Centers for Disease Control Halts Evictions Through End of Year
Last week, the Centers for Disease Control announced a policy change halting evictions through December 31, 2020. What does this mean for rental property owners who count on this income to pay the mortgage on their investment? First, it’s important to understand what the policy change actually states.
Policy Change – Considerations for Landlords
This sudden change in policy states that the enforcement of rent collection is deferred until a later date – for now – into 2021. It does not absolve the tenant of paying the rent, nor does it stop the landlord from charging and accruing late fees, penalties, or interest on unpaid rent. However, this should not make the landlord feel at ease, as enforcement of judgments can be challenging. Many a landlord has collected a stack of unpaid judgments with few prospects for financial recovery. In states such as Texas, where there are significant exemptions that shield personal property from judgment enforcement, it may be very difficult to collect against the stubborn tenant that takes advantage of the situation. Combine that with tenants who use money orders or eschew the use of bank accounts, or who skip out making it very difficult to provide service of process, and this is clearly a significant potential challenge facing landlords.
The Declaration – What Is Required
While this policy would seem to be leave the landlord in a very tenuous position, it is not all bad news. The tenant is required to opt-in to these protections via a declaration, and the protections are not automatic. The tenant must file the declaration under penalty of perjury, and there are a number of items that the tenant must certify, including:
- “I have used best efforts to obtain all available government assistance for rent or housing”
- “If evicted I would likely become homeless, need to move into a homeless shelter, or need to move into a new residence shared by other people who live in close quarters because I have
no other available housing options.” - “I am using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary
expenses” - “I understand that any false or misleading statements or omissions may result in criminal and civil actions for fines, penalties, damages, or imprisonment.”
There are certainly points here that a landlord could use to mount a court challenge against a tenant in a situation where a tenant attempts to take advantage of the eviction halt to avoid payment of rent outside of exigent circumstances.
Taking Stock of Your Investment Property Situation
For landlords and investors, this policy change should give every owner pause to re-evaluate their situation – the fundamental economics, debt load, and maintenance costs, and whether the risk outweighs the reward. Now more than ever, it is important to ensure the investment makes sense financially, that there is enough of a cushion financially to whether the storm – whether that be higher than anticipated maintenance costs or unpaid rent. Fortunately interest rates are low. For the savvy investor, this situation may bring about opportunity as some landlords exit their investments amid the uncertainty.
