Options for multifamily landlords with nonpaying (or slowing) tenants

Options for multifamily landlords with nonpaying (or slowing) tenants

Times are challenging for multifamily landlords with nonpaying (or slow-paying) tenants. Below is a snapshot of the primary eviction impediment requiring that residential landlords “halt” certain evictions. Also included below is a checklist for multifamily landlords dealing with nonpaying tenants.

As it currently stands, the existing requirement that landlords “halt” certain evictions come from the  Centers for Disease Control  (“CDC”). Indeed, on September 4, 2020, the federal government’s CDC issued an order titled “Temporary Halt in Residential Evictions to Prevent Further Spread of  COVID-19 ” (the “CDC order”). The CDC order initially imposed a moratorium on residential evictions of “covered persons” through December 31, 2020. The moratorium is now set to expire at the end of January 2021. The CDC order defines a “covered person” as a “tenant, lessee, or resident of a residential property who provides to their landlord, the owner of the residential property, or other person with a legal right to pursue eviction or a possessory action” a declaration under penalty in the form set forth in the CDC order.

Notably, the CDC order applies to any state or local area with a moratorium on residential evictions that provides less protection to residential tenants than the CDC order. Currently, Arizona state law provides fewer (or, rather, zero) protections for tenants dealing with the pandemic and, as a result, the CDC order applies in Arizona through at least January 31, 2021, and maybe further extended or modified.

In order to minimize the challenges associated with a nonpaying tenant, landlords do have some options. These include:

1. Accepting other forms of payment from the tenant for rent (e.g., payment by credit card, prepaid debit card, gift card, etc.).

2. Inquiring with the tenant as to whether the tenant’s employer, relative, or other person would provide rent assistance to the tenant, guaranty the tenant’s lease obligations, or execute a promissory note for past due rent.

3. Agreeing with the tenant to apply any existing security deposits to unpaid rent.

4. Asking whether the tenant might be willing to voluntarily relocate to one of the landlord’s other vacant, and less expensive, properties.

5. Allowing the lease to expire and not renew the lease. If the tenant remains in possession after the non-renewal and expiration of the lease, the tenant may be considered a holdover tenant and subject to eviction and the obligation to pay additional rent. Although the CDC order may make an eviction of a holdover tenant difficult, a holdover tenant may be more willing to voluntarily leave due to the prospect of being liable for double rent.

6. Offering the tenant “cash for keys,” through which the landlord pays the tenant to surrender the premises for a certain dollar amount.

7. Monitoring the tenant’s compliance with nonmonetary terms of the lease. The CDC order does not prohibit evictions for tenants who:

a) Engage in criminal activity while on the premises.

b) Threaten the health or safety of other residents.

c) Damage or pose an immediate and significant risk of damage to property.

d) Violate other portions of the lease, including those relating to pets and unpermitted guests and residents.

In short, although the CDC order is now set to expire on January 31, 2021, the CDC order will likely be further extended. In the interim, multifamily landlords may wish to consider the checklist items above to address a nonpaying tenant.

For a complete analysis of what multifamily landlords can do with respect to the CDC order and nonpaying tenants, feel free to email me for our memorandum of arguments and options for multifamily landlords.

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