We had the chance to take a few of the questions we’ve been asked to Kirk Cullimore, a Utah-based lawyer who specializes in landlord law, fair housing, and property management.
Question: As a housing provider, what is the best course of action if a tenant must defer rent but my mortgage is still due?
Answer: This must be determined on a case-by-case basis. However, the CARES Act provides opportunities for mortgage deferrals for all mortgages backed by Freddie Mac or Fannie Mae.
Additionally, many other mortgage servicers or providers are offering deferral programs. You need to be careful though. Many of the deferral programs just allow you to defer your mortgage payment for a month to three months. Then FOUR mortgage payments will be due at the time the deferral period is over. Also, interest will continue to accrue on the principal balance of your mortgage during any deferral periods.
Question: In a rent deferment plan, is it better to spread a missed payment out over a few months or just require the missed payment at the end of the lease term?
Answer: This is definitely a business decision that should be made for each individual business. I would recommend requiring the payment to be spread out over just an additional month or two. Many residents will be eligible for stimulus checks under the CARES Act, increased unemployment benefits under the CARES Act, or other subsidies, grants or charities under these unique circumstances. As many of these benefits will be received over the next several weeks, a housing provider should also expect to be made whole as quickly as possible while still providing leniency as the circumstance may require.
Question: Can a housing provider use a security deposit for missed rent payments? and can the housing provider then require the resident to replenish the security deposit?
Answer: Yes, security deposits can usually be used for missed rent amounts. You should review your lease agreement, though, to ensure you are allowed to use the security deposit for rent during the lease term
This may be a good idea to help housing providers get working capital right away. You can then make the deferral agreement or other agreements to have the resident replenish the security deposit over the next several weeks or months. You still cannot post notices or start evictions for failure to replenish the security deposit amount within the moratorium period.
Question: Is COVID-19 or any of the economic fallout from the pandemic cause to terminate a lease?
Answer: Nothing related to COVID-19 in and of itself provides a contractual or legal basis for a resident to be released from their lease. There may be unique, extenuating circumstances that a housing provider may want to consider for a resident. In certain scenarios, it may make sense for a housing
provider to offer lease buy-out options or early termination options. Keep in mind, reasonable accommodations for disabled individuals under fair housing laws may require other considerations still. You should consult with legal counsel if a reasonable accommodation request is made.