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The Rollins Group LA

What Landlords Should Consider as Eviction Moratoriums End

Navigating this terrain requires a lot more delicacy and empathy than in normal times.

Many landlords had been eagerly anticipating the end of the CDC eviction moratorium that was slated for the end of 2020. While no landlord relishes having to evict tenants who are struggling due to the economic impact of COVID-19, the industry has been left with little other choice, given the complete lack of support offered by the government to landlords. And we’re talking big numbers here; the rental shortfall is predicted to be between $25.1 billion and $34.3 billion. 

The impact of the moratorium on “mom and pop” landlords has been the hardest to bear, given this segment of the market is composed of small individual investors, many of whom simply can’t afford to go months without receiving rent. And with nearly half of all residential rental stock (22.7 million units) owned by this investor class, the impact of the moratorium on many landlords has been significant.

Now, due to a recent extension of the federal moratorium until January 31 (and with some states extending their own moratoriums for longer, such as New York until May 1) landlords in most states have an extra few weeks to prepare themselves before taking action against non-paying tenants.

However, given the unique and difficult circumstances that both landlords and tenants find themselves in, navigating this terrain requires a lot more delicacy and empathy than in normal times. So with this in mind, I’ve put together some advice for landlords contemplating what steps to take at the end of the month.

If a tenant has missed rent for a number of months

What’s unique about this situation is that a tenant could be 6 months behind on their rent. In normal circumstances, this would usually never happen, as you would have been able to evict a tenant long before it got to this point. What’s more, the deposit won’t cover anywhere near the amount owed.

Initiating eviction proceedings as soon as the moratorium ends would be the obvious recourse for many landlords caught in this trap. However, you should consider your strategy for recouping unpaid rent before using the nuclear option. As soon as you evict a tenant your contractual relationship ends along with any goodwill that existed between the two of you.

Therefore, your only way of recouping all of the missed rent will be via the courts. Not only is this extra cost for you to bear, but with the courts backed up right now, it could be months before your case is heard, and even then your former-tenant may not have any money to begin repayments. In which case, if your own finances permit, exhaust every other option available to you and your tenant that would allow you to recoup at least some of the missed rent while enabling your tenant to keep a roof over their head. This could be a combination of:

On the part of the landlord:

  • Rent reductions on missed rent, such as taking out your margin so it’s “at cost”, which will reduce the burden on your tenant by reducing the balance they owe, while enabling you to eventually cover your costs once the balance is paid
  • Rent repayment plan on missed rent, which can be a viable solution if your tenant has recently found work

On the part of the tenant:

  • Apply for new renter assistance programs that were included in the latest round of stimulus
  • Agree to give a portion of any upcoming stimulus checks to pay off some of the balance

Of course, there is the risk that delaying eviction proceedings will get you into even more of a hole, especially if your own financial situation is tough. So in a situation where you need cash coming in to cover the next mortgage payment, eviction and re-tenanting may be the best option, as at least you’ll have cash flow to cover your immediate costs. 

If a tenant has missed rent for the last one or two months

This is of course the most common scenario, in pre-COVID times, where a landlord would begin eviction proceedings. The security deposit would cover most of the rental arrears, so you would either break even or perhaps suffer a small loss.

However, if you find yourself in this scenario when the moratorium ends, you may not wish to proceed as normal with the eviction. Consider all of the facts including:

  • The tenant’s track record
  • The tenant’s current/near future employment status
  • Any new rental assistance programs your tenant may be eligible for
  • Any new stimulus checks that are on the horizon
  • The current local market conditions

For example, if your tenant has been renting from you for a number years, has an excellent track record, but recently lost their job but have plenty of interviews lined up, then the better option could be to explore what else you can do together to find a resolution. This could include lowering the rent to “at cost” while your tenant is out of work, then agreeing to a rent repayment plan for the missed rent split over a number of months, which kicks in once your tenant is back in work.      

Again, not only does the tenant get to keep a roof over their head, you also retain a good tenant who should be able to start repaying rent in the near future. Also remember, the economic impacts of COVID-19 will be felt long into 2021. Therefore, by evicting and re-tenanting you could just end up with the same problem with future tenants, so it’s best to do all you can to retain a good tenant that’s going through a tough time.

However, as with the scenario of much longer rent arrears, this will also depend on your financial situation. If you can’t afford another month without rent, then issuing an eviction notice could enable you to re-tenant quickly. But this is not without risk – if the tenant refuses to budge, you’ll have to go through the courts to get an eviction order which will add delays, and this will also burn your bridges with the tenant and your hopes of them clearing the balance voluntarily.

If you decide to proceed with an eviction

Those whose situation dictates that they need to push ahead with eviction proceedings once the moratorium is lifted, now is the time to get everything in order. For many “mom and pop” landlords, this could be the first time you’ve had to do this, so it’s best to talk to an attorney who specializes in landlord-tenant law first.

They will be able to provide you with advice specific to your situation, but as a general rule, these are the steps a landlord needs to take when evicting a tenant:

  • Check the law: Check your state’s eviction laws and any updated rulings at the federal level concerning the CDC eviction moratorium, as well we cross-referencing the relevant terms in the lease agreement.
  • Have a valid reason: In this instance, this will be nonpayment of rent. You will also need to gather documentary evidence that proves the tenant has missed rent for the periods you’re claiming.
  • Talk to your tenant: Before sending the eviction notice, exhaust every other option (as discussed above), in terms of what other solutions both parties could agree to.
  • Send the formal notice: Put in writing the amount owed and the date they must pay or vacate the property by.
  • File with the local court: If the tenant has not vacated, you’ll then need to file the eviction with the courts.
  • Attend the court hearing: Bring all documentation including the lease agreement and payment records, to prove your case.
  • Eviction: The court will inform the tenant when they must vacate by, if they fail to do so, you’ll then need to call the local authorities to escort the tenant and their possessions from the property.
  • Claim outstanding rent: Finally, you’ll then need to pursue rent that is owed using a small claims lawsuit.

The Rollins Group LA

1 Comment

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