Tenants Who Cannot Pay Due to COVID-19

man pulling empty pockets out of shorts

The impact of COVID-19 on the world economy is unprecedented. GDP has dropped some 4.8% for the first quarter of 2020, the stock market has taken a hit, businesses are suffering and laying off staff, and unemployment has risen. Those most vulnerable — low-wage employees who don’t get paid if they don’t work — are now facing tough times as they struggle to pay their rent and bills. Nearly half of residents in New York City, the hardest hit city in the US with coronavirus, are expected to have trouble making their rent, according to City University of New York researchers. 

So, as a real estate agent, what can you advise your landlords to do in these situations? Can they evict upon non-payment? What do you and your landlords need to be aware of as far as government policy during these uncharted times? 

Here are some tips to ensure you have the most up-to-date information available to advise your clients and at the same time protect yourself from a future lawsuit. 

Keep Updated with Government Policy on Evictions

The Federal Government, State Governments and Municipalities have stepped in to protect vulnerable residents from eviction during these tough times. Moratoriums on evictions have also been put in place to help prevent the spread of COVID-19 by allowing residents to stay home at their place of residence. 

On March 18th, the Department of Housing and Urban Development placed a moratorium on all evictions for a temporary period. The Governor of California also issued an executive order preventing evictions through May 31,2020. 

The CARES (Coronavirus Aid, Relief, and Economic Security) Act, enacted March 27, also provides a moratorium on evictions for residential tenants in a “covered property”, which includes a covered housing program or the rural housing voucher program. 

However, it’s important to keep up-to-date about government policies in your area as they are frequently changing.  

For the latest info on Federal, State and Municipality policies, Eviction Lab is a great resource: https://evictionlab.org/covid-eviction-policies/ 

The National Association of REALTORS® has also provided some updated information on the CARES Act. 

Know Your Client’s Circumstances and Advise Accordingly 

Agents working with landlord clients need to act sensitively in these tough economic times. Landlords with a mortgage on their property may have experienced economic disadvantage themselves as a result of the coronavirus, including job or business losses. With nearly 1.5 million cases of coronavirus in the United States and more than 80,000 deaths, landlords may also have been personally touched by COVID-19. 

Regardless of the circumstances, however, agents must advise landlords of the facts regarding rent collection, evictions and limitations on their actions at this time. As an agent acting on your client’s behalf, you need to be careful that you do not initiate any eviction proceedings, which would be deemed a breach of the law or government policy during the pandemic. If you unwittingly do become part of unlawful eviction proceedings, you could find yourself facing a lawsuit. 

Help Landlords Renegotiate Terms of the Lease (if they’re in a position to do so)

Many landlords and tenants are renegotiating terms of the lease during the pandemic. For example, some landlords are accepting lower payments to obtain at least some money, rather than none at all. Others are deferring payments on the basis of hardship and unemployment. Any decisions regarding a renegotiation of the terms of the lease are ultimately the landlord’s to make in consultation with the tenants, and will largely depend on financial circumstances. 

Guide your clients through the options available to them so that all parties — landlord and tenants — can find a mutually beneficial solution during the pandemic.   

Proceeding to Eviction

There are certain cases where eviction can still proceed, even with the government moratoriums on evictions in place. Eviction cannot proceed on the basis of non or late payment. But in other instances where the tenant is in breach of their rental agreement, an eviction is still an option. For example, there are still options for landlords to evict on the basis of drug use or criminal activity. 

Eviction proceedings which were commenced prior to the COVID-19 moratoriums on evictions are also able to continue by law. 

Protecting Yourself and Your Clients

The changing real estate landscape as a result of the coronavirus poses some risk to real estate professionals and landlords. In addition to keeping up-to-date with government policy, you must have adequate insurance to protect yourself and your business from potential lawsuits. 

CRES provides extensive Errors and Omissions insurance designed specifically for real estate professionals. With CRES Real Estate E&O + ClaimPrevent®, you can also access our legal advisory service 7 days a week. Contact CRES at 800-880-2747 for a confidential discussion today. 

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

Originally Published June 3, 2020

Category: ,

Give your clients more protection from a home warranty, with a CRES Qualified Home Warranty from First American. Up… https://t.co/3UmzkTdYuN Real Estate Brokers -- reduce your upfront real estate E&O costs with a per-transaction payment plan. See how it co… https://t.co/3FK9Jnw9IP