ACTION NEEDED: R.I. LANDLORDS SHOULD BE ABLE TO RECOUP EVICTION COSTS AGAIN
COVID RELATED ADJUSTMENT OUTDATED AND CREATING COSTLY IMBALANCE
HOW WE GOT WHERE WE ARE
Does it seem all that long ago that the Covid outbreak spread to the U.S. and interrupted our lives? As early as January 1, 2020 it was confirmed that the disease was spread from person to person and soon after governments across the globe were left to figure out how to keep people away from large gatherings without destroying their economy. Working from home became the norm, for those that could, and subsequently, ensuring people had a home became focal for national and state governments. In September of that same year, the CDC issued a federal halt to evictions and that moratorium would go on to be renewed in Rhode Island until August, 2021.
Although not without controversy and certainly not comfortable for property owners, the initial logic made some sense: we couldn’t have more and more people on the streets during a pandemic and paying rent would become increasingly difficult as people got sick and work was harder to find. It was estimated that over 2,000 households in R.I. could be facing eviction if not for governmental support. Eventually, states set up rent relief programs to help landlords who relied on rent that wasn’t coming in to pay their mortgages and by most accounts those programs were successful. But rent relief, and the eviction moratorium, no longer exist because the needs of society have changed drastically. Along with drastic drops in mortality and hospitalization, unemployment rates are lower than ever and opportunities to work are abundant…so why is there a Covid-era holdover in rental property policy that is causing significant headaches for property owners in the Ocean State?
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THE CURRENT EVICTION COST PROBLEM: ASYMMETRY
Now that the eviction moratorium is over, the regular process for tenant payment and eviction has returned…for the most part. The one glaring issue that our clients continue to run into centers around recouping eviction costs from tenants again.
When an eviction case is brought to court, there are naturally legal costs. On average, evictions in Rhode Island cost between $500 and $600. Prior to Covid, tenants could be charged up to $435 to cover those legal fees, which makes sense as the tenant’s inactions are the cause for the court appearance. But since Covid, that fee for tenants has been capped at $135.
There is now an asymmetry when it comes to eviction filing and lease enforcement. For a property owner, it now costs you about $400 to begin the process of removing a tenant who is not paying or is breaking the lease in some way. You will not get that $400 back so the issue of whether or not to evict becomes a question of probability for you…is it worth $400 to get the tenant to do what they are legally binded to do? That question shouldn’t exist…and it didn’t prior to Covid. Why does it still exist?
In reality (and sadly in practice), tenants who may be on their way out can stop paying rent and knowing the speed of the courts and the minimal fee, they can game the system and get two months for $135. Now that rent relief has ended, this is becoming more and more common. A hundred dollars is a mere slap on the wrist. A fee of over $400 proved much more successful in dissuading tenants from going down this path.
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EVICTIONS ARE NECESSARY
Let’s be direct: no one wants a tenancy to end in eviction. All property owners should be aiming for long-term tenancy and they should be doing all they can to add value for tenants so they want to stick around, take care of the property, and pay in a timely manner. But when the relationship breaks down to the point that the tenant is no longer meeting the expectations of the agreed upon lease, the property owner should have a low-friction option to remove that tenant. As it stands now, there is added friction due to policy that is outdated.
Tenants don’t want to get evicted and they should do all they can to avoid getting to this point. For property owners, evictions are not pleasant either. Evictions lead to vacancies and expenses in fixing up the rental unit to get it to rent ready status. So both parties have the same goal, and more often than not, when they meet on a given court date, they’ll often work out a payment plan that both sides agree on…but those court dates are being put off by landlords with the hopes things will improve before they sink that $435. When things don’t improve, more time has gone by and it’s that much harder to reach an agreement, and paradoxically going forward with the eviction becomes more common and necessary.
SOLUTION
The solution here is clear: fair housing advocates pushed for the eviction moratorium when Covid hit and their rationale made sense at the time. Post pandemic, there is no doubt there are steps that could be taken to make things better for tenants who live in poorly managed and maintained apartments, but misplacement of the costs of eviction is not one of them. State officials need to reexamine this policy and bring it to an end.
As property owners, it is important that we advocate based on our experiences because the conversation is one sided without our input. Contact your elected official and make sure they’re aware that this Covid-era change still exists and that it is hurting property owners and tenants alike because it’s kicking solutions down the road and making it easier for people to abuse the system.
Want to learn more, or have additional questions about anything pertaining to rental property and/or real estate investment? We encourage you to reach out to our team.
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Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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