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Understand eviction orders and their impact on landlords

The Centers for Disease Control and Prevention order prohibits eviction until the end of the year if a tenant does not pay rent and meets four specific requirements. In late October, Colorado Governor Jared Polis issued an even more restrictive order. Courtesy Scott Graham, Unsplash

Benjamin McKay
Attorney, Polsinelli

The COVID-19 pandemic and the resulting economic fallout have exacerbated a housing crisis in Colorado and across the country. Many citizens risk losing their homes due to job loss or illness. Landlords face their own challenges as they rely on rental income to pay off loans and bills for their properties.

In the midst of the crisis, states and localities have adopted moratoria restricting evictions and, on Sept. 4, the Centers for Disease Control and Prevention issued an order titled, “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19.” The order remains in effect until the end of the year and provides eviction protection for residential tenants who cannot pay rent. To qualify for protection, a tenant must satisfy the requirements under the order. To make things even more complex for Coloradans, Governor Polis issued a more restrictive order (Order 227) for Colorado on Oct. 21 – potentially making the CDC order inapplicable to Colorado.

Michael Shomo
Attorney, Polsinelli

As landlords and tenants navigate this unprecedented order, we offer a closer look at the mechanics of the order, the legal implications and how landlords can navigate the potential hardships. We’ll also discuss the interplay between the CDC order and Order 227, and whether the CDC order currently is operative in Colorado at all.

Understanding the CDC order. The CDC order only prohibits eviction if a tenant does not pay rent and meets all of the following requirements:

  1. Tenant must make “best efforts” to make partial timely payments as close as possible to the full amount due. The tenant also must attempt to obtain any available governmental rental assistance.
  2. Tenant cannot expect to earn more than $99,000 in 2020 or $198,000 if married and filing jointly.
  3. Tenant must be facing “substantial” hardship including loss of household income, lay-off from a job or extraordinary out-of-pocket medical expenses.
  4. Eviction would cause homelessness or crowded living circumstance.

Landlords can evict tenants who do not pay rent and do not meet the requirements. Landlords also can evict tenants for reasons other than not paying rent. Further, the CDC order does not relieve any tenant from obligations under a lease, including the obligation to pay rent. That means all back rent remains due, but a tenant cannot be evicted for unpaid rent until after Dec. 31. Tenants may not realize the moratorium does not let them off the hook for unpaid rent.

The CDC order permits landlords to charge late fees, penalties and interest for unpaid rent and to evict tenants who do not qualify under the CDC order. To qualify, tenants must present a declaration form to their landlords and certify that they satisfy the order’s requirements. Landlords should read the order and CDC’s declaration form to understand the detailed requirements.

Criminal penalties apply to landlords who do not comply with the CDC order. Fines up to $200,000 may be imposed for violations. A fine of $500,000 may apply if a violation results in death. Individuals who violate the order also may be subject to one year in jail.

The CDC order does not apply in any jurisdiction with a residential eviction moratorium providing the same or greater level of public-health protection. Because Order 227 offers at least equal protection to the CDC order, Order 227 will govern evictions in Colorado until it expires on Nov. 20.

Understanding Order 227. Order 227 broadens eviction protections in some significant ways. It states that if a tenant breaks any lease covenant, including the covenant to pay rent (example: repeatedly violating the smoking policy), the tenant will be protected from eviction if they can demonstrate “financial hardship.” The order also forbids landlords from evicting tenants who holdover after their lease expires if the tenant demonstrates financial hardship. A tenant is not protected from eviction if the tenant poses an imminent physical threat to another person or causes significant damage to the landlord’s property.

In the rare situation where eviction is permissible under Order 227, Colorado landlords must give the tenant a 30-day notice prior to eviction instead of the shorter statutory notice periods, and notice of the CDC order. Also note that unlike the CDC order, Order 227 prohibits the collection of late fees.

Guidance for landlords. As landlords grapple with the CDC order and how it impacts them, several questions arise. Does the order apply to all tenants? What do I do in January when my tenant hasn’t paid rent? How will I stay on top of my own bills and loan payments?

These are important questions. If your rental income has declined and you may be unable to make mortgage payments, consider speaking with your lender about a temporary forbearance or other workout solutions. Due to the current economic downturn, lenders may be willing to work with landlords to avoid foreclosures.

The CDC order and Order 227 require tenants to make partial payments if possible. They also require tenants to attempt to obtain government rent assistance. Consider working more closely with tenants to encourage partial payments. Keeping the door open for productive conversations could help mitigate losses. You also may consider providing tenants with information on the various government assistance and resources available.

Finally, when in doubt, consult with an attorney. The orders issued in response to the COVID-19 pandemic are unprecedented and quickly fashioned to address emergent circumstances. Consequently, they are imperfect, constantly changing and require additional interpretation.

What’s next. While we cannot predict the future, one thing is certain – the CDC order is unlike any other federal order we have seen. It will have a ripple effect into 2021. When the order expires, tenants again will be subject to eviction for unpaid rent – future and past. As a result, we likely will see a rise in evictions, igniting more conversations about homelessness, affordable housing and rent control in Colorado.

In the coming months, we will learn more about the longer-term impacts of the CDC order, its legal implications and whether it will set new precedents. Like much in the pandemic, flexibility, creativity and teamwork will be required to navigate it successfully.

Featured in CREJ’s November 2020 issue of Multifamily Properties Quarterly

Edited by the Colorado Real Estate Journal staff.