Honestly, it doesn’t seem like this moratorium is all that potent, in a good way or even a bad way.
Although, let me be clear…we’d be better off without it.
In Nebraska, where we run a property management company called Wistar Group, our Governor, Pete Ricketts, issued a moratorium somewhat similar to the one issued by the Centers for Disease Control this week. We can use our experience over the last five months as a template for a better understanding of what it was intended to do, what it did do, and then measure the efficacy of it. My experience is that it’s not gonna kill the property management industry…or do much of anything at all.
What it did was pretty much outline what it means to be a decent person, while maybe helping tenants to rest assured that no vulture-like investors or property management companies could take advantage of the harmful effects of the COVID-19. That’s what this order essentially does. Let me explain.
First of all, we can evict for anything other than non-payment of rent. That means if a tenant is causing a ruckus we can still issue notices to correct, and if they don’t start being a good neighbor they can be evicted (14/30 Day Notice)…and other such incidents. So that remains the same business as usual. So who cannot be evicted based on the new rules?
NARPM (the National Association of Residential Property Managers) issued a basic outline of the order. Here’s the distilled version of the rules for qualifying:
- The resident must have used best efforts to obtain all available government assistance for rent.
- If they make $99,000 this year ($198,000 filing jointly) or more they do not qualify.
- Everyone who has received federal assistance including the Economic Impact Payment (stimulus check) qualifies.
- Residents qualify if they are not able to pay rent because of:
- substantial loss of income
- extraordinary out-of-pocket medical expenses (supposedly due to the virus)
- The tenant will have had to make their best effort to make timely, partial payments
- Or if an eviction would likely render the tenant homeless or force them to live in close quarters in a shared living environment.
*Worth mentioning that the tenant will have to swear under penalty of perjury that the above are true.
Here’s the thing, basically a tenant cannot be evicted unless they don’t do anything to help themselves find ways to pay rent. Here in Nebraska, and from what I’ve heard all around the country, the not-for-profits and counties are flush with cash specifically to help anybody who needs help with rent. Our experience has been that if someone asks for (and more or less needs) assistance they get it, one way or another. To help make things easier we are providing tenants with a list of ways for them to find assistance for rent if they inquire about help making a payment…and it works. We get rent payments all the time. Pro Tip: private organizations are easier to work with.
Here’s the problem, while the moratorium doesn’t seem to actually do much, the intention might be good…so let’s make that assumption so as to not make it political.
The problem we really face is that people will have heard that the Trump administration has put a moratorium on eviction and some (not many) will read that as “ooh, this means I don’t have to pay rent.” They will be wrong, and you probably already know who those tenants are based on experience with some of them, right? What makes this confusion hard is that we, as managers and investors, will be burdened with educating them, and walking them back from making bad decisions. What this law really requires is that management companies and investment property owners work overtime helping people come up with creative ways to finance their rent payments. Maybe it’s a payment plan, maybe it’s even a deferment, or maybe it’s helping them to find the money or…just making sure they understand how this impacts them.
When it’s all said and done many will have been helped and a relative few will test the system. Those relative few, let’s call them ‘bad actors’ will ultimately pay a price; whether it’s ultimately being evicted, having to come up with large sums of money or getting sent to collections…they ultimately pay a bigger price than residents who are working with us to do the right thing through Corona-season.
If we act in good faith with residents who are also acting in good faith all will be fine. I really believe that. At the end of the day, this is some version of meddling by the federal government that probably won’t accomplish much, but it will end up causing negative consequences for the poorest among us. So, we have to do what’s right, apply the Golden Rule to our actions, and we’ll be fine. We’re all suffering to some degree because of this damn bug, but relatively speaking our burden will amount to not much more than an inconvenience and unnecessary worrying. But, if you can channel that inconvenience into helping people out…that’s lemonade baby!
Basically it comes down to this; prepare your team with ways they can help residents out. If helping them isn’t working make sure there is a way to deal with the problem, up to and including eviction…just like we’ve always been able to do.