Perspective EBRHA BOARD PRESIDENT
Wayne Rowland
Risky Business
A
t the outset of the COVID-19 pandemic, when shelter-in-place orders were imposed in California and people were essentially sidelined from their jobs, there was much talk on the part of elected officials about the need to fend off an expected tsunami of evictions that would likely result. Iterations of this concern became the justification on the part of the governor in taking executive action. But in using his emergency powers to declare an eviction moratorium for residential and commercial rental properties throughout the state of California, Gov. Gavin Newsom, in one single action, permanently changed the risk profile of owning property in California. And not necessarily for the better. Most of us, in getting into the “essential business” of providing housing for California residents, got into this field with our eyes open. None of us were expecting a free lunch. 34 JULY+AUGUST 2021 / EBRHA.COM
It’s common knowledge that owning real property has always come with its own set of risks. That’s why, at the point of sale, buyers are always advised to perform careful due diligence before plunking down their hard-earned down payment and closing on a purchase transaction. Due diligence is an essential part of buying residential real estate and typically starts with on-site inspections of a property’s condition. This, along with an examination of title, rental agreements and any contractual obligations that might encumber the property, forms a minimum basis of due diligence components. In addition to the above, because California rental housing regulation comprises a complex jigsaw puzzle of state and local housing laws, which often contain stiff penalties for noncompliance, a review of applicable state and local laws has become necessary. Having said all of that, it is still a business of “buyer beware.” Due diligence will not by itself contain the risks of owning rental homes. It can, however, help the prospective property owner identify and quantify those risks and be able to set plans in motion aimed at minimizing these known risks. I emphasize “known” risks. As to unknown risks, if proper due diligence is performed, unknown risks are greatly minimized … generally speaking. But this is California, so “generally speaking” might not apply. And that’s the problem. To that point, the various eviction moratoriums that spawned from the initial statewide moratorium are informative. Many counties enacted moratoriums while cities within those same counties enacted their own moratoriums. Some of the city moratoriums, to this day, contain provisions that directly or indirectly conflict with those of the county. Oakland, for example, which is in Alameda County, has a very different set of moratorium rules than those of Alameda County. Without getting into specifics, there are clear issues of preemption that muddle the applicability of many of its provisions. Meanwhile, the stakeholders, consisting of renters and property owners, are left with no clear guide as to which rules apply under what circumstances. To be sure, the crisscross of competing provisions between city, county and state moratoriums is prevalent throughout the state. In fact, about the only thing that all the moratoriums have in common is that they all apply broadly and without
OPPOSITE: TINGEY/UNSPLASH
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