NREIA Legislative Update

NREIA Legislative

The depth of the impact of COVID-19 spread from the restaurant and entertainment industries to the housing industry with a stroke of the pen. On August 8th, President Trump announced an executive order detailing how HUD should further assist renters and those struggling to pay FHA-backed mortgages. In addition to the multiple specific requests of HUD was a single reference to the CDC and the National institute of Health instructing them to address eviction issues to reduce the spread of COVID-19.

Over the next couple weeks HUD in its various capacities began rolling out additional assistance programs, or extending existing foreclosure bans, primarily for single-family homes.

These steps were consistent with the CARES Act and did not raise much concern among those in the housing industry. Everyone understood that these were in reaction to, and due specifically to Congress (the House and Senate) not being able to come to terms with an agreement they have been working on since May.

In the meantime, for several months, property owners and managers have been working with residents through the toughest of circumstances. From job losses to reduction in hours, to things as simple as ongoing maintenance done in a socialdistance complying fashion. While states with eviction moratoria in place we're starting to have anecdotal stories of increasing non-payment, most residents (over 90 percent!), have been diligent in paying or communicating and developing workouts to resolve back rent.

Since May the National Real Estate Investors Association has been helping raise federal awareness of the need for rental assistance for struggling tenants.

On September 1st the White House shared a CDC rule that was to be promulgated as of September 4th in the Federal Register. The stunning news that the CDC would ban all evictions for non-payment across the entire country baffled the industry. Indeed, even the 37-page emergency rule, which precludes and does not require public comment, lacks any evidence detailing a correlation between those who are evicted for non-payment and the spread of COVID-19.

The waiver developed and dictated by the CDC for use by any resident who claims not to be able to pay, holds the meager and highly suspect proposition of being charged with perjury, should evidence be found contrary to the resident's claims. In contrast, property owners and managers face civil and criminal fines and punishments of up to $100,000 and a year in

Let us not become weary in doing good, for at the proper time we will reap a harvest if we do not give up. — Galatians 6:9

jail per violation if the resident does not die. The fine more than doubles if there is a death of the resident. Interestingly, there is no requirement that the death is related to COVID-19 or caused by COVID-19.

Additionally, the organization pursuing the eviction could be liable up to $250,000 with no loss of life, and doubling if there is a loss of life. This means that a husband and wife partnership could face a year in jail each, $100,000 in fines each, and their partnership or LLC face another quarter million in fines.

As this is an election year and tensions are already running high, I will forgo casting aspersions and blame. Instead, I will leave that for the impending lawsuits that challenge the constitutionality of this state-level contractual issue.

In the meantime, property owners and managers need to be extremely careful on how they move forward with evictions. Or for that matter, how they are recording their business in general.

On September 4th the National Real Estate Investors Association hosted an introductory discussion on this issue and the link to the recording as well as a summary can be easily found on www. RealEstateInvestingToday.com.

Needless to say, this is a developing issue, that may or may not terminate on its scheduled sunset of December 31st, 2020. It is absolutely critical to stay informed at this time. There will most likely be clarification updates at the national level, state and local translations and implementations of the original rule and additional follow-up rules. Please stay plugged-in and attentive to your local association’s updates. Local courts and precedent will make this rule apply differently sometimes judge by judge, as well as region by region. And, as was noted with the potential penalties, you do not want to lose your business because of an inappropriate filing.

Additionally, in a reiteration of statements by the two attorneys that co-hosted our national webinar, please make sure your lawyer is aware as well. Some courts may not allow filing which does not seem to be banned by the CDC, while others may not allow setout, depending on state terminology.

It has been pointed out that the CDC rule clarifies that residents are still responsible for their rent and

Update

any late fees or penalties and interest, and are to make payments up to the full rent as they are able. How that ability to pay is determined will likely be the result of not only a judicial ruling, but a factor of the relationship you have with that resident.

In any case there are a few principles that applied to everyone:

First: document everything. If a resident communicates verbally, write up the conversation, and put it in their file, whether they are telling you about going on a vacation, or reduced hours at work. You do not know when those conversations and printed emails and printed texts may come in very handy should a CDC waiver show up later in the year.

Second: Communicate with your residents! This principle is one we have been mentioning from the beginning of this crisis, and is a good best management practice overall. Working through difficulties together is not only the best principle, it is a human necessity during this crisis. And while we may not be able to be in person as much as we would like, many times property owners and managers are the first ones to know of a senior struggling, a single mom overwhelmed, or of kids wondering where their next meal will come from. Real estate investor associations have always been very charitable; it is part of the blessing of being a successful entrepreneur. Thus, even at this dark hour when we are facing the potential for scams that could overwhelm our very businesses that we must, yes, must (!) fully engage with our business, our community and our residents.

Most of you are fully aware of resources in the community that you can share with those in need, share them now more than ever. Remember, real estate investing is a people business. You have made it this far because you've been successful with people — yes, you may be able to swing a hammer or manage a spreadsheet, but it comes down to people. Those who survive the next several months will be those who engage with their business, engage with people and engage with life.