For the past year, we’ve lived in a surreal world. Many people could not work, and those who could often work primarily -- if not exclusively -- from home. Even fully-employed individuals saw significantly reduced salaries in many cases. As a result, government agencies at the state and federal level, put certain protections in place to prevent further hardship to individuals. While we are still in the midst of the pandemic with a large percentage of the population still not vaccinated, there are indications that some of these protections - including moratoriums on eviction and shut-off of utilities - may not be in place much longer. Are you ready?
Perhaps the best-known protection was the moratorium on tenant evictions put in place by the Centers for Disease Control and Prevention (CDC). The eviction moratorium was initially put in place by Congress as a 120-day eviction moratorium that applied to rental properties that received federal assistance. When it expired, the current eviction moratorium was put in place by the U.S. Department of Health and Human Services through the CDC, which issued an order implementing a much broader eviction moratorium that applied to all properties nationwide. The eviction moratorium has been extended several times and is currently set to expire on June 30, 2021. While well-intentioned and arguably necessary, the eviction moratorium was somewhat of a knee-jerk reaction designed to quickly bandage a gaping wound. Simply put, there was insufficient thought behind how the unpaid rents would be handled in the future, and insufficient controls to manage who would be entitled to defer rental payments.
Amongst lower and middle-income New Yorkers -- those most likely to have been impacted by job loss during the pandemic, and also most likely to rent their homes -- shelter often accounts for 40% of spending. When they resume employment, this fact is unlikely to change as they return to similarly paying positions. With many living a check to check existence, these New Yorkers will most likely have used any savings they may have had during the last year. As such, it is unlikely they will be able to repay what, in some cases, will amount to a full year’s rent once the eviction moratorium ends.
While we have all heard the public cry for rent forgiveness, government officials largely have been silent on the issue of whether rent forgiveness is on the table. Moreover, if rent forgiveness is being considered, it is unclear how the government would finance it. According to the Mortgage Bankers Association, about 8 million people missed at least one rent payment since March 2020, so the aggregate unpaid rent could be a staggering amount. Recall that the previous spending package passed with only a narrow margin.
Adding to this dilemma, it now appears that the eviction moratorium may be seeing its final days. One might reasonably assume that, as the economy has not recovered and many people are still unemployed or just returning to work, the eviction moratorium would once again be extended. A court in the District of Columbia, however, recently ruled that the CDC exceeded its authority by ordering the nationwide moratorium, casting doubt on whether there will be another extension and, if so, whether it will be as broad. Alabama Association of Realtors, et al., v. United States Department of Health and Human Services, et al., Index No. 20-cv-3377 (DLF).
In addition to individual renters, there is also the issue of the impact of the moratorium - or its end - on small landlords. Due to the pandemic, many small landlords who had relied on rental income to pay their mortgages and other financial obligations and now find themselves in the untenable position of not being able to meet their own expenses due to tenants’ nonpayment of rent, while being unable to evict the nonpaying tenants.
If you are an individual who owes back rent due to the pandemic, or a landlord impacted by the eviction moratorium, you may wish to consider whether filing for bankruptcy protection is right for you. You may be able to discharge or reorganize your debts to make them more manageable going forward. Call me for a free consultation to see if you may be able to eliminate your debts and start fresh by filing for bankruptcy. The consultation is free - the advice is priceless!
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