Governor Pritzker has said multiple times that they are putting a moratorium on evictions in Illinois during the COVID-19 stay-at-home order, but what does that really mean for landlords and tenants?
My understanding is that residential evictions have been placed on hold while the stay-at-home order is in effect. Therefore, my expectation is that many tenants will not pay rent for April and May (and probably June). In fact, I recently read that, according to the National Multifamily Housing Council, nearly 31% of all tenants did not pay their rent for April. That number is up from 18% last year. Given that, what can residential landlords do?
First, the rent is still due and will be owed after the stay-at-home order passes. If your lease has rules for fees or interest charged on unpaid rent, those costs can still be added to the tenant’s account. Practically speaking, the tenants who do not pay will owe past due rent, fees, and interest come June. That’s not an ideal situation for them or the landlords.
Second, many attorneys have discussed the option of suing delinquent tenants in small claims court. You cannot evict them, but you can secure judgments against them, which may be important in the event we see large numbers of bankruptcies. Once a judgment is secured, you can potentially freeze their accounts or garnish their wages.
The main problem I see with this second option is that it will be very difficult to appear in small claims court during the stay-at-home order. The counties I practice in are closed except for essential cases. I can promise you that your small claims case for unpaid rent is not essential. Therefore, that route is much harder than it seems.
Third, you can secure a lawyer and prepare the proper documents now in anticipation of the stay-at-home order lifting. You can start providing notices to delinquent tenants now so that when the order is lifted, the eviction process can begin immediately.
Fourth, and perhaps most practically, you can attempt to work with your tenants and modify their payments now so that you can continue collecting something and avoid the eviction process entirely. I believe that if you work with your tenants, they will make some payments, whereas if you hold firm on the rent, they may pay nothing. Ideally, come June, they won’t be months behind and will likely attempt to catch up rather than move.
Keep in mind that many low-income renters are essentially judgment proof and will be hit very hard by the recession that will sweep over this country for the next few months (or longer). A judgment is worth only the paper it is printed on. I think most landlords are much better off working with tenants to collect what they can. That saves the landlord money on evictions and helps them to keep some cash flow going during these hard times.
To my knowledge, there is no prohibition on commercial evictions. Yet, many large businesses have announced their intention to not pay rent for April. Subway, Staples, Mattress Firm, and others have announced that they will not be paying rent this month, which creates a tough situation for their landlords.
The reality is that I don’t believe that commercial landlords will have much ability to evict their tenants. This is because an eviction of a business is not likely to be considered an essential case. That means that the landlord can file the case but will likely struggle to get a court date.
Many large landlords are agreeing to waive rent, but it begs an interesting question: who should foot the bill for the loss in business, the retailer or the landlord?
In fact, I think the solution is similar to the solution I offered for residential landlords. Landlords should be making efforts to modify the relationships they have with existing tenants so that the tenants can continue to pay some rent and stay in business. If the businesses close, the landlord may struggle to find new tenants so bringing in some cash flow is preferred to none.
This is a time where we need to think of the long-term benefit of the relationships we’ve built. Let’s not be too quick to act against longtime business partners. Landlords and tenants need to work together to make sure everyone stays in business and pays what bills they can.
If you have any questions about this topic, please give us a call. We’d love to discuss it further.