The federal CARES Act was signed into law on Friday, March 27, 2020. The Act contains several provisions which prevent eviction of residential tenants for a one-hundred twenty (120) day period, called the “Moratorium Period”.
Under § 4024 of the Act, the eviction “Moratorium Period” began March 27, 2020 and ends on July 26, 2020. The eviction Moratorium applies to a landlord with tenants living in a “covered dwelling” as defined by the CARES Act. During this Period, the landlord of a “covered dwelling” cannot initiate legal action to evict the tenant due to nonpayment of rent, nor can the landlord impose any fees, penalties, or other charges on a tenant for late payment of rent.
The term “covered dwelling” means property such as an apartment building, nursing home, group home, seasonal facility, residential facility, mobile home, condominiums and single family homes occupied by tenant pursuant to a residential lease or even without a lease or a lease that is terminable under State law. Additionally, “Covered Property” is also defined as property pledged as security for a “Federally backed mortgage loan,” as defined by the CARES Act.
The landlord must wait out the 120-day Moratorium Period to collect rent and evict. If a landlord chooses to evict, then they must give at least a thirty (30) day Notice to Vacate for non-payment and another thirty (30) days for tenant to vacate. If the tenant stops paying rent, it will be at least one-hundred eighty (180) days before the landlord could lease property to a new tenant. If the tenant violates other material aspects of the lease agreement unrelated to the payment of rent, a landlord may initiate an eviction proceeding immediately.
At the end of the Moratorium, tenants will owe back rent for the last one-hundred twenty (120) days. There is no provision waiving the rent payments permanently, meaning the Moratorium period defers rent payments, it DOES NOT waive rent payments.
The downside of the CARES Act for Landlords is that if any landlord had not already executed an eviction order before March 27, 2020, then any tenant may continue to occupy the property during the Moratorium Period without paying rent.
But the CARES Act also gave landlords a break too. Sections 4022 and 4023 provide the forbearance of payments from all borrowers of a “Federally backed mortgage loan”. To obtain a forbearance, the single-family borrower must attest to his/her loan servicer that the borrower is experiencing financial hardship due to the Coronavirus. For any tenant-occupied property for which the tenant is not paying rent because of lost employment due to COVID, the hardship is crystal clear.
The borrower may forbear mortgage payments for one hundred eighty (180) days initially. The borrower may extend that period another one hundred eighty (180) days if a second forbearance request is made within the first one hundred eighty (180) day period. During forbearance, interest at the non-default rate continues to accrue. But no payments, penalties, fees, or, costs may be imposed upon the borrower.
Tenants your best course of action if you lose your employment due to COVID-19, is to notify your Landlord immediately letting them know of your situation, then file for unemployment, and work out a payment plan with the your Landlord. Remember that a Landlord still has to pay the mortgage on the house you’re leasing. And, for Landlord, notify your mortgage company and employ any programs of assistance (if needed) and work reasonably with your tenant(s) payment plans. Communication is key.
Keep in mind that this is a summary of the provisions as of the 1st week in June and the government both state and federal have been revising and amending the rules as time progresses. It is imperative that both landlords and tenants stay informed of the latest changes. Bottom Line, Tenants, even though you may have lost your employment, you are still contractually obligated to pay your lease for the full term of your lease. Landlords, likewise, you are also contractually obligated to fulfill the terms of the lease agreement, so work with the tenant for the term of their lease because we affect each other by what we do or not do, so communicate immediately with one another, utilize the programs available to support one another so we can keep our economy strong and all get through this together.
