Do you own rental property? If so, you might be affected by the latest CDC Eviction Moratorium. The numbers and situations surrounding the pandemic do not indicate landlords will see rent-relief any time soon. In addition to national, state, and local eviction moratoriums related to COVID-19, the CDC issued its own national eviction moratorium that will remain in effect through the end of 2020.
Data from the National Multifamily Housing Council (NMHC) shows that slightly over 90% of apartment rents paid on time for September. However, the numbers for single-family houses and smaller property owners are much less reliable. That’s because independent landlords own the bulk of these properties. Currently, independent landlords don’t report numbers to a national database. It’s estimated that 97% of the nation’s nearly 23 million single-family rentals are “mom and pop” investors. Typically, these investors own one to three properties. In a broader scope beyond apartment buildings, The Center on Budget and Policy Priorities (CBPP), finds approximately 21% of all adults in rental housing were behind on the rent as of the end of July.
For single-family landlords, some typical stories go along these lines….
Tenants Stopped Paying Rent After April
Does this sound a little like the situation you currently find your Solo 401k rental in? By the middle of April of this year, about 90% (300 million) of Americans were in lockdown. A tenant in a single-family home in Alabama didn’t pay their May rent. There was lots of confusion at the time. The tenant gave multiple reasons why they couldn’t pay rent. Mostly it was about losing their job. However, it’s also a story about unemployment benefits being delayed as millions of new applications poured in. By June, the reason shifted to a member of the household being diagnosed with COVID. Then, the entire house was under quarantine with no hope of bringing in any income.
The landlord tried to work with the tenants by waiving late fees and offering alternative ways to pay the rent. But the unemployment situation was terrible and the two adults in the household were still without a reliable income. This spurred national, state, and local eviction moratoriums. June and July passed without rent collected. It’s almost certain tenants earned some income. Perhaps the income was the extra $600 in unemployment benefits. Those benefits continued into July. But the moratoriums meant that the available income was going to priorities other than the rent.
Know the Rules for the Eviction Moratorium
The Alabama moratorium on evictions ended June 1. However, some landlords had to wait even longer. Some had to wait for the CARES Act moratorium to expire on July 24, 2020, before an eviction was possible. But the landlord’s problems collecting the rent or evicting weren’t over yet. The landlord determined where he stood legally and began filing the legal paperwork. Unfortunately by then the CDC issued a new national eviction moratorium. The new eviction moratorium is effective through December 31, 2020.
The landlord understands there is a lot of chaos going on and his tenants are facing challenges. He also gets that we are all in this together. But, he’s waited for the rent payment. He offered every concession possible. Now, he feels frustrated and is unsure what to do next…
What the CDC Eviction Moratorium Means for Landlords
The CDC eviction moratorium has added to the frustration of landlords. However, one thing it seems to have accomplished is formalizing a process that tenants and landlords across America have been trying to navigate on an ad hoc basis for months. Unfortunately for landlords, the CDC moratorium does not provide any mortgage relief if rents are not paid.
Also, the CDC moratorium does not override state and local moratoriums. If any of these remain in place, landlords need to comply. Staying current with all state, county, and local moratoriums is nearly impossible. You may need to seek legal aid and advice at your local level.
Landlords that have government-backed mortgages are being offered some relief with their mortgage payments through Freddie Mac and Fannie Mae. You might also find useful resources through the Consumer Financial Protection Bureau. However, help for landlords remains limited. Additionally, landlords in a mortgage forbearance program must agree not to displace tenants solely for nonpayment of rent.
By the end of the year (when the CDC moratorium expires), some landlords are going to be more than 9 months behind in collecting rent. Forbearance isn’t even close to an ideal solution because if tenants can’t make up the rent, the landlord will still owe the back payments. On a brighter note, almost all forbearances do allow for an extended payment plan rather than making up the payments all at one time.
Forbearance Considerations
Generally, you’re going to find two possible solutions. One is extending the loan for a year. Instead of a 30-year mortgage, it becomes a 31-year mortgage and monthly payments remain mostly the same. The other option is spreading the missed payments over the remaining months of the existing 30-year loan. In that case, monthly payments will increase for the balance of the loan.
Landlords can also seek relief from property taxes, utilities, and maybe insurance. Most states have paused utility shut-offs due to nonpayment. Of course, it’s only a temporary pause and not forgiveness of the amount owed. Are the utilities are in your tenant’s name? If so, verify the tenant is paying the bills. Another risk for landlords is that the tenant does not pay the water and garbage bills. That could result in the city adding a large unpaid balance to your property taxes. It could also result in a lien on the property. Additionally, those services could be withheld from your next tenants if they remain unpaid. You might want to consider paying the service bills, documenting it, and withholding the funds from the security deposit when the current tenants move out.
Not All Evictions are On Hold
Landlords need to remember that generally, these eviction moratoriums are limited to situations directly related to COVID-19, and tenants are required to complete a sworn Declaration to the Landlord. An eviction can still take place for non-COVID reasons including:
- Engaging in criminal activity while on the leased premises.
- Threatening the health or safety of other residents.
- Damaging or posing an immediate and significant risk of damage to property.
- Violating any applicable building code, health ordinance, or similar regulation relating to health and safety.
- Violating any other contractual obligation, other than the timely payment of rent or similar housing-related payment (including nonpayment or late payment of fees, penalties, or interest).
If you’re waiting on the rent until the U.S. Congress and the Administration enacts another stimulus bill for households, it doesn’t look to be happening in the next couple months. You might want to take this issue up with your Congressional Members along with some type of rental relief for landlords.
