The Supreme Court ruling to end the moratorium on evictions appears to be a small sign that the rental market is returning to normal following the chaos of the COVID-19 pandemic. While the moratorium was established to protect tenants during the global health crisis, unfortunately, landlords were left footing the bill. The federal ruling should be welcome news for most property owners, yet in many cases, there is still confusion about when you can evict a tenant who doesn’t pay rent.
Most landlords and property owners prefer not to evict tenants. However, in some cases, there is no alternative. Having a tenant who can’t make rent payments impacts a landlord’s business. For example, during the coronavirus pandemic, many landlords couldn’t pay their mortgage and had colossal property tax bills to pay, and they had to do this without much help on a federal or state level. Even though tenants received rental assistance, for many it still wasn’t enough to pay rent, so their landlords were left out of pocket.
Does the end of the moratorium mean a return to normality? Or will the crisis in the rental market continue to spell uncertainty for landlords and property owners? Unfortunately, the answer isn’t as simple as it seems.
The end of eviction moratoriums—what landlords should know
The Supreme Court lifted the federal ban on evictions at the end of August 2021. It would seem that landlords could now take steps to evict delinquent tenants with unpaid rent. But many states continue to have moratoriums in place. For example, Nolo reports that California will continue to ban evictions until the end of September, and New York is keeping an eviction moratorium in place until mid-January 2022. Other states have limited evictions for nonpayment of rent until the end of the pandemic—and when that day will come, no one knows.
Why the end of eviction moratoriums isn’t so simple
Rather than providing clarity and relief, the eviction ban continues to cause confusion. Unfortunately, many landlords still face financial hardship, and it’s the small, individual investors who are hit the hardest. According to Bloomberg, the end of moratoriums doesn’t mean the end of landlords’ financial problems.
Here are a few eye-watering statistics.
- As many as 3.5 million households are estimated to be behind on rent.
- Unpaid rent amounts to an estimated $17 billion.
- Over 3 million households are at risk of eviction.
- By the end of the year, there could be roughly 750,000 evictions.
- $47 billion is available to landlords for relief. However, state and local government bureaucracy means relief is either slow to arrive or challenging to get.
Even if it is possible to evict tenants who are behind on rent, it doesn’t mean that every landlord can afford to file for eviction. Evicting a struggling tenant is a costly process, and in addition to the money involved, it takes time to evict someone. So, in the end, it doesn’t guarantee that a landlord can recoup unpaid rent.
In light of this, many landlords may decide to hunker down and work with tenants to develop a payment plan. After all, the ban on evictions didn’t mean that rent arrears were canceled. Tenants still owe their landlords any unpaid debt they incurred during the COVID-19 crisis.
For tenants to be eligible for protection, landlords should have received a signed declaration from them stating their financial hardship. A tenant must meet the following five requirements.
- They had a substantial loss of income—meaning they cannot pay the total rent.
- The tenant didn’t earn more than $99,000 during 2020, or expects earnings to be less than $99,000 for 2021.
- They are making efforts to pay partial rent payments.
- The tenant tried seeking government assistance for housing or rent.
- They have no other housing available.
Being a landlord can be fun—if you do it right
No matter how great you are at finding good rental property deals, you could lose everything if you don’t manage your properties correctly. Being a landlord doesn’t have to mean middle-of-the-night phone calls, costly evictions, or daily frustrations with ungrateful tenants.
Is there relief available to landlords who don’t receive rental payment from their tenants?
The ban on evictions hit landlords and property owners hard. Some commentators have suggested a plan in which the government would guarantee payments to landlords to cover 80% to 100% of back rent owed. But even where relief is available for landlords, the system is confusing and seems broken.
California, for instance, has the largest state rental assistance in the country to help landlords and renters. However, landlords can’t get state relief if their tenants are unresponsive or if they cannot prove that the tenant qualifies as low income. Also, it’s impossible to get state help if a tenant moves out and the landlord can find them.
Another example of the problems facing landlords is that tenants are slow to apply for assistance. For example, in Long Beach, Calif., around 14,000 renters have registered to receive rental payment assistance up to 100%. However, reports show that only about 7,000 completed forms have been sent.
Is evicting tenants always the answer in a post-COVID era?
In many cases, eviction is the only way to protect your assets.
But due to the crisis that continues to affect the rental market, some landlords are considering alternatives to evictions post-COVID. Why is this?
When you evict a tenant, your contractual relationship ends. This means an end to any goodwill that existed between the two of you. So, the only option to recoup losses is through the courts. However, a claim for unpaid rent in a small claims court could take quite a long time to be settled because the courts are backed up. And, of course, there is the cost of suing a former tenant.
Before slapping a “pay or quit” notice on a tenant, it’s probably best to start with a conversation to see where you both are at this point. You can also ensure that the tenant is pursuing any federal or state rent assistance that’s available. Once you have a clear picture of their situation, you can make an informed decision.
Suppose the tenant has no intention of paying rent or making up what they owe. In that case, eviction is probably the best option. But if they show a willingness to come to a solution, then maybe you can avoid a costly eviction.
The first step would be to work out a payment plan with the tenant. That way, you can continue to receive income in rent, and the tenant can gradually reduce the balance they owe. If the two of you can agree on a payback arrangement and a plan to restore the tenancy on a reasonable time scale, you may have found a better alternative to evicting the tenant.