Extended Eviction Moratorium a Setback for Landlords

by | Sep 21, 2020 | Rental Property Management Tips

As many states were set to lift bans on eviction proceedings against nonpaying tenants, the President signed an Executive Order directing the CDC to declare a public health emergency and to implement a ban on evictions.

That ban, which began September 4, cites the need for tenants to have a place to quarantine, isolate, and social distance, and declares that eviction increases the risk of tenants spreading COVID-19 through homelessness or moving into “close quarters” with friends or family. The order carries with it a penalty of $100,000 and a year in prison for individual landlords who attempt to evict nonpaying tenants.

Because the Executive Order was issued independently of any additional stimulus package, there currently is no corresponding source of income for tenants to pay rent and the order offers no protections for landlords.

The federal eviction ban potentially covers most landlords, except those in states where eviction moratoriums are currently in place that offer the same or greater protections to renters. However, the eviction ban applies only if the tenant is covered under the order:

The tenant has used best efforts to obtain all available government assistance for rent or housing;

The person either expects to earn no more than $99,000 in annual income in 2020 ($198,000 if filing jointly), was not required to report any income in 2019, or received a stimulus check under the CARES Act;

The tenant is unable to pay the full rent due to substantial loss of household income, loss of compensable hours of work or wages, a lay-off, or extraordinary out-of-pocket medical expenses;

The individual is using best efforts to pay as much as they can in a timely manner, taking into account other nondiscretionary expenses; and,

Eviction would likely render the individual homeless or require them to move into close quarters with other people.

A Virginia landlord is one of many who say the CDC order is illegal. With the help of the New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, he has filed a lawsuit challenging the federal ban.

In what his lawyers are calling an “unprecedented overreach”, the landlord is citing a litany of constitutional issues, from blocking landlords’ rights to the courts to an abuse of agency authority. The landlord has been forced to incur costs to maintain a property where he already is owed thousands in delinquent rent, property damage, and lost opportunity income because he cannot recover the unit and rent to a paying tenant.

Virginia lawmakers chose not to extend a statewide eviction ban, which expired in August. A federal judge now must decide whether a federal administrative agency has the authority to override state landlord-tenant law. The landlord’s attorney argues that if the order is allowed to stand, “then federal power has no limits.”

The New Civil Liberties Alliance fears that this precedent could destabilize rental markets and reduce rental supply. NCLA’s Executive Director and General Counsel warns, “If Congress wants to prevent evictions, it could pass an emergency rental subsidy, but it cannot force landlords to let tenants occupy their property.”

That sentiment is mirrored in a recent statement by the National Multifamily Housing Council. NMHC President Doug Bibby is expressing “disappointment” in the Administration for enacting an eviction moratorium without any funding for renters.

Bibby calls out the discordant plan to stall evictions for failing to help renters meet their financial obligations. “Not only does an eviction moratorium not address renters’ real financial needs, a protracted eviction moratorium does nothing to address the financial pressures and obligations of rental property owners. Without mortgage forbearance protections and protections from other property-level financial obligations such as property taxes, insurance payments, and utility service, the stability of the entire rental housing sector is thrown into question,” Bibby writes.

Bibby argues that while Congress is in the best position to provide financial support such as supplemental income for renters, decisions about renter protections such as eviction are better left to local lawmakers.

The ban does not relieve tenants of the obligation to pay rent or protect them from accruing fees provided for in the lease agreement. When the ban expires December 31, all outstanding rent payments, fees, and interest allowed in the will be due in full, likely causing significant financial hardship for tenants and triggering a wave of eviction filings.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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