How the CARES Act Impacts Apartments: FAQs
Even prior to the passing of the CARES Act on March 27, we’ve fielded countless questions on the implications to the apartment industry. From evictions to fees to rent payments to mortgage forbearance, here are answers to some of the most frequently asked questions.
Mike Semko, RealPage’s vice president of legal and a former counsel to the National Apartment Association, provided answers to many of these questions as part of a webcast on April 2, which is available for on-demand viewing.
Q: Do the tenant protections in the CARES Act apply to all apartment properties across the country?
A: No. Tenant protections (i.e. eviction limitations) under Article 4024 apply specifically to properties with a federally backed mortgage or participation in one of various federal programs (including Section 8 vouchers and Section 42 tax credits) covered by the Violence Against Women’s Act or the Rural Voucher Program. For conventional properties not tied to a federal program, they would only be included if they have a federally backed mortgage. That would apply to any loan from Fannie Mae and Freddie Mac, the two lending behemoths in the multifamily space, in addition to federal agencies like FHA and HUD. A property with debt held by a private lender (such as a pension fund) or without a federally backed mortgage would not covered by the tenant protections in Article 4024.
Q: Does the CARES Act cancel or suspend rent payments?
A: No. Leases are still valid, and rent is still due.
Q: If a property does not request forbearance, do the tenant protections still apply?
A: Yes. The CARES Act applies to any covered property that meets the above criteria, regardless of whether forbearance is requested. The tenant protections are in effect from March 27 to July 25.
Q: What does the CARES Act say about evictions?
A: Apartments subject to the CARES Act (based on Article 4024 defined above) cannot evict delinquent renters for 120 days. That 120-day period runs from March 27 to July 25. However, the effective moratorium extends an additional 30 days. This is because apartment managers are required to submit a notice to vacate 30 days in advance, but they cannot submit notice until after July 25.
Q: Do the new federal standards on evictions negate local and state rules?
A: No. If a local municipality or state rule is more restrictive than the CARES Act, they take precedent. Even if a property isn’t subject to the CARES Act, they are still subject to eviction moratoriums set in place by local and state governments. The majority of states and many cities have adopted their own eviction rules, so check with your local and state governments.
Q: What fees are allowable under the CARES Act?
A: Properties subject to the CARES Act can still apply resident fees as normal (i.e. parking, trash, amenity spaces), but cannot charge any type of late fee nor can they evict for non-payment of any fee for the duration of the federal eviction moratorium.
Q: Can property managers evict renters who are damaging units or bothering other residents, or who have been convicted of a crime?
A: The CARES Act does not specifically prevent property managers from evicting renters for reasons beyond being delinquent on unpaid rent or fees. However, check your local and state rules, as some are more restrictive than the federal rules. Additionally, many local law enforcement agencies have announced they are temporarily not participating in eviction proceedings due to social distancing rules.
Q: Can property managers request proof of a hardship (i.e. lost job) for renters unable to pay rent?
A: The CARES Act does not prohibit property managers from asking renters to prove a hardship; however, tenant protections under Section 4024 still apply whether hardship is proven or not.
Q: What protections do property managers have against renters who choose not to pay rent even if they are financially able to do so?
A: If a property is subject to the CARES Act, tenants still receive the same protections. This is a point of contention for the rental housing industry, which has endorsed protections for renters who lose income or get sick, while at the same time requested Congress prevent abuse of those benefits.
Q: Does the CARES Act require property managers offer payment plans?
A: No. The CARES Act does not require payment plans – which historically have been exceptionally rare in conventional, market-rate apartments. However, that is changing very fast. The National Multifamily Housing Council has encouraged member organizations to offer them. RealPage pulled participants in our CARES Act webcast on April 2 on whether their firms planned to offer payment plans, and 93% confirmed they would. Payment plans can be a win/win for renters and property managers. Renters with a financial hardship are given relief in the form of reduced payments or multiple payments, while remaining in good standing. Property managers benefit from reduced risk of non-payment. Any payment plan put in place should be documented and signed by the resident. According to NMHC, the CARES Act also requires apartment firms report residents on modified payment plans as “current” in reporting to the credit bureaus “or as the status reported prior to the accommodation during the period of accommodation unless the consumer becomes current.” That credit protections ends “at the later of 120 days after enactment of the legislation or 120 days after the date the national emergency declaration related to the coronavirus is terminated.”
Q: What protections are available under the CARES Act to property owners?
A: Mortgage forbearance of up to 90 days is available under Article 4023 to multifamily properties with a federally backed multifamily loan (which includes loans from Fannie Mae or Freddie Mac) who were current on their loans as of February 1 and can show hardship directly or indirectly from COVID-19. Forbearance essentially protects them from a foreclosure. Properties with mortgages held by private companies are not covered by the new law. However, lenders are well aware of potentially revenue issues for all real estate types, and it wouldn’t be surprising to see some work with borrowers on creative solutions.
Q: What other benefits does the CARES Act provide for apartment owners and managers?
A: The CARES Act includes significant benefits for business owners in the form of tax credits, tax payment extensions, small business loans and other programs designed to help employers meet payroll and keep their businesses going. For a thorough review of how the Act could benefit your business, consult with local counsel.
Q: What other benefits does the CARES Act provide renters?
A: Unemployed Americans benefit from additional unemployment payments of $600 per week on top of state benefits. The CARES Act also provides (regardless of employment status) one-time checks of up to $1,200 per adult and $500 per child, with limitations based on income levels.