BUSINESS LAW 101 / The Coronavirus Housing Crisis

By Albert L. Kelley, Esq.

Coronavirus has had a long-lasting impact on the housing situation that is not likely to be resolved anytime soon. On July 29, Governor DeSantis signed an Executive Order continuing the stay of mortgage foreclosures and evictions based on the Coronavirus until September 1, 2020.  This Order modifies the prior stay that has been in effect since April.

On April 2, 2020, Governor DeSantis first issued an Executive Order that suspended the law as it apples to residential foreclosures and evictions.  The Order had no bearing on commercial structures.  This was a fairly broad Order with little specification. While it was tied to coronavirus, the way the Order was written allowed tenants to avoid nearly all residential evictions.  The Order was extended on May 14, 2020, and then again on June 1, 2020, and then again on June 30, 2020.  The new Order that was just signed is a little more narrow, gives a little more specification and ties the foreclosure and eviction stay specifically to those cases where the mortgage or rent cannot be paid because the homeowner or tenant has suffered from a loss of employment, diminished wages or business income or other monetary loss related to the coronavirus emergency.  The stay does not affect evictions or foreclosures for commercial structures or leases, for reasons other than nonpayment, or for nonpayment due to reasons that are not coronavirus related.

Related to this is action that is pending in Congress on a federal level.  As part of the CARES Act, Congress had issued a moratorium on evictions of tenants in properties that are backed by a federally secured mortgage.  In other words, if the property owner has a mortgage backed by Fannie Mae or Freddie Mac, they were precluded from evicting tenants.  The CARES Act expired on July 25, 2020 however there are several attempts to reinstate this moratorium.  At present, before a property owner with a federally backed mortgage can evict a tenant, they are required to give that tenant a 30-day written notice of intent to evict.  If the tenant makes up their rent shortfall during the 30-day period, they are allowed to stay.  It is possible that this moratorium will be reinstated during the next few weeks.

For tenants, the CARES Act and Governor DeSantis’ Executive Orders are a Godsend, as it allows the tenant to be confident that they will at least have a roof over their heads. For those tenants that are still able to pay their rent, they can look to these laws as insurance over future issues; for those that can’t pay their rent it is a security blanket.

For landlords, these Orders are problematic.  While the orders have not relieved the tenants of paying rent, the landlords can not do anything about it if they do not. For those landlords with mortgages, they are still subject to making their mortgage payments or facing foreclosure, as in many cases their mortgages are not for single family residences, but for investment property.  Therefore, they are not subject to the Governor’s stay.  Without rent coming in, many of these landlords cannot make their mortgage payments. For those landlords that do not have mortgages, they still rely on rent income to pay their taxes, insurance and their day-to-day cost of living. Most landlords don’t own apartment buildings or multiple units.  They rent a single unit or an add-on to their house.  The rent income is how they pay for their groceries and other life expenses.  Without the income, these property owners can struggle.   Once the stay gets lifted, the tenants will be required to immediately make up all rent that was not paid.  If they cannot, then the landlord will be entitled to evict the tenant.  In addition, the landlord will be entitled to get a judgment against the tenant for the back rent and to garnish the tenant’s wages until collected. But that may be too late.

For homeowners, the Orders can have a mixed effect.  Because the banks cannot foreclose on the properties, most banks are offering a deferment or forbearance on mortgage payments.  These are not the same thing and should not be confused.  With a deferment, the missed payments are moved to the back of the mortgage, so the homeowner simply starts making their payments again at the end of the deferment period.  A forbearance however, only states that the payment does not need to be made until the end of the forbearance period.  In other words, if a bank gives a homeowner a three-month forbearance, at the end of the third month the homeowner needs to restart their regular mortgage payments along with making the past three-month mortgage payments in full.  This is a sure-fire way to throw a homeowner into default and kick-start the foreclosure process.   There is almost never a reason to agree to a forbearance program.

Regardless if you are a tenant, landlord or homeowner, the coronavirus emergency has likely had an effect on you.  These Executive Orders are merely a way to delay the inevitable. Unless we find a way to gradually bring people out of this situation, when the Order expires there will be an immediate flood of evictions, followed a few months later by a wave of foreclosures. For those of us in the industry, the signs are already being seen.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University.  He is the author of four law books available through Absolutely Amazing e-Books and the host of “Basics Of The Law, a weekly YouTube channel. This article is being offered as a public service and is not intended to provide specific legal advice.  If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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