On September 1, 2020, the Centers for Disease Control (CDC) announced it would issue an order to temporarily stop residential evictions nationwide for nonpayment of rent of qualifying tenants in response to concerns about the spread of COVID-19. This action comes after a previous executive order from President Trump directing the CDC to take this action, as we covered previously.
The CDC released a draft version of its order on September 1, 2020, and announced the order is scheduled to be published and take effect on September 4. The order will remain in effect through December 31, 2020. The CDC’s action poses numerous legal and financial questions for landlords. Initial details are set out below, and a follow-up blog post will be published after the CDC’s final order is published in the coming days.
What landlord actions are affected and prohibited by the CDC’s order?
Unlike the CARES Act, which imposed an eviction moratorium only on properties receiving federal or federal-related assistance or financing, the CDC order applies to all residential landlords.
The order prohibits landlords from evicting tenants for nonpayment of rent if the tenant submits a declaration certifying they have, in sum, faced hardship in paying rent due to the COVID-19 pandemic. Specifically, to qualify for the protections, each adult listed on the lease or rental agreement must complete and submit to the landlord the CDC-provided Hardship Declaration Form showing they meet the following five requirements:
1. Income requirements:
The tenant must verify that he or she either
(i) expects to earn no more than $99,000 in annual income for the calendar year 2020 (or no more than $198,000 if filing a joint tax return)
(ii) was not required to report any income in 2019 to the IRS
(iii) received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act
2. Cause of inability to pay:
The tenant must verify that he or she cannot pay full rent “due to substantial loss of household income, loss of compensable hours of work or wages, a lay-off, or extraordinary out-of-pocket medical expenses.”
3. Government assistance:
The tenant must verify that he or she has used “best efforts to obtain all available government assistance for rent or housing.”
4. Effort to make partial rent payments:
The tenant must verify that he or she is “using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses.”
Finally, the tenant must verify that he or she will likely experience homelessness or be forced to move into close quarters with others if evicted because no other housing is available.
The CDC’s exact language defining these five elements can be found in the form Declaration.
The penalties for violation of the order are severe. Fines for landlords who violate the order range from $100,000-$500,000, including up to one year in prison.
What actions are unaffected by the CDC’s order?
Evictions based upon nonpayment of rent are the only evictions affected by the order. Tenants may still be evicted for violations not related to the timely payment of rent, such as engaging in criminal activity, damaging the property, violating lease and other contractual obligations unrelated to the payment of rent, violating building codes or health ordinances, or threatening the health or safety of other residents. The order clarifies that those who may have COVID-19 should not be evicted for threatening the health and safety of others so long as they take reasonable precautions to prevent spreading the disease.
In addition, the order expressly states that it does not apply to foreclosures on home mortgages.
What can landlords do about missed rent payments?
Per the order, tenants are still obligated to pay rent, and landlords are still permitted to charge any and all applicable late fees, penalties, and interest associated with missed rental payments.
The order is silent regarding the issue of filing money judgment actions for unpaid rent during the moratorium and is also silent as to a landlord’s ability to report missed payments to credit reporting agencies.
What questions have been raised in response to the order?
There are countless questions already swirling around the CDC’s announcement.
Assuming the order is formally published later this week by the CDC, the order will have been passed merely by executive order and without Congressional action. Many housing providers and legal practitioners are raising questions about the validity of the CDC’s action, and a legal challenge to this order seems likely.
Further, it is unclear whether and/or how states will implement the order and whether and how local eviction courts will enforce the order.
Importantly, the order does not indicate whether or how a landlord may challenge the validity of a tenant’s hardship declaration if the landlord has reason to believe the tenant did not complete the form truthfully.
Particularly, in Iowa and other states, there are numerous financial resources available to tenants. Among others, Iowa recently expanded its eviction rental assistance program and has broadened unemployment benefits for those who have lost their jobs during the pandemic. We expect questions from landlords regarding whether a tenant has truly used his or her best efforts to obtain all available government assistance for their rental payments and is truly unable to pay rent due to a COVID-19 job loss or other loss of income. However, landlords appear to be in a no-win situation, considering the severe penalties for violation of the order.
The Big Picture
Landlords have faced significant difficulties over the last seven months and that difficulty continues. Analysis of these questions is ongoing, and landlords concerned about their legal liability and potential remedies in light of the CDC order should seek legal counsel.
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