Respect State Housing Law

The CARES Act passed into public law on March 27, 2020 (Public Law No: 116-136) in response to the COVID-19 pandemic has had a lasting impact on the property management industry.  For those who may not be aware, the CARES Act applies to all “covered dwelling(s),” which essentially comes down to two things, is the residential rental property financed with a federally-backed mortgage, or is the lease supported with federal assistance (subsidy).

Approximately 70% of single-family mortgages (U.S. Government Accountability Office) and 47% of all multifamily mortgages (Multifamily Executive) are federally-backed.  Thus, the vast majority of single-family homes and nearly half of all multifamily properties are covered dwellings under the CARES Act.

The lasting impact on the property management industry is found in section 4024 of the CARES Act.  Section 4024 is identified as the “Temporary Moratorium on Eviction Filings.”  Section 4024(b) identifies a 120-day period in which no adverse action whatsoever could be initiated by the landlord for a tenant's failure to pay rent when due, which includes charging late fees.  While this 120-day moratorium did indeed prove to be temporary, due to what Loebsack & Brownlee indicate as a “drafting error in the legislation,” the eviction notice restriction found in Section 4024(c) has proven all but temporary.  Section 4024(c) requires that after the moratorium ends, the lessor must give a 30-day notice to vacate to the tenant before filing an eviction. The section indicated no end date for this provision.

During the pandemic, alternative methods were available to landlords to help mitigate the significant loss resulting from non-payment of rent; from emergency rental assistance payments (ERAP) to mortgage forbearances.  However, these methods are not as available as they once were.

As the courts began to open back up to take eviction cases, court dates took significantly longer to get scheduled, and were often scheduled much further into the future to accommodate for the backlog of court cases the moratorium caused.  In addition, to combat the challenges of false ERAP claims, ERAP administrators began to require an eviction notice or filing before an ERAP request could be approved.  This resulted in many magistrates granting continuances to delay judgments to buy time for ERAP approval or funding to be provided to the landlord.  Residents also began to take advantage of the appeal process to gain additional time for funding when landlords became unwilling to endure the significant wait for ERAP funding, which significantly extended the eviction process due to the long wait times to get a court date in district court.  Many of these issues such as court date scheduling, and the upticks in continuances and appeals remained long after ERAP funding ended in many cases.

While the court process for evictions begins to normalize, it still takes a significant amount of time. In the state of North Carolina according to § 42-3 of the North Carolina General Statute, a tenant has “10 days after a demand is made” to pay their rent or they can face eviction for failure to pay rent.  Since Section 4024(c) of the CARES Act is federal law, it supersedes state law.  Thus, the CARES Act adds 20 days of rent loss to an already lengthy eviction process.

This is why KAM Realty Group supports the “Respect State Housing Laws Act” Introduced by Georgia Representative Barry Loudermilk in the House of Representatives (H.R.802) on February 2, 2023, and Florida Senator Marco Rubio in the Senate (S.3755) on February 7, 2024.  The purpose of the Respect State Housing Law Act is to strike subsection (c) of Section 4024 of the CARES Act which would restore the existing renter protections and eviction processes of the states.

Landlords and Property Managers do not want vacant units.  While we are in the business of meeting one of humanity’s most basic needs; shelter, we do so to simultaneously have needs met as we depend on the income generated from occupied units not just in many cases to meet personal obligations, but also to meet our obligations to our residents, employees, and creditors.  For too long, the CARES Act has resulted in a benefit to the residents at the expense of the owners and their agents.  An expense that a landlord with a single house and a mortgage on that house oftentimes cannot bear in the absence of timely rental payment.

KAM Realty Group looks forward to the continued progress of the Respect State Housing Law Act in the House of Representatives and is committed to staying abreast of ever-changing legislation impacting our industry, and to developing a proactive response to said impact to fulfill our obligations to our clients and customers.

Disclaimer: This article is not legal advice. Legal information is not the same as legal advice, where an attorney applies the law to your specific circumstances. Consult an attorney for advice on your interpretation of this information or its accuracy. You may not rely on this article as legal advice, nor as an endorsement of any particular legal understanding.