#319 Landlord Forbearance Options

It has been a long and treacherous road for landlords. From evictions to past due mortgage payments, COVID-19 has had quite an impact on the rental industry. The latest news to hit the market includes new forbearance options for landlords to help them retain their properties.

For NYS landlords, the Tenant Safe Harbor act is passed, heavily impacting the already existing argument around eviction moratoriums. With the new act in place, a court cannot use unpaid rent (accrued during COVID-19) as the basis for a non-payment eviction of a tenant who couldn’t pay rent.


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Show Transcription:

Andrew Schultz: (00:00)
Hey everybody. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode 319, and I’m your host, Andrew Schultz. On today’s episode, we’re going to be talking about new forbearance options for multifamily property owners, the tenant’s safe Harbor act, which was recently signed into law here in the state of New York. And we’re going to talk a little bit about leases, who should sign, who shouldn’t and so much more we’ll get to that right after this.

Voice Over: (00:27)
Welcome to the RentPrep for Landlords podcast. Now your host Andrew Schultz.

Andrew Schultz: (00:32)
All right. Lots to talk about today. Let’s jump right in our first article titled Fannie Mae and Freddie Mac offer new multifamily forbearance options and tenant protections. This article published by Housing Wire on June 29th, 2020, and written by Julia Falcon. The federal housing finance agency announced that Fannie Mae and Freddie Mac are allowing servicers to extend forbearance agreements for multifamily property owners with existing forbearance agreements for up to three months, totaling four barons for a total of six months, according to the government agency, Fannie and Freddie announced Monday that the companies had created three additional forbearance options to assist multifamily borrowers who have been impacted by COVID-19. These options also extend tenant protections. The options include delaying the start of the repayment period, following a forbearance and extension of the repayment period, and an extension of the forbearance period with an optional extended repayment period. According to Freddie Mac, any extension of the forbearance period, we’ll also extend the prohibition on evicting tenants solely for nonpayment of rent, which was part of its original forbearance program established in response to Hurricane Harvey in 2017. Borrowers with loans with a forbearance agreement in place may not charge tenants late fees or penalties solely because of the nonpayment of rent during the forbearance period or the borrower’s repayment period. The announcement said forbearance program also requires borrowers to provide flexibility to tenants, allowing repayment of back rent over time and not in a lump sum. The announcement continued finally taking advantage of the new protections announced today will require borrowers subject to any provisions under local law to provide 30 days notice to tenants prior to any eviction taking place during the repayment period.

Andrew Schultz: (02:14)
So this article is interesting in that it extends the forbearance period being offered to multifamily property owners. Originally when forbearance periods were being discussed as part of the cares act it was decided that single-family. And when I say single-family, I’m talking one to four units is what they consider single-family for this purpose. Single-family housing providers were given actually single-family property owners, not just housing providers were offered up to 180 days of forbearance with the option to extend an additional 180 days. As long as they requested that second extension during their first forbearance period. And at that time multifamily for five units plus was, was really restricted, much more significantly to just a three-month forbearance. So they’re extending that three months into a second three month for a total of six months, which is great. I’m just hoping that that’s enough time for multifamily owners to be able to stabilize in the current market and given the current set of circumstances that we are dealing with.

Andrew Schultz: (03:19)
Ultimately, I think that I’d like to see the multifamily property owners the housing providers be able to match the same as what’s being offered to the single-family property owners and the small housing providers, things of that nature. I’d like to see the full one 80 with the option to extend another one 80, depending on where this carries us. And I think that the reason that it makes sense to offer those extensions is because you’re also offering some kind of protection to the tenant as a result of granting that extension. So I think that’s kind of a win-win scenario here. Our next article is a bit of a legislative update here in the great state of New York. This press release issued by New York State Senator Brad Hoylman’s office was issued on June 30th, 2020, “Tenant Safe Harbor Act” Sponsored By Senator Brad Hoylman Signed Into Law. And I’m going to go ahead and read the press release in its entirety here.

Andrew Schultz: (04:13)
Today, the tenant safe Harbor X sponsored by Senator Hoylman and assembly member Jeffrey Dennowitz. I’m hoping I’ve pronounced that correctly was signed into law by governor Cuomo, Senator Hoylman issued the following statement in response. There is a tidal wave of evictions looming over New York. No one should be forced onto the street. During a pandemic, we have a moral obligation to do everything possible, to keep new Yorkers in their homes. Now that the tenant safe Harbor act has been signed into law. Those new Yorkers most effected financially during this pandemic will have immediate protection from eviction. No single law can single-handedly solve the eviction crisis, but the tenant safe Harbor act is one crucial step to address the looming tidal wave of evictions. I’m grateful to Governor Cuomo for signing the tenant safe Harbor act and the law today and for his leadership throughout the COVID-19 crisis.

Andrew Schultz: (05:01)
I also want to thank my colleagues, assembly sponsor Jeff Benowitz and Senate code prime sponsor, Liz Kruger, who were instrumental in helping craft this legislation, the tenant safe Harbor act S eight one nine two B. If you want to look that up provides protection from eviction, for renters who have experienced financial hardship during the COVID-19 state of emergency the legislation prohibits courts from ever evicting, residential tenants who experienced financial hardship for nonpayment of rent that accrues during or becomes due during the COVID-19 period, it would apply to any unpaid rent accrued between March 7th, 2020 and the yet to be determined date on which all COVID related restrictions on nonessential gatherings and businesses are lifted. The legislation builds upon the protections of the current eviction moratorium prior to the tenant safe Harbor act, a tenant who was unable to pay rent during the COVID-19 crisis could be evicted for nonpayment.

Andrew Schultz: (05:55)
As soon as the moratorium ended now because of the tenant safe Harbor act, the court never uses unpaid rent that accrued during the COVID-19 period as the basis for a nonpayment eviction of a financially burdened tenant. However, the court could impose a money judgment according to the NYU firm and center, an estimated 1,156,800 renter households in the ORIC state have at least one worker who lost a job due to COVID-19 of those households. And estimated 327,000 workers have lost their jobs, but are not claiming unemployment. Insurance benefits. Many are ineligible due to their immigration status. The tenant safe Harbor act passed the New York State Senate and New York state assembly on March 27th, excuse me, May 27th, 2020. And it was signed by Governor Cuomo on the evening of June 30th of 20

Andrew Schultz: (06:45)
Very interesting article because of the implications that it puts on every housing provider here in the state of New York of which I am one, we have a property management company right here in the state of New York. So this is legislation that has a direct impact on me and how I run my business as well as on every single client that we work with. Essentially what the state has done here is said that starting with March 7th, 2020, and extending until a date unknown because no region in New York state has completely exited the covert restrictions yet. So until that time period where your region has exited the covert restrictions, that rent is essentially nonaddictable. You’re not able to take that tenant to court and get an eviction based on the non-payment factor. You can get a money judgment, but money judgements in the state of New York are much more difficult to get for a variety of reasons.

Andrew Schultz: (07:37)
And they’re very, very difficult to collect on. Ultimately, if a tenant has no assets that you can collect against, there’s nothing for you to collect. So you’re just sitting on a judgment that you can’t really do much with keeping in mind. Of course, that New York is one of the States that tends to lead the way when it comes to new legislation like this. We’re looking to find out what your opinions are, drop us a comment, or join us on the Rent Prep for the Landlord’s Facebook group. You can find that at facebook.com/groups/rent prep, if you’re looking for more information about this piece of legislation, you can head on over to my YouTube page and catch that link over at ownbuffalo.com. Just click on the button for our YouTube page. And you’ll find that I did a breakdown of the new piece of legislation. I actually went line item by line item in the piece of legislation and broke it all down. So you can find some more information about this particular piece of legislation over on my YouTube page. If that’s something that interests you.

Voice Over: (08:36)
Form quorum, where we scour the internet for ridiculous posts from landlords and tenants

Andrew Schultz: (08:44)
Foreign quorum is a segment that we’ve developed with the intent of using a, to answer questions that we’re pulling from various places around the internet. Usually, we’ll be pulling our questions from the wreck prep for landlords group. We also pull questions from other Facebook groups, as well as on different websites. For instance, Reddit has a great landlord subreddit and a great real estate subreddit. And there’s oftentimes a lot of great questions and answers on those on those particular subs. So we can pull questions from there as well. So the premise behind forum quorum is for us to go and find those tough to answer questions from around the internet, bring them back here to you and answer them using our wisdom and our knowledge from years and years in the property management industry. So our first forum quorum comes from, I believe the rent prep for landlord’s Facebook group.

Andrew Schultz: (09:30)
And the question is, does everyone living in an apartment have to be on the lease? My initial response to this question would be, yes, absolutely everyone living in an apartment should be on the lease. There are different ways to put people on a lease. And I think that that’s something that warrants a little bit of discussion here as well. But before we jumped into that, I want to talk about screening. So when you’re talking about screening, we’re going to be looking at anyone over the age of 18. We’re going to be running, you know, the credit and background checks. We’re going to be looking at references the, the whole nine yards for anyone. Who’s going to be over the age of 18 living in the property, because we want to know as much as we can about the people who we’re renting to.

Andrew Schultz: (10:09)
There’s a difference between someone who is going to be a responsible party on the lease and someone who’s just going to be an occupant on the lease. And here’s a couple of different scenarios. So we’ll use just a traditional family unit for the sake of this discussion. You know, we’ll have, we’ll have two responsible parties on the lease who are paying the rent, and then we’ll have two non-responsible parties who are not paying the rent butter, just occupants. In this instance, we’ll use, we’ll just say their children. So when you have children even when they turn 18, it’s generally a good idea to start screening them. And the reason I say that is because you may have a student who is going to college and isn’t living at home full time, but they are living in the home for say three or four months out of the year, they’re home for breaks and for summer and stuff like that.

Andrew Schultz: (10:59)
It’s a good idea to make sure that that person is screened because they’re over the age of 18. And it’s a good idea to make sure that that person is on your lease, but they don’t necessarily have to be the responsible party. You would list them as just an additional occupant, the same as you would with a younger child or an adult who is not responsible for the actual rent payments of the Lee’s you’re responsible parties are going to be the people who use screen, knowing that they’re the responsible parties and you’re checking their income and things like that to make that sufficient, make sure that that’s sufficient to carry the apartment. That would be my advice, make sure every single person, you know, of any age is listed on the lease. If they’re going to be living in the property for any period of time, there’s definitely a difference between those who were responsible parties on the lease and those who are just occupants. So you can divide those two out into separate categories when you’re putting your lease together. But definitely make sure that you’re listing at least the names of everyone who’s going to be living in the unit.

Voice Over: (11:58)
Water cooler wisdom expert advice from real estate pros.

Andrew Schultz: (12:06)
Our final segment of today’s show is going to be water-cooler wisdom. This is a great little segment where we’re going to be sharing our wisdom with you, the experiences that we’ve had throughout our time in the industry. And it’s not always going to be just me. We’re going to be pulling in these stories from other industry professionals and things like that as well. So that’ll be a more well-rounded segment. You’ll hear some different voices on here over the course of time. So today I’m starting this a little bit different than we typically would because I actually saw a question on one of the landlords and groups on Facebook, not the rent prep group, but a different group that sparked a memory in my mind that I wanted to share. So I’ll first I’ll share the question. And this is the entirety of the question.

Andrew Schultz: (12:48)
Who would you rent to a young, unmarried couple moving out of parents’ home for the first time or a single man who has long term rental history is a contractor and usually makes improvements. That was the entire question that was posted. And on that I posted a response and said, you didn’t provide us any information. You’re, you’re giving us nothing to go on in terms of the qualifications, the true qualifications of the applicants or even if they’ve applied at this point, we don’t really know if they’ve either one of them has actually put in an application or if you’re just speculating here. So the whole thing reminded me of a story from probably four or five years ago now, where we were actually accused of a fair housing violation and it never went anywhere. And I want to explain why it never went anywhere.

Andrew Schultz: (13:39)
So we had shown an apartment to a disabled veteran who had turned around and did apply for the apartment and was ultimately denied. He called one of the local agencies that deals with fair housing and tried to file a fair housing complaint against us saying that we had discriminated based on his status as a disabled individual and a status as a veteran. And the fact of the matter is that neither one of those was true. The only thing that happened is when we screened him, we realized that he just didn’t meet our criteria. We have a written set of criteria that we follow every single time. And this gentleman didn’t hit on a couple of the criteria. I believe it was income and credit score were both lacking. So that was, that was where we were at. We had to deny the application because it didn’t meet our criteria.

Andrew Schultz: (14:28)
The thing that saved us when it came to that inquiry, and it never really turned into much more than a basic inquiry was the fact that we had those written screening criteria that we could point back to. So after this gentleman signed the release and allowed us to share his application and our screening with the agency that was doing the investigation, we showed them, you know, here’s the application, here’s our written screening criteria. Here’s where he scored on our screening criteria. He did not meet the qualifications for the apartment, which is why he was not offered the apartment. It had nothing to do with this status as a veteran, it had nothing to do with his status as a disabled individual. It had everything to do with the merit of the application. So going back to this question that was asked, who would you rent to?

Andrew Schultz: (15:15)
The question is, or the answer is, you rent to the person who is qualified and based on the question that was asked, I don’t know, as though either one of those people is qualified, you haven’t supplied enough information there to really be able to offer any kind of constructive feedback whatsoever. Actually, that’s not true. There is constructive feedback that I can offer here. My constructive feedback is to get a set of written screening criteria and follow them every single time. My second piece of constructive criticism would be, don’t ask vague questions on Facebook groups, supply the information people need in order to help you. And there you guys have it. There is our water cooler wisdom for this week. So that pretty much wraps us up for another week here on the rent prep for landlords podcast. Thank you so much for tuning in. We really do appreciate it.

Andrew Schultz: (16:02)
If you’re looking to get in contact with us, you can find us at rentprep.com. You can also find us at facebook.com/tenantscreening and the Rent Prep for Landlord’s Facebook group. That is a private Facebook group. You can find that at facebook.com/groups/rentprep, please make sure you fill in the questions when you’re applying and we can approve your membership that way. We try to keep that group private so that it is just landlords. And it’s a great free resource that you can tie into to ask your questions, to see what other landlord’s experiences are. It’s a great opportunity to network as well. Definitely check that out. If you’re looking to get in contact with me, I can be found at ownbuffalo.com or at facebook.com/buffaloforeclosed homes. Thank you so much for listening for rentprep.com. I’m Andrew Schultz, and we’ll see you next week.