by Mason Higgins
The Centers for Disease Control (CDC) and the Department of Health and Human Services (HHS) issued a joint order effectively halting residential evictions for nonpayment of rent for qualifying tenants. The order goes through the end of this year and joins other federal and state-level moratoriums designed to help keep people from becoming homeless due to the pandemic. While the order could be a lifeline for savvy tenants, it requires they follow certain steps, meet certain requirements, and plan accordingly for its expiration.
This order follows the expiration of eviction and foreclosure moratoriums imposed by state local governments and by the Coronavirus Aid, Relief, and Economic Securities (CARES) Act. Unlike the CARES Act moratorium, and many similar state moratoriums around the country, the purpose of the CDC order was not to keep people from becoming homeless. Due to the CDC’s narrow charge, the order is strictly an effort to combat the spread of coronavirus (by keeping people in their homes, off the streets, and out of shelters where the virus can easily spread). Still, whatever its purpose, tenants who are struggling should understand the protections the order might offer them.
To qualify for protection under the CDC order, tenants must present their landlords with a signed declaration that they:
- have tried to obtain government rental assistance
- expect to earn no more than $99,000 (or $198,000 jointly) in 2020
- are unable to make their full rent payments due to lost wages, or extraordinary out-of-pocket medical expenses
- will make their best efforts to make timely, partial payments that are as close to their full rent payment amounts as possible
- will likely become homeless or need to move to a shelter if evicted
- understand that they are not being forgiven of their rent obligations and may be subject to fees, penalties, and interest for unpaid rent
- understand that the temporary halt on evictions expires on December 31, 2020 and that they may be required to pay all back rent and fees in full after that date or be subject to eviction.
The paragraphs of the declaration outline the process tenants should follow:
- apply for aid
- understand the situation
- make a plan
Struggling tenants should start by applying for rental assistance. For tenants who qualify, rental assistance may make their situation tenable. This would be the best-case scenario.
Generally speaking, rental assistance programs are not loans—they are direct financial assistance, usually paid straight to the landlord to ease the tenant’s obligation. Under the Wisconsin Rental Assistance Program (WRAP), tenants whose household income is at or below 80% of the median income for their county can receive up to $3,000 to help them pay their rent obligations. The income considered is the month of or prior to the application date. This means that tenants who recently lost their jobs will be eligible for assistance in no more than one month from the date they stop receiving income.
Struggling tenants should apply for WRAP and other rental assistance programs in their area. Even if they do not qualify, applying for assistance is a requirement to receive protection under the CDC order. Next, after hearing back from the assistance programs they have applied to, tenants should work to get a clear picture of their financial situation. This will be crucial in step three.
Tenants who are struggling should take a minute to map out their finances. This step does not require any fancy charts or expensive books, just two columns. On the left, add up all the money coming in each month (income, wages, child support payments, Social Security or retirement payments, etc.). On the right, add up all the money that goes out each month (bills, groceries, gas money, child support costs, etc.). The point, at this step, is to make a barebones budget and to get a picture of where every dollar that comes in needs to go. Is the total on the left larger than the total on the right? By how much? Depending on your lifestyle, if more is coming in than going out, you might not be in bad shape. But, what if the total on the right is larger? In that case, we’re on to step four.
While eviction moratoriums do offer temporary relief and a breath of opportunity to tenants struggling to make ends meet, they also stand to place renters in debt to their landlords. No national moratorium, and none in Wisconsin, releases tenants from their obligation to pay rent to their landlords. Accordingly, while tenants with protection under the CDC order may remain in their homes through 2020, they will still be obligated to make those rent payments eventually.
Unlike the CARES Act moratorium, the new order does not preclude landlords from imposing late fees, fines, or other penalties for unpaid rent. Tenants who cannot make their rent payments now will owe the balance of those payments in 2021, possibly with extra penalties. The CDC order does not outline when and how landlords can apply these penalties or demand any back rent. Struggling tenants should be proactive and work with their landlords now to negotiate a plan that will keep them in their homes once the CDC order expires. This is step four: building a plan.
Depending on their backgrounds, tenants may not be comfortable approaching their landlords on their own to negotiate. This is completely reasonable and is a choice each tenant will have to make. This is where reaching out to an attorney or a law clinic might be helpful.
Savvy tenants with experienced counsel may be able to negotiate binding plans with their landlords now. Such a plan might allow for tenants to gradually pay off their back rent so that they can stay in their homes after the nonpayment moratorium expires. Without a plan, tenants who could not afford the entirety of their rent payments during the pandemic could face eviction come January 1, 2021.
Such a plan might look something like this: Tenant has a lease agreement with Landlord to pay $800 per month in rent. The lease agreement runs through May 2021. Because of financial hardship due to the pandemic, starting in September 2020, Tenant is not able to pay Landlord all $800 per month. Tenant can only afford to pay Landlord $400 per month right now due to financial hardship from the pandemic. If Tenant meets the eligibility requirements for the CDC’s eviction moratorium and properly notifies Landlord, then Landlord cannot evict Tenant for nonpayment of rent alone until January 2021.
But Tenant’s rent obligation is not being forgiven. Instead, he is accruing debt (in the form of back rent) to Landlord—$400 for September, $400 for October, $400 for November, and $400 for December. That is a $1,600 debt come January 2021. If Tenant cannot afford $800 per month now, it is not likely he will be able to afford to pay Landlord $2,400 (the back rent plus January’s rent payment) in January. Who knows how and when Landlord will demand the back rent? Without a reasonable payment plan, Tenant could be one of the 30-40 million renters who might face eviction in 2021 due to the COVID-19 pandemic*. Luckily, Tenant read this article, and reached out to his attorney.
Tenant and his attorney negotiate and sign a legally binding contract with Landlord. Under agreement, Tenant will rent from Landlord for another year (through May 2022), will pay Landlord $500 per month now through December 2020 (more than he wants to afford right now, but not impossible), and, in return, has until January 2022 to get caught up on his rent payments as long as he pays no less than $500 any month during 2021. Additionally, Landlord agrees not to charge Tenant any late fees or penalties as long as he is caught up by January 2022. This will not be easy for Tenant, but assuming all parties sign this contract, he will have a clear path towards staying in his home through the pandemic and beyond. Landlord is happy with this agreement, at least if Tenant is paying enough to cover the mortgage payments and taxes for his share of her property. And she does not have to worry about finding a new tenant or filing for eviction. Tenant’s lawyer is happy to have helped him.
If you are in Tenant’s shoes, call your attorney today.
*Source: National Low Income Housing Coalition: https://nlihc.org/
