[REN #958] Real Estate: Surge in Eviction Filings Despite National Ban

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Real Estate: Surge in Eviction Filings Despite National Ban, Real Estate News for Investors Podcast Episode #958 Heade

Corporate landlords are defying the federal eviction ban with a surge in new filings. According to one report, institutional landlords filed more than 900 eviction cases in eight metro areas during the week after the ban was announced. The ban attempts to protect tenants who can’t pay their rent because of the pandemic, but the moratorium is not preventing landlords from challenging tenant claims about their finances.

The Private Equity Stakeholder Project was already tracking evictions during the COVID-19 pandemic before the CDC announced a national moratorium on evictions, and that in early August, the big landlords had only filed 165 eviction claims. The organization attempts to connect investors with the people and communities that are impacted by private equity investments.

The organization’s executive director, Jim Baker, told Bloomberg news, “We’re quite surprised by the number of filings we saw. What’s striking is that we’re not talking about mom-and-pop landlords. We’re talking about gigantic companies.” (1) The big landlords filing multiple eviction claims include Starwood Capital Group, Invitation Homes, and the Vancouver-based Omni Group.

Tenant Declaration Form

The eviction moratorium doesn’t provide blanket protection for tenants. It protects tenants who can prove they’ve been impacted by COVID-19 and can’t pay the full rent, but it doesn’t protect tenants who cause other lease violations or trouble on the property. For those with financial problems, they have to sign a declaration form from the CDC website. (2) It’s a felony if they lie on that form, because it’s being signed under penalty of perjury. The filled-out form needs to be handed to the landlord, who can challenge it. If the issue goes to court, the tenant will have to follow legal procedures, including an appearance in court.

Some tenants may not understand the process. They may feel their responsibility ends with the signing and submitting of that document. But that’s not the case. If the landlord brings the case before a judge, and the tenant doesn’t show up for the court date, the judge will probably side with the landlord and the tenant will find a notice to vacate on their door.

That’s apparently been happening in Columbus, Ohio. According to one news organization, the courts have been approving dozens of evictions every day since the federal ban was announced — all because tenants are not showing up in court. Spectrum News 1 says, the moratorium created confusion for some tenants because they may hear a news story about the ban and think they are automatically protected. (3) Or they may think that courts are not even processing eviction cases right now. But that’s not what’s happening. One magistrate told Spectrum that the court is as busy as ever.

The Meaning of “Best Efforts”

The National Real Estate Investors Association dug into the issue with two attorneys from Ohio who came up with several important insights about this moratorium. (4) The first point they made was that the moratorium doesn’t mean a landlord can’t try to evict a tenant who isn’t paying rent. The national eviction moratorium doesn’t ban evictions. It protects tenants who have made their best effort to pay as much rent as possible, but are unable to pay their full rent due to COVID-19.

The key legal term in that sentence is “best effort.” According to Attorney Jeff Watson, “There must be substantiated best efforts. And it’s not ‘good efforts.’ It’s not ‘some efforts.’ It’s ‘best efforts’… I also think the tenants have to open up their checkbook, their check register, their spending habits, to the landlord to show how much is going out in non-discretionary spending.”

Attorney Jeffrey Greenberger also emphasized the importance of landlord-tenant communication. He says, landlords need to be proactive about communicating with tenants so that landlords know what’s happening, and to communicate with tenants in a way they relate to. Millennials may prefer text messaging, for example. Greenberger says, “in-person” communication is also important. He says, “We actually have to go back to talking to people. We can’t be all online and virtual and login to the portal. We are reaching out and talking. He even suggested that landlords put something in the lease that says, “Failure to communicate with us when we reach out to you is an event of default.”

Alternatives to Eviction

The attorneys suggested a few eviction alternatives as well, including the non-renewal of a lease. The moratorium doesn’t prevent a landlord from ending a tenancy when the lease expires, and it doesn’t force a landlord to renew, although there may be local rules that govern that situation. It might also be appropriate to use shorter-term or month-to-month agreements to make it easier to evict a tenant who isn’t paying rent. Again, there may be local rules to pay attention to, but it’s possible that a shorter-term lease would give landlords some flexibility.

The possibility of “suing” tenants for back rent was also suggested. Greenberger says, there’s no moratorium on lawsuits for non-payment of rent. He says, “At least they’ll realize there’s some consequence to not paying their rent.” He says, some of his clients are doing that, instead of evicting.

Hefty Fines for Landlord Violators

Watson and Greenberger also warned about hefty fines for violating the moratorium. A landlord operating as a sole proprietor could be fined $100,000, while an organization faces double that amount. If an evicted tenant dies after being evicted, the fine rises to $250,000 with possible jail time, or double that for an organization. A married couple operating as an LLC might be viewed as an organization, for example.

In true attorney form, Watson and Greenberger questioned the scope of liability a landlord may have in the death of an evicted tenant. Would a landlord be responsible for the death of a former tenant who gets hit and killed by a car? After all, if the eviction hadn’t taken place, the tenant might not have been exposed to that danger. Their advice, if you want to evict a tenant during the pandemic, you might not want to “go it alone.” They suggest getting help from an attorney.

Links:

(1) Bloomberg Article

(2) CDC Declaration Form

(3) Spectrum Article

(4) National Real Estate Investors Association Report

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