How has The Cares Act affected landlords? How can landlords protect themselves moving forward?
"More than ever we must band together to survive in an environment that has been stacked against us by our legislatures and tenants."
Landlords, it’s time we all pay very close attention. A second devastating wave of trouble is thundering towards us and it is imperative that you know how to protect yourselves and your investments. On July 26, 2020, the 120 days of eviction relief provided by the Cares Act expired. With that, landlords across the United States were given the green light to start the eviction process for non-payment of rent, with the caveat of having to use a special 30-day notice as required by the act. We are seeing that landlords are generating notices with $4000-$8000 demands for the last several months of unpaid rent, begging the question that if they couldn’t afford $1000 a month rent, what makes us think they can come up with $4000 to make the landlord whole? It appears that tenants interpreted the eviction moratorium as “we do not have to pay rent,” which could not be further from the truth. So, what happens now?
Over the next 30 days, if the Cares Act is not extended, thousands of people in your area face being evicted and receiving a judgment against them for thousands of dollars. These costly judgments had to come from somewhere to help the landlords who carried their loans and their unpaying tenants for months. For many landlords, the burden was too great, and they did not survive carrying these unexpected costs. The Cares Act also gave businesses large PPP loans to cover employee pay, and those that were unemployed collected more than they would have if they worked, all to help people cover their expenses. What did the struggling landlord get from the Cares Act? Nothing but their properties “seized” by the Federal government if they had a loan backed by Fannie Mae or other government backed loan (something the landlord did not ask for) and told they could not make decisions for properties they own. This has resulted in landlords who are financially stretched and a pool of potential tenants that are not all that dependable.
COVID has had a significant impact on our society but it is by no means the first time that people have endured challenging situations. Everyday people deal with illness, cancer, and other diseases and disabilities that are terribly unfortunate. In the past, tenants that have struggled with these types of issues have leaned on family, savings, or churches to help them make ends meet. With the Cares Act, the landlord was the one forced to carry the bill. We have been beat up enough and the struggle is not over. The current pool of potential applicants in the next 30 days will have evictions and judgments against them that can hurt you.
Here is how to protect yourselves:
Call your screening company and make sure they search for eviction records in your local jurisdiction and in the jurisdiction your applicant has lived. Credit bureaus removed eviction and judgement data from their reports last year, so the only way you can find a civil eviction record is for your screening company to go right to the court. Keep in mind, since these are off the credit bureaus, these evictions will not affect credit scores.
Ask for proof of payment of rent for the last 4 months through bank statements or cancelled checks. Do not fall for they were living with family and did not have to pay rent.
Give good landlord verifications. What that means is when you are asked about a current or former tenant, stick to fact-based answers, and stay away from sharing your personal, biased opinion of the people. A factual question you can answer and provide backup for is “Has your current tenant paid his or her last few months of rent?” Simple question with a simple answer of yes or no. We need to protect each other so no one gets hurt again and that can happen when we ask for and provide good landlord verifications.
Right now, the collection companies are salivating over these new, large judgments to collect on. If you rent to a person who has a judgment, chances are they will be garnished at every job they apply, leaving them with less money to pay you rent. With the “free money” mentality and the ability to obtain a residence after their first eviction, they might consider making the smaller car payment over the larger rent payment and take a chance that a second eviction won’t hurt them either. As a landlord, you don’t want to experience the pain all over again.
I do not want to see any fellow landlord be victimized again. We are good people who have been responsible enough to be able to provide housing across this country to millions of people. For the most part we are all not rich, but rather are living simple responsible lives, trying to get ahead a little and raise our families. More than ever we must band together to survive in an environment that has been stacked against us by our legislatures and tenants. Together we can weather the storm and come out of this a stronger and more unified group.
The secret to being successful in this business is finding the right tenant or what I call “business partner” and proper screening is one way to beat the challenges ahead, including bad legislation put out by our government under the guise of Cares.
David Pickron is President of Rent Perfect and a fellow landlord who manages several short- and long-term rentals. He is a private investigator and teaches organizations across the country the importance of proper screening. His platform, Rent Perfect, was built to help the small landlord find success.