 - AAGLA 2020-11
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 Feature Story
properties well, treat our tenants with the respect decent tenants deserve and rarely incur a problem.
As I said, up until late-February of 2020 investments generally performed well. Unfortunately, bedlam then descended upon us. Upon arrival of the traditional seasonal virus, dubbed the coronavirus, government authorities declared it to be a near-replica of the bubonic plague pandemic. Our governor ordered the state locked down. With most citizens relegated to home confinement, millions of workers instantaneously lost their jobs as tens of thousands of businesses closed. Over the following 75 days the state’s budget surplus of $5.6 Billion became a deficit of $54.3 Billion.
If, in fact, the virus resembled the mid-14th Century Black Plague, and the actions taken were probably appropriate. However, research quickly determined it to be mostly innocuous. Findings by Stanford University in the Santa Clara County area and confirmed by a Los Angeles County survey conducted by the University of Southern California, determined the coronavirus causes no more than mild discomfort for most people. Both studies verified its mortality rate at about one in ten thousand.
Ignoring the realities, state officials began enacting rules, promoted by test-advocating epidemiologists, designed to end the pandemic by slowing the spread of the virus. The problem, of course, is slowing the spread stretches the pandemic. With no logical procedures being followed, the self-contradictory program merely dragged on and on ... to the detriment of every Californian needing to make a living.
Let’s now return to “landlording.” On March 4th of this year, for reasons mostly unwarranted, our governor declared a State of Emergency whereby he gave himself the authority to rule California by edict. Shortly thereafter he declared that tenants could no longer be evicted for nonpayment of rent. It is now more than a half-year later, and the rule is still in effect. Understandably, an increasing number of tenants, regardless of their financial abilities, have been living rent-free as many landlords are facing insolvency.
With the legislature having been back in session and now on recess, several new laws were proposed. Most notable at the time was Assembly Bill 1436 (e.g., Long-term Eviction Relief), which proposed to
continue a ban on evictions until 90 days after the Governor had voluntarily relinquished his executive privilege ... a most unlikely event ... or April of next year. Instead, the Governor signed a so-called “stop- gap” measure, Assembly Bill 3088, which protects non-paying tenants through January 31, 2021 while the State Legislature and Governor figure out a longer-term solution.
An eviction normally takes approximately five months between the issuance of a three-day notice to quit to the actual removal under a writ of possession by a deputy sheriff. Thus, the period of time a non-paying occupant can live rent-free – March 2020 to June 2021 – totals 15 months or longer. I cannot think of a less pleasing way to engage in “landlording.”
While we were viewing the proposed laws from the last legislative session, consider Assembly Bill 828 (“Eviction Moratorium / Residential Rent Reductions”). This law would have mandated an immediate 25% rent reduction for every tenant if a landlord cannot prove the reduction in rent causes a material economic hardship of at least 25%. And just to make certain few if any apartment owners escape the inevitable, the law provides that if the landlord owns 10 or more rental units, the court would have been forced to presume the landlord will not suffer a material economic hardship. I can easily imagine what this law would have done to the owner of a 12-unit apartment with an 80% mortgage loan on the building. In no time at all, the property’s equity and cash flow will entirely disappear.
As Assembly Bill 3088, the stop-gap measure, expires on January 31, 2021, we can probably look forward to some forms or portions of Assembly Bills 1436 and 828 to be proposed as a longer-term solution to assist the state’s renters at the expense of rental property owners.
A final thought: Although the concept of free rent for the tenant, together with let the landlord go hang, may seem to be a bonanza for the low- income citizen, as well as a crafty electioneering device, the not-too-distant result will prove to be unfavorable. Landlords will disappear; habitable rental units will cease to exist; and the multitude of the bereft will end up residing in the sort of decrepit structures known as communal apartments which, in an earlier era, housed the impoverished masses of pathetic souls in the Soviet Union. If this is what the authorities intend, then God save us all.
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