The federal government has pushed a series of measures through in rapid succession to try and limit the losses as much as possible. But this rapidly evolving crisis has impacted real estate investors<\/a> and landlords in unexpected ways and left many unsure about ever-changing rules.<\/p>\n And if there\u2019s one new set of rules that landlords need to understand, it\u2019s the CARES Act.<\/p>\n The Coronavirus Aid, Relief, and Economic Security Act<\/a>\u2014cutely monikered with the acronym CARES, as Congress so loves to do\u2014included sweeping measures that impacted nearly every single American. But one section proved particularly relevant to landlords.<\/p>\n The CARES Act suspended evictions for 120 days, from March 27 through July 24, 2020, for a wide range of properties. Those properties include:<\/p>\n That, of course, leaves many other rental properties unaffected. The two loan-based inclusions, for example, apply to mortgage loans designed for homeowners, not landlords. Even if landlords sometimes use them for house hacking<\/a> or other savvy financing tactics.<\/p>\n Related: <\/em><\/strong>These States Will Be Hit Hardest by COVID-19 Recession<\/a><\/em><\/p>\n Still, it does suspend evictions at millions of rental properties across the country. Note that the act prohibits landlords from even beginning the process by serving an eviction notice to cure or vacate. The suspension applies across the board, not just for nonpayment of rent, so landlords can\u2019t non-renew leases or evict for other lease violations such as criminal activity or abusing their properties. The act also stipulates that after the suspension ends, landlords<\/a> must provide tenants at least 30 days\u2019 written notice before requiring them to vacate.<\/p>\n And the CARES Act marks only one of several potential eviction restrictions on landlords right now.<\/p>\n Even if none of the CARES Act property stipulations apply to you, you still may not be able to evict tenants violating your lease.<\/p>\n Many states, counties, and cities have declared local eviction moratoriums, preventing any evictions for any reason within their jurisdictions<\/a>. Some come with explicit timelines, others left the suspension open-ended.<\/p>\n Nor do landlords\u2019 enforcement challenges end with express moratoriums. Even in many landlord-friendlier jurisdictions, civil courts remain closed. Landlords can\u2019t complete the eviction process without a rent court hearing, which leaves them with no practical way to remove tenants in violation of their lease contract.<\/p>\n It\u2019s not easy to fill vacant rental units during the pandemic<\/a>. I know\u2014I\u2019ve been trying to do it.<\/p>\n But I\u2019ve also been even pickier than usual right now. If I can\u2019t enforce a lease contract, then I\u2019m effectively signing a lease based on the renter\u2019s character and my belief that they will honor the agreement.<\/p>\n Not that it comes down to character alone. Many unemployed tenants simply can\u2019t afford to make rent payments right now.<\/p>\n So, you also need to scrutinize the applicants\u2019 jobs, under the cold light of the pandemic. How likely is it that they\u2019ll be able to continue working? Because not all careers are getting hit evenly by the coronavirus-induced recession. Nurses have far greater job security than, say, bartenders right now.<\/p>\n I\u2019d rather leave my property vacant than rent it to someone who will damage and wear the property without paying rents, who I can\u2019t evict for the foreseeable future. And make no mistake: you can\u2019t assume that the initial timelines, such as the CARES Act 120 days, will be the end of it.<\/p>\n Related: <\/em><\/strong>How the Unemployment Rate Affects Us All (Yes, Even the Employed)<\/a><\/em><\/p>\n My city has extended its lockdown timeline three times now\u2014which goes to show that the future is more uncertain than I can ever remember, at least when it comes to rules of commerce.<\/p>\n The CARES Act could very well be extended another 120 days. Local eviction suspensions could extend even farther into the future. And it\u2019s anyone\u2019s guess when courts will reopen in any given jurisdiction.<\/p>\n In its original form, the CARES Act stipulates that tenants are still liable for all rent payments, even if landlords can\u2019t legally enforce that liability right now. But what unemployed renter can come up with four months\u2019 back rent payments all at once?<\/p>\n They can\u2019t, and the longer our economy remains closed, the clearer it will be that tenants simply won\u2019t be able to catch up on back rent. This leaves lawmakers with three choices: allow mass evictions, stiff landlords for those back rent payments, or step in and pay tenant\u2019s rents\u2014with a series of ugly strings attached for the landlord but not the tenant.<\/p>\n Look no further than the several disturbing bills proposed by fringe-left members of Congress. Bills like the Emergency Rent and Mortgage Cancellation Legislation<\/a> and the Take Responsibility for Workers and Families Act<\/a>.<\/p>\n This legal uncertainty, even more than the soaring unemployment rate and recession fears, is why the pandemic is changing my real estate investing plans<\/a>.<\/p>\n Don\u2019t get me wrong, I too worry about the building backlog of evictions waiting to happen. With much of the world\u2019s economy simply closed down, people can\u2019t earn money, can\u2019t pay their rent, and certainly can\u2019t spend money to bolster other people\u2019s jobs. Fully one in four renters is struggling to pay their rent<\/a> right now, and frankly, I expect that number to get worse before it gets better.<\/p>\n When eviction bans lift, brace yourself for a wave of evictions. Any landlord who\u2019s been through the process knows how miserable it is for everyone involved. It\u2019s expensive, time-consuming, emotionally draining, and it usually ends with rents that will never be collected and damage to your rental property.<\/p>\n And a backlog means a much longer process than usual. I\u2019m accustomed to a backlog of evictions in Baltimore City, where it can take months just to get a court hearing scheduled, much less an actual put-out date. The rest of the country should prepare for a similar experience.<\/p>\n Related: <\/em><\/strong>Coronavirus & the Real Estate Market: 4 Challenges Investors Face Today (& How to Overcome Them)<\/a><\/em><\/p>\n Tenants are getting eviction relief at the moment. But landlords aren\u2019t getting foreclosure relief.<\/p>\n Yes, the CARES Act suspends foreclosures at those properties included under the bill. But most landlords use other forms of financing, such as portfolio loans, commercial loans, or private loans to fund their properties.<\/p>\n So rents stop coming in, but mortgage payments need to keep going out.<\/p>\n Not that mortgage payments even represent the bulk of landlords\u2019 expenses. Landlords must still pay for repairs, maintenance, property management fees, property taxes, landlord insurance, travel and accounting expenses, and a dozen smaller costs.<\/p>\n Speaking of insurance, some landlords are finding help from their insurance<\/a> policies. Rent default insurance policies are paying out (even though most have stopped issuing new policies). And even standard rental property insurance sometimes includes \u201cbusiness interruption\u201d or \u201cbusiness income\u201d protection. Landlords should review their policies carefully and discuss with their insurance agent.<\/p>\nThe CARES Act Eviction Moratorium<\/h2>\n
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Eviction Roadblocks Beyond the CARES Act<\/h2>\n
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<\/p>\nScreening Implications<\/h2>\n
Regulation Uncertain<\/h2>\n
![\"One](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/07\/uncertainty-702x336.jpg\" "\\"\\"")
<\/p>\nThe Growing Eviction Backlog<\/h2>\n
No Foreclosure Relief for Landlords<\/h2>\n
Final Thoughts<\/h2>\n
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