THE CDC’S EVICTION MORATORIUM CREATES NEW PANDEMIC CHALLENGES
BY DILLON G. BROWN
The COVID-19 pandemic and efforts to control it continue to preoccupy condominium association boards and property managers and challenge their ability to respond to rapidly changing governmental guidelines and requirements. Federal regulations issued by the Centers for Disease Control and Prevention (CDC) temporarily prohibiting property owners from evicting residential tenants for non-payment of rent create a new set of challenges. Although the moratorium primarily affects owners of rental properties, some condominium associations may feel its effects, as well.
The moratorium applies only in states that have not enacted pandemic-related eviction restrictions or that have restrictions less stringent than the CDC’s. A more restrictive emergency eviction ban enacted by the Massachusetts Legislature in response to the COVID-19 pandemic expired on October 17th, when Governor Charles Baker decided not to extend it. The differences between the two moratoria are significant.
MASSACHUSETTS EVICTION MORATORIUM
The Massachusetts moratorium prohibited landlords and property managers from pursuing Non-Essential Evictions,” which the law defined as:
Evictions for non-payment of rent
Evictions resulting from foreclosures
No-fault or no-cause evictions for termination of tenancies at-will or non-renewal of tenancies
Evictions for cause, other than those involving criminal activity or lease violations affecting the health and safety of others.
The decidedly more tenant-friendly Massachusetts eviction moratorium barred landlords and property managers from taking virtually any eviction related actions (including issuing notices to quit or other eviction-related notices, demanding that tenants vacate the premises or otherwise threatening eviction), unless an emergency required the eviction, and even in those cases, a court had to approve the action.
The state law did not just tie the hands of Landlords’ and property managers; it locked the courthouse doors as well. The moratorium prohibited courts from accepting summary process complaints, entering judgments for possession of the premises, or even scheduling any court related eviction proceedings. To make matters worse, Massachusetts courts would not issue and constables could not serve execution orders requiring removal of tenants and their belongings from the premises
CDC EVICTION MORATORIUM
Because the Massachusetts moratorium has expired, landlords and property managers must follow the CDC rules, which will remain in effect until at least December 31, 2020, but may be extended beyond that date. Unlike the Massachusetts moratorium, the CDC’s allows landlords and property managers to pursue residential evictions for non-payment of rent, with one major caveat: Tenants may not be evicted if they submit a written declaration, under pains and penalty of perjury, attesting that they:
Have used their “best efforts” to obtain all available government assistance for payment of rent;
Expect to earn no more than $99,000 in annual income for calendar year 2020 ($198,000 if filing a joint return), were not required to report any income in 2019, or received a government stimulus check under the CARES Act.;
Are unable to pay the full rent or make a full housing payment because of adverse financial impacts of the pandemic;
Are using their best efforts to make timely payments as close as possible to the full payment;
Have no other available housing options and if evicted, would either be made homeless or forced to reside in a congregate or shared-living setting.
Under the CDC moratorium, landlords and property managers can pursue evictions for non-payment of rent until they receive a tenant’s pandemic affidavit. At that point, all eviction-related actions must cease immediately. Landlords and property managers who violate the CDC’s order are subject to hundreds of thousands of dollars’ in fines, possible imprisonment, or both.
Unlike the Massachusetts moratorium, which flatly prohibited all eviction-related actions and procedures, the CDC order allows landlords and property managers to issue notices to quit and non-renewal notices and serve execution orders to remove tenants from the premises for all evictions. It is important to note: The tenant affidavit applies only to evictions for non-payment of rent; it does not apply to and cannot be used to block evictions for other causes.
The CDC order also rips open the courthouse doors the Massachusetts moratorium had closed. As a result, Massachusetts courts are now accepting summary process summons and complaints for all evictions, following procedures detailed in “Housing Court Standing Orders” the Massachusetts Judiciary issued recently.
These orders represent “an effort to accommodate the significant influx of summary process cases that will proceed in the Trial Court following the expiration of the moratorium, and to provide opportunities for landlords and tenants to access resources.” Among the key procedural points:
Courts will now process eviction actions for non-payment of rent (which they could not do under the state moratorium), unless tenants have submitted the affidavit required by the CDC rules, affirming that their delinquency results from the adverse impacts of the pandemic. Landlords who receive this affidavit cannot pursue eviction actions and the courts won’t consider them.
For non-payment cases, the new eviction protocols require landlords themselves to submit an affidavit at every step of the eviction process (summons, complaints, motions for summary judgment, requesting and serving executions) affirming under pains and penalties of perjury that they have not received a tenant affidavit citing the pandemic’s adverse effects as the reason for their delinquency.
The judiciary’s “outstanding orders” do not indicate how the courts will respond if tenants submit the required CDC affidavit late in the eviction process, after a landlord has initiated legal action. But that uncertainty notwithstanding, the CDC rules give property owners far more latitude than the state moratorium provided to deal with non-paying tenants.
Like the now-expired state eviction moratorium, the CDC rules specify that tenants are not relieved of their obligation to pay rent and that landlords will be allowed to collect all accumulated rent when the moratorium is lifted. The CDC regulations also allow landlords to add penalties and interest to the total outstanding balance.
That may be a moot point, however. Even if landlords can tack on penalties and interest, it is unlikely that a court considering a post-pandemic eviction action would allow them. It is even more unlikely that most tenants facing four or five months or more of accumulated rent payments will have the resources to pay that debt, with or without the addition of interest and penalties. The more likely scenario is an avalanche of eviction actions and clogged courts. Some landlords may negotiate payment plans with their tenants; most will probably seek to regain possession of the units in the hope of re-renting them quickly.
Anticipating the financial burdens on tenants unable to pay several months of back rent, and on landlords unable to collect the rents on which they depend, the state has thrown both something of a lifeline. The “Eviction Diversion Initiative” Governor Baker announced recently allows landlords who own fewer than 20 units to seek emergency rental assistance from the Residential Assistance for Families in Transition (RAFT) program. That program previously offered assistance only to tenants, capped at a maximum of $4,000 per household. The new program allows landlords to apply, with the consent of their tenants, for a maximum of $10,000 per household, provided that the tenancy will be preserved for at least six months or (for households with school-aged children) until June 2021, whichever is longer.
IMPACTS ON COMMUNITY ASSOCIATIONS
Although the eviction restrictions will primarily affect rental property owners and property managers, community associations may feel its effects ─ directly (if the association owns units that are rented to residential tenants) or indirectly, if investors rent the units they own.
Some Massachusetts condominium associations directly own rental units, but investor-owned units are much more common, and investor owners would be subject to the CDC rules. Owners who depend on the rental income may not be able to make their mortgage payments or pay their monthly condominium fees, and associations with a large percentage of investor owners could see a surge in delinquent payments as a result.
The extremely narrow grounds for eviction under the state moratorium would have made it difficult for condo associations to deal with troublesome tenants. Under the state rules, unit owners could not evict tenants unless their behavior endangered the health or safety of other residents. Boards could pressure owners to deal with problem tenants, but they could not force owners to violate the law. The CDC’s broader eviction grounds (which now allow landlords to terminate tenancies for any material breach of the lease agreement) eliminate what could have been a problem for many associations.
The critical question – a question no one can answer – is when the pandemic will end (or be deemed under control) and how long the eviction restrictions will remain in effect. The longer that timeline, the greater the financial pressures on rental property owners and the greater the risk that at least some community associations may have to deal with the financial fallout.
WHAT TO DO
The CDC moratorium ends December 31, 2020, but is “subject to further extension, modification, or rescission, as appropriate.” The moratorium is being challenged and it is interesting to speculate, but impossible to predict, how the courts will rule in those pending cases. (See related article). For now, rental property owners and condominium associations will have to comply with the CDC’s rules while they are in effect. Our advice:
Owners of residential rental properties should proceed as they would in “normal” (pre-pandemic) times to evict tenants for cause or tenants who aren’t paying their rent, unless tenants complete a COVID-affidavit, in which case the eviction efforts would be temporarily barred.
Owners should apply to the RAFT program for emergency rental assistance and advise their tenants to do the same. You can’t force tenants to seek assistance, but you can certainly encourage them to do so. Condominium associations should provide this information to investor owners to pass on to their tenants. Owners will be able to collect back rent or recover their units eventually). But the courts will be backlogged once the pandemic is lifted, so the recovery process will take time. Owners should do anything they can to mitigate their potential losses.
Association boards should anticipate that some owners who rely on rental income from their units may have trouble paying their monthly condominium fees. Boards should also take all steps necessary ensure the association’s ability to collect delinquent payments under the Massachusetts Superlien (M.G.L. c. 183A) But they should balance that fiduciary obligation with compassion for owners who are struggling with the effects of the pandemic, and an understanding of the restrictions on the ability of investor owners to collect rent from nonpaying tenants. Patience may not be required, but it is advisable.
Boards and managers should check with the association’s attorney before initiating any eviction, collection or foreclosure- related actions. There is no way an attorney can make this statement without sounding self-serving. But there is also no question that timely legal advice can help the board protect the association’s interests while avoiding any steps or missteps that could undermine the interests the board is trying to protect.