6 Issues Low-Income Housing Owners Should Understand About the Rental Eviction Moratorium

Published by Christian Ayson on Wednesday, January 6, 2021
Journal Cover Thumb January 2021

President Donald Trump signed legislation Dec. 27 to extend the national rental eviction moratorium ordered by the Centers for Disease Control and Prevention (CDC) to Jan. 31, 2021. Whether the new eviction moratorium gets extended again or is allowed to lapse, there are significant issues of which low-income housing owners need to be aware.

The CARES Act that was passed earlier in 2020 included a 120-day eviction moratorium, which restricted eviction of covered persons in properties in covered housing programs for nonpayment of rent as well as charges related to nonpayment of rent during the moratorium period. The eviction moratorium in
the CARES Act ended July 24, 2020. In order to continue to curb the spread of the pandemic, the CDC issued an order Sept. 1, 2020 extending the eviction moratorium through the end of the year.

As of Dec. 10, 2020, there were 15.2 million cases of COVID-19 and 288,000 deaths from the pandemic had been reported nationwide. The unprecedented threat to health and safety subsequently turned into economic and housing insecurities.

Below are certain questions that an owner of low-income housing may have in regards to the eviction moratorium:

Issue 1: How would I know if my tenants are covered persons under the eviction moratorium?

Covered persons under the eviction moratorium are tenants meeting certain income and hardship criteria. Specifically, single taxpayers with gross incomes of no more than $99,000 or joint filers with gross income of
no more than $198,000. In order to afford the protections of the eviction moratorium, each adult tenant on the lease has to deliver a declaration to the owner, electronically or hardcopy, that they meet certain hardship criteria such as substantial loss of income or extraordinary out-of-pocket medical expenses. Note that the CDC order does not require that the financial hardship be related specifically to the COVID-19. A CDC sample declaration form is available on the CDC’s website.

Note that under the CDC order, the owner is not required to notify the tenants of the CDC order nor the declaration requirement to be protected from eviction.

Issue 2: If my state and/or locality have moratoriums at the same time as CDC’s order, which should I follow?

Many states and localities instituted their own eviction moratorium to protect renters. In case of conflicts among the moratoriums, the owner must apply the order with the most stringent requirement. For example, in California, tenants cannot be evicted until Jan. 31, 2021, if they pay at least 25% of the rent. Another example is that the CDC order allows owners to initiate eviction proceedings during the moratorium period–something that was not allowed under the CARES Act. However, doing so may be prohibited under orders of the state or locality. Thus, owners should always be aware of the orders issued by the state and local governments applicable to their properties.

Issue 3: Does the eviction moratorium preclude me from evicting tenants for causes other than nonpayment?

No. Tenants can still be evicted for good-cause violations of the lease during the moratorium period. CDC guidance provides examples of violations a tenant can still be evicted:

  • engaging criminal activity on the property;
  • threatening the health or safety of other residents;
  • damaging or posing an immediate and significant risk of damage to the property;
  • violating any applicable building codes, health ordinances, or similar regulations related to health and safety; and
  • violating any contractual obligation of the lease other than the timely payment of rent, including late or nonpayment of fees, penalties or interest.

Note that the examples provided are nonexhaustive and additional protections may be available under state and/or local laws. Furthermore, CDC orders that tenants who are confirmed to have, have been exposed to, or might have COVID-19 and take reasonable precautions to not spread the disease should not be evicted as they may pose a health or safety threat to other residents.

Issue 4: Do tenants still need to be certified during the moratorium period?

Regardless of the program types, initial income certifications to determine eligibility of the households are still necessary. Documentations can be delivered electronically and original documents can be provided at a later date. If in-person meetings are necessary, they should be limited and the owner must take reasonable precautions and follow social distancing guidelines.

IRS Notice 2020-53 grants relief from all annual income recertifications from April 1 through the end of the year. Recertifications will resume in the following year’s anniversary dates. As discussed earlier, owners should always check the applicable state and/or local requirements. For example, California owners are required to put a clarification record in the file, in lieu of a normal recertification, indicating that the recertification was not completed due to guidance from the IRS notice.

If recertifications were completed but were late, there will be no compliance finding for late recertifications during the COVID-19 period. The recertifications should be retroactive with current signature dates and “true and correct” statements.

Note: For households in assisted housing units, tenants have the option to request for interim recertifications to reflect their loss of income.

Issue 5: Can I require my tenants to provide proof with their hardship declarations and can I challenge those declarations?

Tenants are not required to submit proof at the time of their hardship declaration. The CDC order does not preclude the owners to challenge the truthfulness of tenant declarations in any state or municipal court if the declaration suggests material falsehood. The protections apply until the court decides on the issue. Therefore, it would be beneficial for both parties that documentations be kept by the tenants to support the claim of substantial loss of income and/or extraordinary out-of-pocket medical expenses.

Issue 6: Am I allowed to restrict access to common areas and amenities at this time?

Yes, as long as the restrictions are to control the COVID-19 outbreak. Closures or access restrictions of common areas do not reduce the property’s eligible basis. However, amenities that are necessary, such as laundry rooms and computer rooms, must remain open. It is imperative that owners implement safety guidelines that will allow for the continued use of these amenities. Service amenities are recommended to be provided virtually. If services require in-person contact, safety precautions and social distancing guidelines must be followed.

Conclusion

An eviction moratorium is a necessary measure to control the spread of the pandemic as it provides stability in housing, which allows households to stay in quarantine and continue to practice social distancing. The eviction moratorium delays but doesn’t prevent evictions. The end of the moratorium period puts millions of Americans at risk of losing their homes. It is important that owners work with their renters to prevent massive evictions from happening. Below are some ways to mitigate hardships on tenants:

Avoid rent increases at this time.

Waive fees for late payments. Note that the CDC order, unlike the CARES Act eviction moratorium, does not prevent charging or collecting fees, penalties or interest from failure to pay rent.

Work with tenants to pay back rents that accumulated during the moratorium period. Owners may accept partial payments or create payment plans, if permitted by local laws.

These recommendations are admittedly difficult for owners as they are also experiencing a decrease in income. However, using the described strategies to mitigate hardships on tenants would better serve the long-stability of the property than to have those tenants move out and never pay months of back rent. Tenants currently experiencing hardship could still provide reliable sources of revenue every month in the long run.  Consult accounting and/or compliance professionals with any questions.