Managing Delinquency and Evictions During COVID-19
In passing the CARES Act, the Department of Urban Development announced that it was suspending all evictions and foreclosure proceedings until the end of April. The Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to do the same for a minimum period of 60 days in response to the hardships incurred by the spread of the virus. Within the text of the CARES act, the government established a national 120-day moratorium on evictions for tenants in properties that participate in government programs or that have a federally-backed mortgage.
In addition to the eviction guidelines provided at the federal level, states and certain local municipalities have extended and expanded upon these guidelines within their respective jurisdictions. In Michigan, for example, Governor Gretchen Whitmer just extended her original executive order prohibiting evictions until May 15th, 2020. This extension relates to landlords and property managers in the following ways:
Termination Notices
The order limits the issuance of a termination notice (7 Day Demand) only to situations where a tenant “poses substantial risk to another individual or an imminent and severe risk to property.”
Nonpayment of Rent Notices
Prohibits the issuance of a Demand for Possession for Nonpayment of Rent.
Execution of Writs
A Writ can only be executed to remove a person and/or personal property if a tenant “poses substantial risk to another individual or an imminent and severe risk to property.” Therefore, a Writ cannot be executed for other legal action including nonpayment of rent.
While most (if not all) official state and local guidelines have said to pay rent normally if you can, many property management companies and landlords worry that with the extension of the moratorium on evictions tenants will create a large delinquency problem over the next few months.
What You Can Do
Be Proactive With Your Tenants
Communicating with your tenants goes a long way during these uncertain times. If you have time, we recommend calling or emailing them to discuss the ongoing situation and if they need help.
You should also communicate the updates to State and Local laws as it pertains to the ongoing pandemic. In Michigan, for example, if your tenant can still afford to pay rent they should do so and even if they cannot, they must still follow all parts of their lease. Even though eviction paperwork cannot currently be filed, rental charges incurred during this time period will still be owed when the courts open back up once this emergency has passed.
Given the current situation, many of your residents may have recently become unemployed and may be struggling financially. If this is the case, you may want to share with them this resource for filing for unemployment, as the CARES Act expands unemployment benefits (learn more here). There are also some local community organizations that offer rent assistance. For Michigan residents, click here to view a list of such organizations by county.
Set Up Payment Plans
If you haven’t already done so, you should offer your residents flexible payment options to help them during this difficult time. Because of social distancing, this can be a bit tricky. While you can install a lockbox to accept checks or money orders at your office, or work with your bank to accept payments, our customers have found it more convenient to set up payment plans via ACH or Credit Card payment within Revela. We have also implemented a Cash Pay solution, which allows tenants to pay their rent with cash at a variety of different big box retailers that are still open as essential services. To learn more about these solutions, please feel free to reach out to us here.
Get it in Writing
We strongly recommend documenting and retaining any correspondence related to the payment of rent with your residents. For any electronic payments, we recommend having your tenants fill out an authorization form (you can download a credit card authorization form here, and an ACH authorization form here).