AB3088 Brings Some Certainty to Investors During the Pandemic

At the beginning of the month, California passed AB3088, a new tenant relief act that was a compromise between tenants and landlords. Known as the Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020, the new law provides certainty to renters and some protections for small landlords. It extends the eviction moratorium through January, and requires that tenants show evidence of lost income due to COVID-19 in exchange for non-payment. In addition, tenants must pay at least 25% of rent during the moratorium period. The law has been well received among landlords.

“The biggest advantage of AB3088 is that it helps provide certainty during these uncertain times,” Sean Burton, CEO of Cityview, tells GlobeSt.com. “The regulatory landscape across California was a patchwork of local ordinances, and AB3088 allows for a more streamlined state approach that provides increased certainty for tenants and landlords. In some jurisdictions, AB3088 provides tenants with additional protections not afforded to them by local ordinances, while in others it may curb certain tenant protections. But by providing a consistent statewide approach, it helps to alleviate the confusion and uncertainty that many tenants and landlords were facing. In addition, AB3088 provides for notice requirements that allow everyone to be aware of the obligations of and protections for tenants and landlords, helping to ensure mutual understanding of the requirements.”

Although this new bill increases the burden of proof for non-payment and requires some rent payment, it still has the potential to impact rent collections. At CityView, however, rent collections have remained healthy through the pandemic, and the owner has worked with tenants. “We have been pleasantly surprised that our collection percentages have been in the high 80s to mid-to-high 90s based on asset class. We did not see the high delinquencies that we were perhaps anticipating at the start of the COVID-19 pandemic,” says Burton. “We are seeing genuine cooperation from tenants and a willingness to pay when possible. For those tenants for whom COVID has impacted their ability to pay all or a portion of their rent, we have remained in constant communication and are working with them. We will continue to work with all our tenants as we navigate through these uncertain times.”

This is the first extension of tenant protections, but with the pandemic seemingly unwavering, it is hard to tell if there will be additional extensions. Burton agrees that the additional legislation is hard to predict. “So much of the continued response depends on future conditions, which are not yet known,” he says. “The continued infection rates, success and timing of a vaccine and the outcome of the election, including at federal, state and local levels, as well as a number of other factors, will impact the continued effects of COVID-19 and how we as a society react those future conditions.”

However, he also adds that aspects of the bill show that legislators are trying to create balance. “The 25% requirement under AB3088 does indicate that the State wants to create a balance between providing tenant assistance and providing for some income to landlords, who have continued obligations to maintain the buildings and pay debt service,” he says. “We’ve had success not just relying on the law, but in creating a partnership and open dialog with our tenants through frequent communication. This approach has allowed us to keep our collections high while working to help those tenants who have communicated to us that they are being adversely impacted by COVID-19.”

While landlords have accepted the bill, many tenants rights groups say that the bill doesn’t go far enough to provide protections to tenants. Burton, however, says that he has seen a positive response to the new law. “In general, I believe that many people feel this was a balanced approach to the problem because it provides certainty to all parties, giving tenants needed relief and allowing for some limited payments to landlords to provide them some support in maintaining their ongoing obligations,” he says. “While some groups oppose it on both sides of the argument, thinking either that it did not go far enough for tenants or that it went too far, it appears to have accomplished its goal in the multifamily space to provide a consistent statewide approach to granting tenants protection from near-term evictions.”