With the introduction of the Centers for Disease Control’s recent eviction moratorium, there has been a lot of discussion about how both renters and property managers will respond. While the order is ostensibly meant to support the real estate industry and prevent mass evictions, the order is set to have several negative repercussions, both in short-term and the long-term. The moratorium has proven so controversial that the National Multifamily Housing Council has denounced it for not addressing the financial needs of either renters or landlords.[i]
[i] Goldstein, M. (2020, September 01). U.S. Orders Eviction Moratorium for Most Through Year’s End. Retrieved from https://www.nytimes.com/2020/09/01/business/eviction-moratorium-order.html
Impact on Property Managers and Renters
For renters, the biggest problem with the moratorium is that it does nothing to address their actual financial needs, as while it prevents them from being evicted until the moratorium expires on December 31st, renters are still expected to pay everything they owe once it ends.[i] Likewise, the order does not prevent landlords from charging fees, penalties or interest, nor does it place any restrictions on how high they can go.[ii] This means that it is highly likely that when the moratorium expires, renters will owe back rent for several months, putting them in worse financial shape than they already were. So while the moratorium was made to help them, it could have a negative impact in the long-term.
[i] Lieber, R. (2020, September 02). The New Eviction Moratorium: What You Need to Know. Retrieved from https://www.nytimes.com/2020/09/02/your-money/eviction-moratorium-covid.html
[ii] Vetstein, R. (2020, September 3). CDC eviction moratorium lawsuit legal challenge. Retrieved from http://massrealestatelawblog.com/tag/cdc-eviction-moratorium-lawsuit-legal-challenge/
Property managers are also facing several challenges due to the moratorium order, especially smaller landlords who own a few units and count on that rent for their retirement.[i] Likewise, the lack of funds could make it more difficult for landlords to make repairs and cover the mortgage[ii] Granted, some local districts have questioned whether they have to follow the order, but there are major consequences for those who oppose it. If a landlord evicts someone and that person becomes ill, it could result in a fine of up to $100,000 and/or one year in jail, and if the former tenant dies, that fine rises to more than $250,000. Furthermore, if an organization is found guilty in this situation, the fines are $200,000 and $500,000 respectively.[iii] All of this means that landlords must take great care not to violate the order.
Along with the added pressure on landlords and renters, the moratorium could have a serious impact on the housing market as a whole, destabilizing it even more COVID-19 itself has.[iv] Industry experts have pointed out that back during the Great Recession, many private equity firms bought up single-family homes as the economy struggled, resulting in housing that was far less affordable. There are concerns that the same thing could happen to rental properties due to a loss of income brought on by the moratorium order.
[i] Badger, E. (2020, September 03).
[ii] Badger, E. (2020, September 03). Why an Eviction Ban Alone Won’t Prevent a Housing Crisis. Retrieved from https://www.nytimes.com/2020/09/03/upshot/eviction-moratarium-rent-crisis.html
[iii] Lieber, R. (2020, September 02).
[iv] Badger, E. (2020, September 03).
What Property Managers Can Do Amid the Chaos
First of all, it is important for landlords to realize that the moratorium order does not completely prevent them from making evictions. Only evictions related to nonpayment are covered by the order, so other grounds for eviction are fair game. Under the following scenarios, an eviction is still permissible: [i]
- The tenant is engaging in criminal activity while on the [leased] premises.
- The tenant is threatening the health or safety of other residents.
- The tenant is damaging/posing an immediate and significant risk of damage to property.
- The tenant is violating any applicable building code, health ordinance, or similar regulation relating to health or safety.
- The tenant is violating any other contractual obligation other than the timely rent payment or similar housing-related payment.
Additionally, there are limits to what the order itself covers. For one, the tenant needs to provide the CDC declaration in order for them to qualify, so if they fail to do so, the landlord can commence with an eviction. That said, the tenant could respond by filing the declaration, which would mean that the eviction is then stayed until January 1st, 2021.[ii] Still, if the tenant does not deliver the declaration, then you can move forward with the eviction normally.
Landlords can also examine the tenant under oath regarding the truth of the statements they make in the declaration, [iii] which can be surprisingly open to interpretation. The wording used in the CDC declaration is quite subjective, with tenants claiming that they have used their “best efforts” to obtain available government assistance and make repayments, and that eviction would be “likely” to leave them homeless or force them to live with others in “close quarters.” This wording can make it difficult for tenants to definitively prove that that meet the order’s requirements,[iv] leaving room for interpretations and offering landlords the opportunity to try and evict nonpaying tenants if they disagree with their self-assessment.[v] There are also state and local laws to consider, as some of them might contradict the CDC’s order in ways that were not anticipated.
The eviction moratorium will likely lead to conflict between renters and landlords, keep in mind that both parties are facing challenges. Sure, it is certainly possible to charge interest and additional fees for renters, or to challenge their CDC declarations in court. Yet in many cases, it might be better for landlords to work with their renters privately to come up with a mutually beneficial arrangement, making the moratorium order a moot point. After all, the order is going to have short-term and long-term consequences for renters and landlords alike, so it is in both of their best interests to work something out separate from the federal government.
[i] Lightfoot, X. D., & Wells, H. R. (2020, September 3). CDC Enacts New Residential Eviction Moratorium. Retrieved from https://www.natlawreview.com/article/cdc-enacts-new-residential-eviction-moratorium
[ii] Vetstein, R. (2020, September 3).
[iii] Vetstein, R. (2020, September 3).
[iv] Lightfoot, X. D., & Wells, H. R. (2020, September 3).
[v] Lieber, R. (2020, September 02).
It is hard to say what the future will look like, but the CDC’s eviction moratorium will likely lead to serious political and social conflict. That said, we at CCSK Law are here to help landlords and other property managers navigate these difficult and uncertain times. If you are in need of practical legal advice regarding the moratorium order, please contact call us at (219)-230-3600 or contact us via email at firstname.lastname@example.org.