The following blog post is a time-stamped, full transcript of Bob Preston’s interview of Tracey Merrell of Kimball, Tirey & St. John LLP. The episode was recorded May 7, 2020 and published on the Property Management Brainstorm Podcast. The audio version of this podcast can be found at this link of the North County Property Group website, as Episode 37- Landlord/Tenant Law during COVID-19: Property Management Brainstorm Show.
Bob Preston: 01:10 What's going on Brainstormers? Before we get started today, I'd like to offer you a copy of my new eBook called Best Practices for Renting Your Home. It's a quick read and offers all of my tips from being in the property management business for over 20 years. Navigating the pitfalls and safety nets that come with being a landlord. The eBook has recently been published and is offered as a free download on the North County Property Group website. Find it at this web link and download it for free. www.ncpropertygroup.com/ebook that's ncpropertygroup.com/ebook. Welcome Brainstormers, this is Bob Preston, your host broadcasting the Property Management Brainstorm show from our studio at North County Property Group in Del Mar, California. If you're new here, please subscribe so you have ongoing access to all of our great episodes and if you like what you hear, please pay it forward with a positive review in any state where you may be acting as a landlord or property manager. It is of course always important to stay current on legislative changes that impact landlord tenant law. This is very true in the state of California where there are many new laws from the 2019 legislative session and more recent aspects in 2020 specific to the COVID-19 pandemic. I have with me today as a guest on the show, Tracey Merrell, managing attorney of education at Kimball, Tirey & St. John, a full service real estate and business law firm with one of their areas of practice being residential landlord tenant law. Now, before I introduce Tracey, I want to make it clear to our listeners that the content of today's episode is within the context of the laws and the state of California. If you are listening to this episode outside of California, I think you will still find it interesting and useful, but you should study and clarify the laws specific to your own state and local jurisdiction. So, with that as the backdrop, Tracey, thank you for joining me on property management brainstorm.
Tracey Merrell: 03:15 Thank you so much. I appreciate it.
Bob Preston: 03:17 Hey, first off, I just want to say that I hope you and your loved ones are staying safe and healthy. This is kind of a crazy, unprecedented time, right? Surrounding us as the COVID-19 pandemic and you were kind enough to come on the show today.
Tracey Merrell: 03:29 Oh, I, yeah, my family is doing well. I'm, I'm trying my best to make sure that my parents don't go to the grocery store because they are in that older section. I'm not going to say how old, but they're older. So I make sure that I help them out. And then, uh, my husband and I are sheltering in place doing what we need to be doing.
Bob Preston: 03:47 A good place for you to start Tracey would be telling us a little bit about yourself and your area of practice at KTS.
Tracey Merrell: 03:55 Uh, yes. Uh, I've been an attorney since, uh, 2009, so just over 10 years and I've only ever practiced landlord tenant law. I have represented, um, the banks and post foreclosure evictions, uh, transferred over to property management. Um, when those post foreclosure evictions were halting and I was a trial attorney for a very long time going to court every single day. So it's a really good, um, use of the um, practical versus, um, theoretical area of law. And now I do education for Kimball, Tirey & St. John because we practice preventative law, trying to teach people compliance rather than getting them punished at the end.
Bob Preston: 04:38 I know we're presenting a lot of material today that's a little bit sensitive and you have a disclaimer I believe you'd like to read to get started.
Tracey Merrell: 04:44 Yes. Um, we uh, have a risk management disclaimer because we don't just protect you, we protect us too. And so I just want to say that the comments made in the broadcast are going to be general information only and is not going to be intended as legal advice, participation or um, listening to the podcast is not going to create an attorney client relationship with myself and the listener or with Kimball, Tirey and St. John and the listener advice on specific legal issues. Please do contact an attorney because they are going to be the person that's best representing your needs. We are going to be discussing new laws and legislative updates as well as all of these new laws related to COVID-19 and they're not exhaustive and are potentially fluid situations. They have not been interpreted yet by the courts. So, the laws are going to change, and we are giving you the information as we have it at this point in our best proposed interpretation.
Bob Preston: 05:37 Very good, fair enough. And that's good information. So, I think a good place to start is that all of our listeners at this snapshot in time, Tracey I'm sure eager to hear the latest updates in California on being a landlord during the COVID-19 pandemic. So I'm hoping you can kind of bring us up to speed on the key aspects as landlords and property managers on what we should know.
Tracey Merrell: 05:57 Um, good to know that first of all they've been passing legislation on every level of government from local ordinances to statewide ordinances and um, statewide executive orders. For example, um, Gavin Newsome, uh, has passed, um, two different executive orders that relate to uh, evictions and he's passed a lot of executive orders related to the pandemic, but two specifically for evictions. The first one that he passed was N-28-20 and that essentially gave permission to local jurisdictions to pass their own protective eviction laws. Uh, it didn't actually give any protections in and of itself, but it gave the local ordinances a chance to protect, um, tendencies based off of certain circumstances. It also protected tenancies based off of penal code 396, which is those price gouging laws. And so that is going to be an additional protection, uh, giving, um, tenants in place, uh, protections against, uh, evictions on, uh, penal code 396. It extended it past the normal 30 day to uh, May 31st window and it also asked housing authorities and local municipal, foreclosures and bank entities to hold off on foreclosures, but in and of itself did really nothing to protect a resident. He then thereafter passed a secondary ordinance N-37-20, um, uh, an executive order and that itself did protect tenants and grant protections to tenants.
Bob Preston: 07:36 And that supersedes and 28 20, correct?
Tracey Merrell: 07:38 It, it doesn't, it doesn't, it's supersedes it when it comes to any conflict between those two ordinance, between the executive orders.
Bob Preston: 07:46 Got it. Okay. Makes sense.
Tracey Merrell: 07:48 But it gave its own protection, so it's not going to say that all the things that he gave per, you know, opportunities under 28 is going to be suspended. It's still an act. But anything that is con contrary to itself and N-37 is going to supersede it.
Bob Preston: 08:04 All right. So, what are some of the specifics of N-37-20 specific to eviction moratorium and tenant protection?
Tracey Merrell: 08:13 Well, what it does is it actually gives a tenant 60 additional days to respond to any lawsuit above and beyond the 5 days plus service. So normally evictions are done on a summons that is 5 days only. Um, you get 5 days of his personally served, but you get 5 plus 10 if it's substituted service. Um, so that's normally between 5 and 15 days. He has added an additional 60 days on top of that. So, you might have 65 to 75 days to respond to a lawsuit rather than just 5. That's the first protection. The second protection that he gives is that he says that we are not going to proceed on writ of possession. We are not going to execute it during this pandemic time. Um, so even if you did go to trial, you got your writ, you were able to proceed with a lockout. They are not going to proceed on the lockout until May 31st, which is the estimated time at this point on when we think this pen pandemic might see, um, maybe a, a light of hope in the future, but it theoretically could be extended.
Bob Preston: 09:21 Right. And from a practical standpoint, the courts are still closed anyway, right? I mean just practically speaking.
Tracey Merrell: 09:26 Um, yes and no. Also it depends. That's another lawyer answer. It's always a lawyer answer. Right. That's great. But uh, yes, the courts are closed to the public. They are, they are open technically for business but only for, um, the parties that are necessary to conduct business. Um, the unlawful detainer courts are still technically open for ex party motions and things that are emergencies. They are also able to file cases because his protections only apply to nonpayment of rent cases related to COVID-19. Obviously there are other types of cases that can be filed in the court system and his executive order really doesn't affect that aspect. So we can go to court and seek things, but um, not mostly everything is also otherwise canceled.
Bob Preston: 10:14 Sure. Now there are some stipulations on the tenant side, right? They have to meet certain criteria or qualifications for this protection.
Tracey Merrell: 10:20 Correct. Um, tenant should be current on rent as of the 27th, which is when N-37-20 was enacted. Actually it says tenant previously paid rent. So there's two interpretations of that. Um, previously paid rent ever or maybe they're a brand new tenant who's now telling everybody they don't want to pay. So, um, theoretically one interpretation is that they were current on rent prior to March of 2020. That's the first one. The second one is the tenant notifies a landlord within a reasonable amount of time, but not to exceed seven days of the rent becoming due that they have an inability to pay part of or all of the rent due to COVID-19.
Bob Preston: 11:04 So if rent is due on may the first, then they would have till May 8th technically to notify their landlord that they're unable to pay rent.
Tracey Merrell: 11:12 Correct. And so all they have to do is let them know. Um, and pretty much I think almost any form that they are in a bit, they have the inability to pay and they also have to retain documentation that proves that they have an inability to pay due to COVID-19 reasons that could be one of three types. You either have an inability to pay the rent because you yourself are not working because you were sick with COVID-19 or you're caring for somebody who's a household member or family member who's sick with COVID-19 or you had a loss in hours or income due to job layoff, furloughs or even a reduction of hours due to the reduction of hours of the business being open. And then third, you have an inability to pay because you are unable to work due to a child who is needing childcare. And who was, you know, had a school closure due to COVID-19. So any one of those three reasons.
Bob Preston: 12:09 Right. And the key is it has to be specific to COVID-19 it can't be just that, Hey, out of the blue, I'm not able to pay rent. I mean it has to be specific due to hardship from the pandemic.
Tracey Merrell: 12:19 Correct. And those are the three um, set outs that they, that they had mentioned particularly.
Bob Preston: 12:25 So you mentioned tenant documentation that they have to retain that. Do they have to show that to the landlord at the time that they're making their forbearance request?
Tracey Merrell: 12:34 Not according to the text of N-37-20 it says that they are to retain it and to give it upon when rent is due or eventually paid. It doesn't necessarily mean that they have to give that to you within the seven days, at least according to this executive order on this level. So that's going to be something that we look at. There are local moratoria that may state that you have to provide it, but this itself does not say that it must be given to you at that time. It just says retain it for when you do pay the rent.
Bob Preston: 13:07 Yeah. So hold that thought about local moratorium cause I want to ask about that in a minute. I guess the other question is, are landlords, if someone suggests to you that they're unable to pay rent, and as a landlord I engage in that conversation, am I allowed to ask them when would they be able to pay or negotiate with them on some kind of a repayment plan?
Tracey Merrell: 13:26 I would be careful about what you do. And I would again, um, remember that there are more than one level of legislation to look at about your abilities to do it or not. I would say that this does not, um, this executive order does not tell you that you cannot do it. But I would say let's be practical and let's be reasonable about what we're saying to our residents. Because I will say as an aside, I was listening to some city council meetings that were several hours long and they just had story after story of tenants being bullied during this time. So whatever communication you do use, you want to make sure that you are open and that you're not seeing or you could not be seen as being aggressive or bullying in any way. So I would say you probably could ask for it if they're willing to give it. If they say no and you're not entitled to it under a local ordinance, let it lie because you don't want to be a bully.
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Bob Preston: 15:31 Okay, so let's talk about kind of the local level impact now. So Gavin Newsome did his executive order statewide and how those get implemented at the local level and the nuances may be applied a little bit differently in all these cities and counties we have around California. Right? I know there are too many cities and counties to cover it all, but how does that work? Which one takes precedence?
Tracey Merrell: 15:51 Neither one of them, um, says that they take precedents. In fact, Gavin Newsome is going to allow a city to a write additional protections. These are kind of the, the lowest bar that you're going to get is statewide. Nobody's going to be able to be evicted and they will have an additional 65 or 60 days to respond. Those are the bare minimum, but you're going to look at that in conjunction with your local levels because those local levels might provide additional protections because the only two things that Gavin Newsome and N-37-20 said is, A, you get more time to respond to a lawsuit and B, you're not going to have a lockout. Um, executed. Now there's a myriad of other things that can happen, um, that may not even take into account. N-37-20 there are certain areas that says no, you cannot serve a notice. No, you cannot file a case and no, you cannot prosecute an eviction. So, at that point, um, I don't think Gavin Newsome protections are really, you know, matter and they might be moot. They're still there and they still cover the tenant, but they're moot because if you can't file a case, it doesn't matter that they get an extra 60 days to respond because you can't even file. So you do have to look at that, those local ordinances. And again, try and see if you can reach out to your local cities or counties to see if they've passed because they don't tend to tell us. You actually have to go to the city and see whether or not they've passed something.
Bob Preston: 17:19 Okay. So then subsequent to Gavin Newsome's executive order N-37-20 on April 6th, I think it was, the California judicial council adopted what they're calling the emergency rule one and that effectively stopped most evictions stay wide for the foreseeable future. Where does that play into all this?
Tracey Merrell: 17:37 Well, um, the judicial council had emergency rule one, which essentially was I think about 11 rules. Um, and for, with respect to evictions because it is an emergency rule affects all cases that are in California, all judicial issues. But the ones that really apply to evictions is A, you cannot issue a summons. They will not issue you a summons when you file a lawsuit. So if you are able to file a lawsuit in your jurisdiction, they will not issue you a summons. And our complaints for eviction are a summons legally requiring a tenant to come to court and respond to the lawsuit we have filed and a complaint. The complaint is the factual basis on why we're suing them. So if you have no summons, then you can't legally serve someone, which means they don't have to come to court. The only time you're going to get a summons under the emergency rules is if it's relating to health and safety. And in order for you to get that, you have to file an ex-parte motion before the court so that a judge can review your case and see whether or not this health and safety issue warrants a summons being issued. So it's going to lengthen the time of your case A, and B, It's going to increase your costs of your case because you are now paying a lawyer to prepare, file and serve a motion and then appear at that ex-parte motion to get the permission to file that order. So that's the first issue on emergency rule one. The second one is that there are no defaults or default judgments unless they're also for health and safety reasons. So, let's say you are able to serve, and that timeline has expired, the clerks of the court probably will not give you a judgment or a default all by themselves. They are going to be looking to a judge to give them the authority to file that judgment, in which case again, you're filing a motion to go before the judge and prove to the judge that A, you serve them and B, this as health and safety and let us move forward. So again, more time, more money to push your case forward. And then, um, lastly what the rules did is it set those trials out an additional 60 days after the request. Traditionally a case for trial, once we request trial, it should be set within 21 days of the request being made. Those are the judicial council rules and those are the timelines that we have throughout the state. Right now they're asking us to give a 60 day requirement. So, it's all essentially giving the tenant three times as long before their trial gets a trial date. So, that's going to obviously once this is all over, extend those days as well.
Bob Preston: 20:24 And there's probably just going to be a backlog, push things out. I'm sure.
Tracey Merrell: 20:27 It's an avalanche of cases. I'm speaking as a former trial attorney, it was already extremely difficult to get your case to go to trial, especially when there was a jury trial demand because the trial attorneys would be ready to go forward. But those defense attorneys would say, I can't possibly go forward. I have 20 cases here today. I can't go forward in all 20 so that was before a pandemic and before we stopped doing evictions or filing evictions essentially for three months, there's going to be an avalanche of cases after that.
Bob Preston: 20:57 Wow. Incredible. So in Sacramento, and I'm not exactly sure of the timing on this, Tracey, so you can bring us up to speed, but at the state assembly level, I understand there's a possible new bill that's being proposed in the works called AB-828, which may among a lot of other things I think require that rental property owners reduce their rents by 25%. Do I have this right? And can you tell us a little bit about AB-828?
Tracey Merrell: 21:21 Um, we tend to not make discussions or discuss legislation that is pending as a law firm just because we have ethical duties and concerns related to, um, whether or not we participate in this kind of role. It's more of a lobbyist and, um, association. If you want to have a say in this, um, talk to your local associations and talk to your local lobbyists who are representing the interests of landlords. Um, but I can say that, um, the, it looks like they're trying to reduce rents by 25%. Um, or is it going to pass? We can't talk about that and I can't really talk about what it potentially also will do because during the legislative process, through lobbyists, the, there are constant amendments to these laws, um, and trying to see if they're going to get passed or not, which is another reason why we as lawyers don't comment on them. Um, because we deal with the laws as we get them once they're signed, we don't pontificate on what it could be. But I would say that if a law like this were to pass, I don't think it should, but that's a personal level. If it were to pass, I would say that there would be several grounds on which to attack it. Essentially it would be illegal taking of real property without justification, which you're not allowed to do. Cause you're telling people what their property is valued at. And also there's a problem with equal protection. Um, currently at least the way we are looking at it. So even if it is passed, I think that landlords, if they start to use their power, their strength, their, their resources, they should be able to try and argue and fight this. I would urge you to do that if you are afraid of something like this because no resources are ever given to landlords to protect your interest on the state level because California is a renters state. And in order for you to get fair and meaningful laws and you need to make sure that you're exercising your rights and your political power.
Bob Preston: 23:24 Okay. Um, and that's really good summary and I appreciate your resistance to say too much about it. Do you think that this was something, this rent reduction, was this something that was in response to COVID-19 or was it already on the table before the pandemic?
Tracey Merrell: 23:38 Um, over the last I think 5 or 6 years, even 10 years, as much as I've been an attorney, a law seemed to get worse and worse and worse for landlords. Um, is it something that they might have tried to do in the, in the past or had an idea? Um, maybe, I don't know, I can't tell what people say or think, but I will say that probably COVID-19 has given them an excellent reason or backdoor on trying to get this to happen.
Bob Preston: 24:03 Sure, absolutely. One of the other new laws put into effect in 2019. In fact, you brought it up earlier about price gouging, but AB-1919 related to price gouging during California States of emergency. Well, we're in one right now, right? Ours in California with the COVID-19?
Tracey Merrell: 24:18 I have heard a few cases of price gouging. In fact, if you listen to any of Gavin Newsome's speeches or even Eric Garcetti’s speeches with, um, with respect to LA, um, they do mention price gouging, not with respect to, um, landlords and tenants per se, but versus with respect to all the medical products that we need. Right? All these 95 masks, the, uh, the toilet paper, the, um, hand sanitizer, um, sanitizer for some reason was $4 on Amazon. And then once this pandemic started, some of those prices became $80 for the same amount of hand sanitizer. Essentially what AB-1919 was intended for and I think was probably, probably more so to our yearly fire issues that we have throughout the state of California, wherever there is a person who is qualified to issue a state of emergency and pretty much um, Gavin Newsome has issued one, he issued one on may on March 4th before President Trump issued one. Um, I think like a week or two later he issued a state of emergency but not so, not just Gavin Newsome. Pretty much every mayor or city or city manager throughout the entire state of California have also all issued states of emergency. There is something happening at this moment and because of that we are going to protect our citizens from people who are going to use this in a way that hurts us as a society. I think it was meant for fires because there were cities that were completely demolished by the fires, especially in Northern California, entire areas that have no housing left. So because there is no housing and because there's maybe a lack of hand sanitizer, obviously, um, Adam Smith's invisible hand makes the value of those properties go up. But if we have a state of emergency, there are certain things that you cannot increase by more than 10%. You can't increase pricing for housing. You can’t do increases for building material if there is a fire and we need to build, you can't issue, um, issues for medical purposes. So, we actually, if you didn't know prior to COVID-19, we actually were already under a statewide emergency with some aspects with the previous fires that were in November and December. Um, there was some rules on reconstruction, um, that were still in place as well as, um, some counties that had rules on price gouging throughout their entire year. You couldn't increase the rent for 10 per more than 10% for the whole year. That was Mendocino County, Sonoma County, Los Angeles County, um, Ventura County, all of them had a price gouging limit on rent increases through December 31st. Now we have a secondary one. Um, because of COVID-19 and N-28-20 added additional price gouging through, um, May 31st. The easiest way for you to look at this is there is a website on the California Department of Emergency Services which has OES. Um, they have a webpage that they are required to have by law that tells us when there's a state of emergency, what it's for and when it terminates. And you need to keep that in mind always, not just within COVID-19 but always when you are doing vacancy decontrol because it does apply to vacancy decontrol units as well.
Bob Preston: 27:44 Wow, that's super interesting. So yeah, I didn't put that together. I had heard about it when I heard you guys speak at the NARPM session in Palm Springs and I didn't quite understand what it applied to, but it makes perfect sense. You know, in California we have a lot of wildfires, maybe occasional earthquakes and more natural disasters. COVID-19 obviously a little bit different. Wow. We've covered a lot of ground today. This has been amazing. Tracey, I'm a big storyteller. When I meet new people, I mean I don't like to tell long stories, but I think it always helps me connect with someone who I'm just meeting for the first time and I know you've got to have a lot of stories either from your days as an attorney or perhaps you know something that's happened in your personal life growing up or in school or whatever. Do you have something you'll share with us as kind of a Tracey story for our listeners?
Tracey Merrell: 28:28 I have so many stories, especially when it comes to trial. I feel like I have seen it all and then someday somebody in court shocks me still and I still don't understand it. But I would say one of the things that kind of guides me as an attorney and as a, as a person and as an advocate is probably the first four years of my practice. I was a foreclosing attorney for those banks and really what it taught me is sometimes people just want to be treated like they're people. They just want to be heard and you're going to get so much more out of people when you treat them like they're people and not just like a tenant. There are people out there and there are tenants or landlord, um, attorneys out there who like, I hate tenants. I hate all tenants. I don't think that's necessarily the best way of reaching out to people because it just breaks down the communication and it puts us on two different walls, like tenants versus landlords. And it's really not a tenants versus landlords situation. You get so much more out of the relationship if you treat them like a person and on, and I get treated like a person. So I listened a lot when I was a foreclosing attorney and I tenants to tell me, or sorry, most of the time they were former owners to tell me thank you when I evicted them, who would have thought that? You know, but.
Bob Preston: 29:49 Well you took the time to listen it sounds like.
Tracey Merrell: 29:51 Exactly. So that's what you have to do. Especially now with COVID-19 you can't just hit people with your stick of eviction right now. You have to be warm and open and listen to them. Are you able to pay the rent? What are you able to pay? Let's work on this together. Maybe you work on a payment plan that goes beyond what you're required. Maybe goes beyond the six month period because they might need that extra time for something else, and if you listen to them, they are probably going to be loving you as a person for treating them like they're a person. Because this is an unprecedented time. Those foreclosures were unprecedented times because it was the recession and life happens. That doesn't make you a bad person. So many tenants think that they are bad people when they get evictions and they're not because it is just what life happens to people. And if you treat them like our person, they're going to respect you and they're not going to give you as much of a hard time as those angry tenants are going to.
Bob Preston: 30:45 That's terrific advice, especially during these days of the COVID-19 pandemic when everybody's reeling right in some way or another. Either you know somebody who's been impacted or your work has been impacted or your personal life has impacted. Just working from home. My gosh, you know what a what a big change it is for many of our tenants and the way they're running their families. This has been an amazing conversation. I'd love to continue. We could probably talk for the rest of the day, but in the interest of time, I need to wrap up the episode. Any last words or thoughts of advice for our audience today?
Tracey Merrell: 31:16 I want to just say try and educate yourself as much as possible there. There are so many laws that even us attorneys have a hard time catching up and so we try to make sure that we give you as much information as possible. Go to our website, www.kts-law.com we do have an education section. We have articles up, we have information up, we have past webinars up. Those are all broken down into one hour increments and you'll get so much out of them and they actually do not cost all that much. It's an attorney's time of an hour, um, for only $29 and it teaches you everything that you possibly can get reach out and go to our website. Also, with respect to COVID-19 we have created a spreadsheet on court closures as well as a spreadsheet on a lot of the local moratoria. I've spent a great number of hours on researching and trying to find these ordinances, so go to that first before you ask or spend money because we try to educate you as much as possible for as little as possible. But we are always welcome to have your phone call to help you with your specific section.
Bob Preston: 32:26 And if someone wanted to contact KTS, would they go to the website? Is there a phone number or an email? How would they do that?
Tracey Merrell: 32:33 We do have a couple of ways. Obviously, we have the website which might be your easiest method right now. Our physical offices are closed and compliance with a stay at home order and trying to flatten the curve, but we do have all of our attorneys up and working. They are all working remotely. You can call them, you can email them. If you haven't emailed an attorney before at our office, email us email@example.com and dash is also that hyphen in case you don't know which one I'm talking about, but email us at firstname.lastname@example.org tell us where your area is because again, we do cover the entire state of California and just tell us the address and what the property is and we will be able to address it to the attorneys that can help you the best.
Bob Preston: 33:21 So for our listeners in California, I can attest KTS has been fantastic, very responsive, lots of good information that they're prepared to share. Terrific resource, a fantastic legal firm. Thank you Tracy. This has been good stuff. I so appreciate you joining our show today, especially during these difficult times around the COVID pandemic. As we wrap up today, I'd like to make another quick plug to our listeners to click on subscribe and give us a light. Also, please pay it forward with a positive review to help encourage more great guests like Tracey to come on to our show. And that concludes today's episode. Thank you for joining the property management brainstorm show. Until next time, we will be in the field working hard for our clients to maximize their property value and rental income and maintain top tenant relations.
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