April rents are now due, and the big question on everyone's mind is whether, and how many, tenants will pay their rent. Here is what landlords and property managers in the District of Columbia, Maryland, and Virginia need to know to formulate their business strategy.
Moratorium on Evictions
District of Columbia
- The District of Columbia Council has prohibited the eviction of residential and commercial tenants or occupants, as well as the imposition of late fees during the state of emergency.
- Since the prohibition is not limited to reasons related to COVID-19, it covers tenants who are otherwise subject to eviction due to non-payment of rent or other lease defaults, holdover tenants, and occupants who are in possession after foreclosure.
- The prohibition does not stop landlords from issuing rent reminders or notices of default, although a form notice should be reviewed to ensure it does not reference late fees.
- Pending eviction cases are stayed until May 15, 2020. However, the courts are open for filing new complaints, including landlord/tenant complaints for summary possession. No summons in a summary possession case can be served under the emergency law, and the case would not be heard until the courts reopen for business. Consult an attorney on whether there is a potential benefit to filing in the particular circumstances.
- By executive order, Governor Hogan has ordered that courts shall not enter judgment for possession in residential cases where the tenant can demonstrate a substantial loss of income due to COVID-19. The order became effective on March 17, 2020 and does not expire until the state of emergency ends. The suspension does not apply to commercial tenants.
- Although court operations are temporarily suspended, there is no prohibition on filing a complaint for summary possession. The moratorium does not stop landlords from issuing rent reminders or notices of default.
- By order of Governor Northam, most court proceedings in Virginia courts are suspended until April 26, 2020, including in the courts that would hear landlord/tenant summary possession cases.
- The suspension of proceedings does not stop landlords from issuing rent reminders or notices of default.
Tenant Access to Capital
- As a result of Congress's passage of the CARES Act and other national and state stimulus, some tenants, large and small, will have access to funds. A portion of the funds can be used to pay rent without jeopardizing their ability to obtain loan forgiveness. We recommend that landlords and property managers distribute information regarding national and local programs to tenants.
- Small Business Administration Loans. The CARES Act significantly relaxed the normal conditions and procedures for small businesses (under 500 employees) to obtain loans from banks and non-bank lenders that are authorized to make Small Business Administration (SBA) loans. More information can be found here.
- Maryland Economic Relief. The Maryland Department of Commerce is administering loans and grants made available to Maryland businesses. Also, businesses in the State of Maryland qualify for emergency disaster relief from the Small Business Administration. The governor's announcement can be found here, and the SBA application portal is here.
- Virginia Economic Relief. Businesses in the Commonwealth of Virginia qualify for emergency disaster relief from the Small Business Administration, which makes loans of up to $2 million to pay fixed debts, payroll, accounts payable, and other expenses. More information can be found here, and the SBA application portal is here.
- District of Columbia Economic Relief. The District of Columbia's small business microgrants program is closed, but we will monitor for additional relief being made available.
- We are monitoring developments in the area of potential relief for tenants and will update you.
Bankruptcy and Lease Termination
- If a tenant is likely to file for bankruptcy, and for business reasons a landlord desires to end its relationship with the tenant, consult an attorney about whether a termination agreement would be in the landlord's best interests. A termination agreement does not have to provide for forgiveness of rent or liability for future rent, but it can resolve whether the tenant has a right of possession and in certain circumstances could expedite a landlord's recovery of possession of the premises.
- If a tenant wants to hand over the keys, there may be unintended consequences for the landlord, and we urge you to consult an attorney before accepting the keys from a tenant.
- If the tenant has already filed for bankruptcy, the automatic stay is in place, and a landlord should take no action before consulting an attorney.
- Multifamily Properties. For mortgages of multifamily properties backed by Fannie Mae and Freddie Mac, property owners are offered mortgage forbearance on the condition that they suspend all evictions for renters unable to pay rent due to coronavirus.
- Other Properties. As of this writing, there are no other national relief programs for landlords who have mortgage obligations even as they are not receiving rent. States are starting to impose moratoriums on loan enforcement, and industry associations are pressuring for more relief. We are monitoring developments and will update you