Today Joe Biden outlined his $1.9 trillion stimulus plan. Included was a proposal to enact a federal ban on evictions through September of 2021.
Talking recently with our attorney, he felt eviction moratoriums were illegal and unconstitutional. A lease is effectively a contract between two parties. An eviction happens when one party (the resident) does not uphold their end of the contract. According to my attorney, an eviction moratorium has the net effect of withholding access to the legal system for one party in this contract.
In contrast, the CDC's opinion was that the eviction moratorium was necessary to curb the spread of COVID because those that are evicted may become homeless and spread infection more quickly.
Do you feel eviction moratoriums are unconstitutional or that owners have an obligation to society to not evict during this pandemic?
@Greg Scott I still have to pay at the pump. No groceries for free, and the other day when I got my teeth cleaned I got charged for that too. So yes, it is outrageous that all these politicians are messing with our business and taking away our rights just so they can buy votes with our rent money! Grrrrr!!
I believe you're in control of the asset. So, this is back on the landlord and screening the top tenants. Also, the quality of your product to attract more stable renters. Lastly making sure you've got the reserves to weather the storm.
There are ways to mitigate or decrease the chance of being stuck because of outside factors.
I don't think this is an either or. I feel that eviction moratoriums are unconstitutional and owners have an obligation to make accommodations that they can during situations of national emergency. We are blessed to have been able to have kept some people housed that would be facing homelessness otherwise. I think offering a tax credit for 150% of the amount of rent forgiveness paid over a couple years would have provided enough incentive for many landlords to decline to evict during this period while allowing the ones that absolutely had to based on economic limitations to do so. Sure the rich get richer, but at least the guy in the middle would be alive.
Instead they just put out complicated legal orders that still allows landlords to put people out in cold but not based on any need of the landlord just by the happenstance of the tenants lease ending or they forgot to mow the grass. Frankly, if you had an iffy tenant and a reason to evict them, you are more incentivized to get rid of them than to work with them because this is your opportunity to do so.
If you have low risk tenants you don't have an issue. If you have diversification in your portfolio you don't have an issue. If you are well capitalized you don't have an issue.
The people on the investor end that are suffering are the ones with high risk tenants, that are not diversified and under capitalized. Does it suck they are in the situation? Sure. But thats life. Adjust the makeup of your portfolio.
When Lehman Brothers went under, it sucked losing that money, but I survived because I was diversified.
I think it only applies to covid related like directly, provable loss of job and such.
Why single out landlords? Do you give free food away. Do you give free gasoline away? If you can weather the storm now then why should renters have to pay at all. So a legal contract is worthless. Since it's not the renters fault then what about when a business fails, does the renter get free rent???
"unconstitutional" has become a very charged word, hasn't it? None of our opinions really count...the reality is the courts will decide what they will allow. The "sacred contract" idea is a red herring--contracts are invalidated by courts all the time. It seems so far they are willing to allow the CDC et. al to do this and give states a fair amount of latitude but have already signaled there is a limit to their tolerance.
As the vaccines pick up their patience will likely grow shorter.
Funny how nobody ever complains about the hundreds of billions the government throws at property owners in the form of low interest federally backed loans, deduction of mortgage interest, 1031 exchanges, step up basis on inheritances etc etc etc. For the record I don't think eviction moratoriums is a good way to solve the eviction problem. Unemployment insurance and direct rent assistance or even a tax credit are far better. But keep in perspective how many benefits you get as a real estate investor and balance it against that. Doesn't seem that terrible.