Understanding eviction and avoiding future proceedings

Understanding eviction and avoiding future proceedings
Published on Jul 7, 2020,08:20 am by Daniel Berlind for Forbes.com

With all 50 states in the process of unfolding plans to reopen the economy after the shutdown caused by the Covid-19 crisis, landlords and tenants alike are curious as to what this new normal will mean for rent payment, deferment or evictions. Like all things in the ongoing pandemic scare, those answers vary from state to state and municipality to municipality. By examining several large markets, we can begin to identify trends and information that are useful to all interested parties and explore potential steps that building managers can take to prevent loss of income.

Understanding Varying Eviction Regulations

The first step to understanding what actions are needed to prevent lost income is learning which regulations apply to your building. This knowledge will allow your organization to make critical decisions surrounding handling problem tenants in this unprecedented time. 

Federal

Let’s first look at the federal level. For all buildings receiving federal funds from a source such as Fannie Mae or Freddie Mac, the CARES Act bans evictions until July 25 and requires a 30-day notice to the tenant. That means that for these such buildings, the earliest a tenant can be fully evicted is August 24. 

While these are the strictest restrictions, they are also the most specific: Only buildings receiving assistance from Fannie Mae or Freddie Mac are constrained. For all other buildings, any additional restrictions are handled on a state-by-state basis. Let’s examine some of the largest states to understand the landscape.

California

California has not outright banned evictions, but it has instituted a legal freeze on court proceedings. Such a freeze delays processing of evictions and extends the time a tenant can be considered delinquent on their payment. This freeze was recently extended until July 28, and with cases accumulating in the courts, the effective date of eviction proceedings is likely further away than that.

Individual cities have enacted ordinances requiring the delayed payments to be paid in full within a one-year grace period. If those payments are completed in that time frame, no late fees may be levied.

Texas

Texas has not only restarted eviction proceedings; it has also resumed debt collection procedures.

Florida

Florida’s governor extended the eviction moratorium for another 30 days on June 2, 2020. In conjunction with that, the Broward Sheriff's office has suspended eviction actions indefinitely. In Miami, eviction proceedings are still being filed, but will not be reviewed until the moratorium lifts. As of early June, there were more than 700 evictions on hold in Miami alone.

New York

New York has restricted evictions until August 2020, but some restrictions lifted on June 20. After June 20, tenants need to demonstrate that they either qualify for unemployment or cannot pay rent as a result of Covid-19.

Practical Challenges Of Eviction

Even if your state is resuming eviction proceedings, there are practical considerations. Foremost among these is the legal backlog. Many states and municipalities have been slowing case flow into the courts across the board, which will delay the processing speed of any eviction hearings and result in a longer period of time with lost revenue.

Further, many cities are seeing rent strikes. These widespread payment freezes are crippling to buildings and can be difficult to handle when evictions are slowed or stopped.

Clearly, the return to normal anticipated by many as restrictions are lifted will not be a return to the status quo. There will be a new normal that includes slower evictions, “prove it” requirements and lengthy time-to-pay protections for struggling tenants. So, what can buildings do to protect themselves from losing income?

Eviction Avoidance

The obvious answer is to avoid evictions in the first place by properly vetting tenants’ financials from the very beginning. Let’s examine a few techniques to do so and ensure future tenants' financial situations are what they claim them to be.

Visual Detection

Most bank statements and pay stub documents use a uniform format for each document produced by that source. In other words, one Wells Fargo statement should be visually in line with any other Wells Fargo statement you are presented with. This allows property managers to verify that the received document matches the known, authentic format.

Check The Math

Alternatively, property managers can verify the math of submitted statements. Typically, an applicant submits both bank statements and pay stubs, creating a verification check for a reviewer. Does that amount earned in a pay stub match the amount deposited in the bank statement? Do the year-to-date values algin? Cross-referencing multiple pieces of evidence from an applicant provides greater insight into their veracity.

Perform Due Diligence

Visual and math checks are not always enough. Experienced bad actors can avoid detection from either source and introduce risk to the process. A more involved check would include performing due diligence on the applicant. Searching resources such as LinkedIn, Open Corporates and SBA.gov can uncover a threadbare career history or a workplace that exists on paper only, indicating a fraudulent applicant.

Implement Technology

In addition to any of the previous techniques, many property managers may turn to technological solutions. Tools (including ours) that allow for programmatic evaluation of tenants and identification of fraudulent documents can prevent a dishonest tenant from ever signing a lease. Implementing a tool that can significantly reduce your rate of evictions avoids the cost of eviction and keeps your building earning consistent income from your good tenants.

Don’t struggle with the continually shifting regulations, lengthening protection periods and hassle of handling an eviction in the heart of a global pandemic. Implement fraud detection practices that enable you to avoid evictions in the first place.