The COVID-19 health crisis and resulting economic downturn have many struggling to make rent or mortgage payments, on the one hand, and many worried about receiving relied-upon income from rental properties, on the other. On April 20, 2020, the Massachusetts legislature passed An Act Providing for a Moratorium on Evictions and Foreclosures during the COVID-19 Emergency (the “Moratorium”), which provides significant protections to certain renters against evictions and mortgagors against foreclosures during the period of the state of emergency due to the pandemic. The Moratorium is currently set to expire the earlier of August 18, 2020 or 45 days after the COVID-19 emergency declaration has been lifted.
Eviction and Rent Provisions
The Moratorium only protects tenants of residential units and “small business premises units.” A “small business premises unit” is defined as premises occupied by a tenant for commercial purposes, whether for-profit or not-for-profit, unless the tenant, or a party that controls, is controlled by or is in common control with the tenant: (i) operates multi-state; (ii) operates multi-nationally; (iii) is publicly traded; or (iv) has 150 or more full-time equivalent employees.
The protections also apply only to “non-essential evictions.” Evictions for non-payment of rent or resulting from a foreclosure fall within the definition of non-essential evictions and so are subject to the Moratorium. The only residential and small business evictions that qualify as “essential,” and thus are permitted during the Moratorium, are:
- Evictions due to criminal activity or lease violations that may impact the health or safety of other residents, health care workers, emergency personnel, persons lawfully on the property or the general public; and
- Evictions of small business premises units due to the expiration of the term of a lease or tenancy, or a default by the tenant under the terms of the lease or tenancy that occurred before the declaration of the COVID-19 emergency.
No Residential Evictions
The Moratorium forbids the non-essential eviction of tenants in residential dwelling units. Landlords or property owners cannot terminate a tenancy, nor can they even send notice to a tenant demanding the tenant vacate the premises, while the Moratorium is in effect.
The Moratorium does not, however, relieve a tenant of the obligation to pay rent for each month of the lease – it only delays the ability of the landlord to evict for failure to pay rent. The Moratorium is silent on the issue of interest, so standard Massachusetts law on interest likely also applies: interest on late rental payments will begin to accrue 30 days after payment was due, at the contract rate, or if no rate is specified, at the statutory rate of 12%.
Protections for both Residential and Small Business Premises Unit Tenants
- Landlords cannot charge late fees for non-payment of rent so long as the tenant provides notice to the landlord within 30 days of non-payment that the non-payment was due to a financial impact from COVID-19. If such notice is provided, landlords also cannot report non-payment to consumer reporting agencies. Again, the tenant is still responsible for paying the rent itself.
- Courts will not accept new filings, enter judgments or executions of possession, or schedule court events relating to non-essential evictions. Courts will grant all motions for stay of execution or continuance for non-essential eviction actions already in process, and will toll all deadlines relating to non-essential evictions.
- A sheriff, deputy sheriff, constable or other person will not enforce any execution for possession for a non-essential eviction.
Early Use of Last Month’s Rent
The Moratorium allows landlords to use the advance-collected last month’s rent early to pay “expenses” which include, but are not limited to, mortgage payments, utilities, repairs and required upkeep, so long as related to the leased premises or the property in which the leased premises is located. If a landlord chooses to use the last month’s rent in advance to pay expenses, the landlord must notify the tenant in writing, including a statement that the landlord will still apply that money as rent for the last month of tenancy and pay the tenant any interest accrued on that money, with the interest calculated as if the money had not been used before the last month of tenancy.
The Moratorium also prohibits residential foreclosures. For residential property that is neither vacant nor abandoned, a mortgagee cannot publish notice of a foreclosure sale; exercise a power of sale; exercise a right of entry; initiate a judicial or non-judicial foreclosure process; or file a complaint to determine the military status of a mortgagor under the federal Servicemembers Civil Relief Act.
Creditors and mortgagees must grant a forbearance of up to 180 days for mortgagors of residential property if the mortgagor submits a request to the mortgagor’s servicer affirming that the mortgagor has experienced a financial impact from COVID-19. The mortgagor cannot be charged any fees, penalties, or additional interest beyond what would ordinarily accrue during the time of forbearance. Creditors and mortgagees cannot report negative mortgage payment information to a consumer reporting agency related to mortgage payments subject to forbearance.
Similar to the rent provisions, the Moratorium does not forgive any mortgagor for any mortgage payment – it simply delays the mortgagee’s ability to foreclose and evict.
What the Moratorium Means for Vacation Rental Property Owners
Vacation rentals are a significant source of income for many Berkshire residents. The Moratorium may prove to be a challenge for rental property owners, because the term “non-essential eviction” would appear to include a situation in which a vacation renter of a residential unit refuses to leave the premises at the end of the lease. The Moratorium makes no carve-out to protect rental property owners in that situation, and they may have no legal recourse until the Moratorium is no longer in effect.
While the Moratorium has not yet been challenged in Massachusetts courts, landlord groups have threatened to sue to halt similar laws in California. Such challenges in Massachusetts may not be far behind should the Moratorium be extended for a significant period of time.
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Should you like to discuss how the Moratorium may affect your particular real estate interests, please contact any member of the firm’s litigation or real estate group.