How The New California Law Both Helps and Hurts Property Owners

What’s in this Article:

  • CA Gov. Newsom signed SB 91 into law on January 29, 2021
  • Owners and Property Managers may receive up to 80% lost rent money from the time period between April 1, 2020 and March 31st, 2021
  • CRAs should not include negative debt allegedly tied to COVID-19 hardship; Including this debt on credit reports adds liabilities to end-users

The world is trying to shake off 2020 and find new ways forward past the trials and tribulations that it has brought. In California, that includes solving the rental crisis that took up most of last year. California SB 91 prohibits property managers and owners from using any COVID-19 related debts as a reason to evict their problematic residents.

SB 91

  • CA Gov. Newsom signed SB 91 into law on January 29, 2021
  • Owners and Property Managers may receive up to 80% lost rent money from the time period between April 1, 2020 and March 31st, 2021
  • CRAs should not include negative debt allegedly tied to COVID-19 hardship; Including this debt on credit reports adds liabilities to end-users

The world is trying to shake off 2020 and find new ways forward past the trials and tribulations that it has brought. In California, that includes solving the rental crisis that took up most of last year. California SB 91 prohibits property managers and owners from using any COVID-19 related debts as a reason to evict their problematic residents.

SB 91

Governor Newsom signed SB 91 into law in late January 2021 as it had passed senate with no nay-sayers and only one against in the assembly. The bill, in conjunction with the eviction moratorium that lasts until March, will make it doubly difficult for property owners to get rid of their non-paying renters. However, it isn’t all bad news.

Governor Newsom signed SB 91 into law in late January 2021 as it had passed senate with no nay-sayers and only one against in the assembly. The bill, in conjunction with the eviction moratorium that lasts until March, will make it doubly difficult for property owners to get rid of their non-paying renters. However, it isn’t all bad news.

The law doesn’t just protect your end users. It will also use federal funds to help repay a resident’s debts in some cases. Depending on the resident, a property manager or owner may receive up to 80% of the lost rent money from April 1st, 2020 through March 31st, 2021. The remaining debt must be forgiven in order to accept this aid, however, refusing to forgive it means the Department of Housing and Community Development (HCD) will only pay 25% of the debt. The remaining 75% will be up in the air, then.

What it Means For Credit Reporting Agencies

If residents who were not paying rent during the pandemic earn less than 80% of the local median wages, then property managers and owners will be eligible to receive lost payments. Although the eviction moratorium is still in effect, with past debt paid for, renters might feel more comfortable moving again and resident screening report requests might increase.

If your end users accept the 80% rental assistance, then it may be good news all around. With the rental assistance your users will begin to receive, you will be able to recoup the losses from resident screening during the pandemic.

Section 2: Why You Should Care

As a credit reporting agency, Section 2 of SB 91 is very important. In order to prevent lawsuits while screening your end user’s applicants, rental debt related to COVID-19 must be ignored.

The law doesn’t just protect your end users. It will also use federal funds to help repay a resident’s debts in some cases. Depending on the resident, a property manager or owner may receive up to 80% of the lost rent money from April 1st, 2020 through March 31st, 2021. The remaining debt must be forgiven in order to accept this aid, however, refusing to forgive it means the Department of Housing and Community Development (HCD) will only pay 25% of the debt. The remaining 75% will be up in the air, then.

What it Means For Credit Reporting Agencies

If residents who were not paying rent during the pandemic earn less than 80% of the local median wages, then property managers and owners will be eligible to receive lost payments. Although the eviction moratorium is still in effect, with past debt paid for, renters might feel more comfortable moving again and resident screening report requests might increase.

If your end users accept the 80% rental assistance, then it may be good news all around. With the rental assistance your users will begin to receive, you will be able to recoup the losses from resident screening during the pandemic.

Section 2: Why You Should Care

As a credit reporting agency, Section 2 of SB 91 is very important. In order to prevent lawsuits while screening your end user’s applicants, rental debt related to COVID-19 must be ignored.

 “A housing provider, tenant screening company, or other entity that evaluates tenants on behalf of a housing provider shall not use an alleged COVID-19 rental debt… as a negative factor for the purpose of evaluating a prospective housing application or as the basis for refusing to rent a dwelling unit to an otherwise qualified prospective tenant.”

 “A housing provider, tenant screening company, or other entity that evaluates tenants on behalf of a housing provider shall not use an alleged COVID-19 rental debt… as a negative factor for the purpose of evaluating a prospective housing application or as the basis for refusing to rent a dwelling unit to an otherwise qualified prospective tenant.”

This means that you and your rental property clients will have to be careful when handling COVID-19 rental debt information . According to SB 91, rental properties will be prohibited from using rental debt related to COVID-19 when evaluating if an applicant should be approved, conditionally approved, or denied. In your screening practices, you will not be able to use that as a “negative factor… for an otherwise qualified” applicant.

As long as these terms are met, however, the non-paying or COVID-affected residents cannot be evicted, but at least they may be able to regain some of the losses. In the meantime, all there is to do is look to the future. Now you can look forward to recouping what was lost during the damage that was 2020.  

This means that you and your rental property clients will have to be careful when handling COVID-19 rental debt information . According to SB 91, rental properties will be prohibited from using rental debt related to COVID-19 when evaluating if an applicant should be approved, conditionally approved, or denied. In your screening practices, you will not be able to use that as a “negative factor… for an otherwise qualified” applicant.

As long as these terms are met, however, the non-paying or COVID-affected residents cannot be evicted, but at least they may be able to regain some of the losses. In the meantime, all there is to do is look to the future. Now you can look forward to recouping what was lost during the damage that was 2020.  

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Cole Seidner is a copywriter here at the CIC Blog. She holds a degree in Writing from Savannah College of Art and Design with a focus in creative nonfiction. Her free time is spent taking pictures of her dogs or reading deep dive analysis on movies that she hasn’t seen.

Comments (1)

  1. Joe

    Reply

    Those Dumb bastards ,out there in California are really stupid. To say the least.

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