Eviction moratoriums have been one of the most discussed topics in the real estate and property management sectors, especially in the context of the COVID-19 pandemic. These temporary bans on evictions have placed significant pressure on landlords, property owners, and creditors. While the intention behind such measures was to protect tenants facing financial hardship, they have also introduced significant challenges for creditors who rely on rental income to sustain their properties and investments.
As a creditor, it is crucial to understand how eviction moratoriums work, how they impact your rights, and what legal remedies are available to you during such times. In this blog post, we will discuss eviction moratoriums, their impact on creditors, and the potential legal strategies available to mitigate their effects.
What Are Eviction Moratoriums?
An eviction moratorium is a temporary ban on eviction proceedings, typically implemented during periods of economic or public health crises. The goal is to prevent tenants who are unable to pay rent due to extenuating circumstances—such as a job loss, medical emergency, or other hardships—from being evicted and becoming homeless.
Eviction moratoriums can vary in scope, duration, and eligibility requirements. They are usually enacted by governments at the federal, state, or local levels in response to economic downturns, public health emergencies, or other significant events.
The most notable example in recent years was the federal eviction moratorium imposed during the COVID-19 pandemic, which was implemented by the Centers for Disease Control and Prevention (CDC). It was intended to prevent the spread of the virus by ensuring that tenants did not face eviction during the public health crisis. While such moratoriums may offer protections for tenants, they can pose unique challenges for creditors.
How Eviction Moratoriums Affect Creditors
For creditors—property owners, landlords, and mortgage lenders—eviction moratoriums can have serious financial implications. These laws delay or outright prevent evictions of tenants who are not paying rent, which means creditors may experience reduced cash flow and face significant operational difficulties. Let’s explore some of the primary impacts:
Loss of Rental Income
The most immediate and obvious impact of eviction moratoriums is the loss of rental income. With tenants unable to be evicted for non-payment of rent, creditors may find themselves relying on limited or no income from tenants who have fallen behind on their rent payments. This can be particularly challenging for smaller property owners who depend on rental income for their livelihood or for creditors who are servicing mortgages.
Increased Risk of Property Damage
Tenants who are not paying rent are often facing financial hardships, which can lead to other problems such as property damage, unauthorized subletting, or neglect of property maintenance. Since eviction moratoriums prevent landlords from evicting these tenants, creditors may be forced to continue bearing the costs of damage or other lease violations.
Difficulty in Maintaining Financial Obligations
For property owners and creditors who rely on rental income to meet their own financial obligations, eviction moratoriums can create serious cash flow problems. Mortgages, property taxes, maintenance, and insurance costs must still be paid, even when tenants are not fulfilling their rental obligations. This can lead to increased debt, the need for loans, or, in worst-case scenarios, foreclosure.
Increased Legal and Administrative Costs
While eviction moratoriums delay the actual eviction process, creditors may still need to navigate the complicated legal and administrative processes to stay compliant. The complexities of eviction moratoriums often require creditors to consult with attorneys, file additional paperwork, and keep up with ever-changing regulations to ensure they are in compliance. These additional legal fees and administrative burdens can strain resources further.
Understanding the Rights of Creditors During an Eviction Moratorium
Even though eviction moratoriums limit the ability to evict tenants, creditors still have certain rights that can help mitigate the financial strain during such periods. While your ability to remove tenants from the property may be restricted, there are several strategies you can use to protect your investment and assert your rights.
Eviction Moratoriums Do Not Forgive Rent Payments
It’s important to understand that eviction moratoriums do not forgive rent payments—they simply delay the eviction process. Tenants are still required to pay rent, and landlords can seek to collect overdue payments once the moratorium is lifted. If tenants do not pay their rent, creditors still have the right to take legal action once the eviction ban ends.
Right to Collect Rent
While you may not be able to evict tenants during the moratorium, creditors can still pursue unpaid rent through legal means. This could include negotiating payment plans, seeking rent assistance programs, or filing civil lawsuits for unpaid rent once the moratorium ends.
Ability to Pursue Other Lease Violations
Eviction moratoriums typically apply only to non-payment of rent and do not prevent creditors from taking action for other lease violations, such as property damage or unauthorized occupants. In some cases, a creditor may still be able to take steps to resolve these issues through other legal remedies, including seeking an injunction or pursuing damages in court.
Communication with Tenants
One important right creditors have during an eviction moratorium is the ability to communicate with tenants. Landlords can still send notices to tenants about unpaid rent, offer payment plans, or discuss alternative solutions. Effective communication can often result in tenants paying or working out an arrangement to catch up on missed rent.
Leverage Legal Remedies
If tenants refuse to pay or violate other terms of the lease, creditors can explore legal remedies such as seeking damages in court, filing for a breach of contract, or pursuing eviction once the moratorium is lifted. Consulting with an attorney who understands the local laws regarding eviction moratoriums is key to ensuring you are following the proper legal process.
Legal Remedies for Creditors Affected by Eviction Moratoriums
While eviction moratoriums may limit your ability to evict tenants, there are still several legal remedies that creditors can pursue to protect their financial interests.
Pursue Civil Suits for Unpaid Rent
Even if you cannot evict a tenant during the moratorium, you still have the right to pursue unpaid rent through a civil lawsuit. Once the moratorium ends, creditors can file lawsuits to recover the outstanding rental payments. Additionally, you may be able to request damages for breach of contract, which may include penalties for late rent payments.
Requesting Payment Plans
In situations where tenants are unable to pay in full, creditors can work with tenants to create structured payment plans. A payment plan allows tenants to pay off their debt over time, which can prevent eviction once the moratorium ends and preserve the tenant-landlord relationship. Be sure to document all agreements and terms in writing to avoid misunderstandings.
Debt Collection Strategies
Creditors can also turn to third-party debt collectors to pursue unpaid rent. Debt collection agencies can help recover funds from tenants who have fallen behind, especially when they have no intention of paying or are difficult to reach. However, creditors should ensure that all debt collection actions comply with the Fair Debt Collection Practices Act (FDCPA) and other relevant regulations.
Foreclosure (In Extreme Cases)
In extreme cases where the creditor is facing significant financial strain due to non-paying tenants and is unable to meet their own financial obligations (e.g., mortgage payments), foreclosure may become a consideration. While foreclosure should always be a last resort, it can be a legal remedy in cases where other efforts have failed.
Explore Government Assistance Programs
Some government programs were created specifically to assist landlords during eviction moratoriums. These programs may provide rental assistance or financial relief for property owners facing significant financial hardship. It’s worth researching local and federal programs available to you, as they can help mitigate some of the challenges posed by eviction moratoriums.
Preparing for the End of the Eviction Moratorium
When eviction moratoriums are lifted, creditors should be prepared to act swiftly to recover lost rental income and begin the eviction process if necessary. While the end of the moratorium may trigger a backlog of eviction cases, creditors can streamline the process by keeping thorough records, consulting with legal professionals, and staying informed about local eviction laws.
Additionally, creditors should begin reviewing their tenant portfolios and assessing which tenants may be at risk of non-payment after the moratorium ends. Early communication and proactive management can help minimize the number of evictions necessary and protect your investment.
Consult with an Experienced Attorney
Navigating eviction moratoriums and understanding your rights as a creditor can be complex, especially with varying laws at the federal, state, and local levels. The team at Tatman Legal can guide you through the intricacies of eviction laws, help you explore legal remedies, and provide strategies for protecting your investment during challenging times.
If you’re struggling with unpaid rent or are unsure of how to proceed during an eviction moratorium, contact Tatman Legal today. Our experienced attorneys are ready to assist you in understanding your rights and help you navigate this complex legal landscape.
Contact Us Today
Don’t let eviction moratoriums threaten your investment. Reach out to Tatman Legal for expert legal guidance tailored to your situation. Our team is here to help you find the best solution to protect your property and income. Contact us today to schedule a consultation and ensure that you are fully prepared for the future.