Coronavirus Lockdowns & Leases: The State of Rent in America

Sample rental agreement

Detroit — Making rent was hard for many tenants on April 1st due to the novel coronavirus pandemic, but it’s only going to get harder at a time when housing is a top priority for people.

Only 69% of tenants paid any of their rent between April 1 and 5, compared with 81% in the first week of March and 82% in April 2019, according to new data released last Wednesday by the National Multifamily Housing Council and a consortium of real-estate data providers.

Eviction bans across the country

Many cities and some states said that they would implement 30-day or indefinite eviction bans so that renters cannot be kicked out of their homes during the crisis. In Los Angeles, renters experiencing hardship due to COVID-19 qualify for the eviction moratorium and will have up to six months to repay any unpaid rent. Other cities and states doing this include Baltimore, Boston, Kansas, Miami, Portland, Sacramento, San Francisco, San Jose and Seattle.

 “They key is to reach out for help and to understand your options as soon as you feel you might be compromised,” says Jill Fopiano, CEO of Boston-based O’Brien Wealth Partners.

The real meaning of force majeure

Many states, such as New York and Michigan, have imposed temporary moratoriums on residential evictions for those who cannot afford to pay rent, but it does not null and void leases unless there is specific language under a force majeure provision, which is a clause that’s written into many contracts that allows a contract to be canceled or postponed due to impossibility performance. Generally speaking, force majeure requires actual impossibility and not merely extreme difficulty.

Asking for and getting rent workarounds

Even as the coronavirus whittles away at incomes, many renters find themselves still on the hook. One new millennial renter in Detroit, Amberleigh Hendricks, signed a two-year lease in January with several other leaseholders who suddenly lost their jobs. They were happily surprised when their landlord came up with a creative solution. “We just moved into the property on February 1st and then corona hit. Now, I’m the only one working and we have a high four-figure rent bill. We were upfront about the situation with our landlord and he responded right away,” said Hendricks.” He basically gave us a rent deferral and told us to pay what we can and then make up the missing rent on the back end,” said Hendricks.  

In many states, the courts where landlords file evictions are closed, but that doesn’t mean when they re-open unpaid rent will be forgotten and forgiven. Landlords who pursue evictions and repossessions could also be faced with tenants who simply walk away from their leases. To wiggle off the financial hook, tenants may cite force majeure, even if there was no such clause in their leases orpossibly file for bankruptcies, if they never financially recover, leaving landlords still holding an empty bag. Landlords  also might not be able to use the typical mitigation strategy of re-letting their properties because of diminished prospects, if the pandemic lingers.  

Emergency Rent Deferral Plans (ERDPs): How they can work  

Renters like Hendricks can ask for and receive ERDPS. So, what is an ERDP?

ERDP allows tenants to opt into a payment plan for their rent over the following eight (8) months or the remainder of their leases. The ERDP is a written addendum to their lease that gives them the ability to take their rent and pay it in equal portions over the next 8 months.

CARES Act Relief for Government-Backed Properties

Multiple forms of relief are already mandated by law. Under the CARES Act, federal legislation that went into effect on March 27, owners of single family and multifamily dwellings financed through Fannie Mae, Freddie Mac, or the Federal Housing Authority (FHA), are entitled to forbearance options if their ability to make mortgage payments is impacted by the novel coronavirus. Renters who lease within a multi-unit property  financed through the government-backed entities also get relief.

For renters in qualifying buildings, landlords are prohibited from filing payment-based eviction proceedings through July 25. In addition, landlords may not charge fees, penalties or other charges related to unpaid rent.

However, none of the CARES Act relief spares property owners or tenants from their legal obligation to make payments on residential or commercial properties that are not backed by the government entities. Without workarounds with their lenders, or an actual order from a local government, they remain on the hook.

Recap: Top 3 Things Tenants Should Do If They Can’t Pay Rent

1.   Give your landlord notice

Renters should contact their landlords as soon as they can to talk through delayed or partial payment options. Email is the best way because it serves as a written record with a time and date attached to the communication.

2.   Work out a payment plan

It’s best to give your landlord at least a partial payment if you can. Make a payment plan with them with repayment dates, and get everything in writing. You can open up the line of communications by saying something like this by email or letter:

“Hello (landlord)______, as you may know, I’m off work right now due to the pandemic. Will you accept $500 this month rather than the typical $1,000?”

If you believe you won’t be able to make a payment at all, bring it up to your landlord as soon as possible and—again—ask if you can put a plan into place to pay once you have income again.

You can also call 211 for your local United Way or Salvation Army to see if they are offering rent help.

3.   Look for outside assistance

If your landlord refuses to work out a payment plan, ask your bank for a short-term loan. Some banks are offering customers loans and forgivable business loans under the Small Business Association backed Paycheck Protection Program for sole proprietorships small businesses. If you need help during this difficult time, you should absolutely take advantage of the assistance.

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1 Comment

  1. My 76 year old high health risk mother has been terrorized by a bad tenant who was served with a 60 day notice for just cause elder abuse and financial exploitation of vulnerable senior. Now he is taking advantage of the eviction moratorium to further exploit my Mother who depends on 2 unit rental income to survive. Why??? Malicious tenants should not be allowed to commit malicious nuisance with the same protections as honest tenants that have a conscience.

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