Every aspect of our world changes daily due to the COVID-19 pandemic. In these challenging times, some industries share overlapping challenges while others face some that are unique. Michigan landlords and real estate investors face both. While every business relies upon the income of customers and clients, residential housing has some challenging aspects. One example is an Executive Order which suspends evictions of residential tenants.
On March 20, 2020, Michigan Governor Whitmer issued Executive Order 2020-19, “Temporary prohibition against entry to premises for the purpose of removing or excluding a tenant or mobile home owner from their home.” Find the text of the Order here. The stated purpose of the Order is to “provide temporary relief from certain eviction-related requirements and to temporarily prohibit the removal or exclusion of a tenant or mobile home owner from their residential premises, except in extreme circumstances.”
RESIDENTIAL EVICTIONS ARE STAYED UNTIL AFTER APRIL 17, 2020.
Order 2020-19 temporarily suspends evictions in the State of Michigan, until at least the day after April 17, 2020, and also sets forth restrictions on procedures such as personal service of process. The Order states, in pertinent part:
- Due to the protection that a residential home provides from the COVID-19 pandemic, and the need to contain self-quarantined and self-isolated individuals within a residential home, no person shall remove or exclude from leased residential premises or residential premises held under a forfeited executory contract a tenant, a vendee of a forfeited executory contract, or a person holding under a tenant or vendee, except when the tenant, vendee, or person holding under them poses a substantial risk to another person or an imminent and severe risk to property. This order should be broadly construed to effectuate that purpose. This section is effective immediately and continues until April 17, 2020 at 11:59 pm.
Under the plain language of the Order, a residential tenant may not be “removed” until after April 17, 2020. Thus, under typical circumstances, evictions are stayed. Likewise, Order 2020-19 Paragraphs 4 and 5, respectively, state that no person may enter to remove a tenant or vendee, even under an existing writ, and that an officer must not serve process requiring forfeiture. However, it should be noted that exceptions to these provisions are stated to exist where “…the tenant, vendee, or person holding under them poses a substantial risk to another person or an imminent and severe risk to property.” That language is less defined, and Paragraph 2 of the Order expressly states that the Order does not affect a judge’s judicial powers. It may be still be possible to seek eviction, but only if the circumstances are so extreme that this language would apply.
WHAT ABOUT RENT?
Rent is always at the top of the list of concerns for Landlords and Tenants, and this has never been more applicable than now. At first, this Order may seem to relieve Tenants of the obligation to pay rent -- and some may argue that it does. However, that is not the case. The Order states, in pertinent part, at Paragraph 3:
- Nothing in this order shall be construed to abrogate the obligation to pay or right to receive payment due under a lease, nor the obligations and duties prescribed by sections 5716 and 5718 of the Revised Judicature Act (“RJA”), MCL 600.5716 and 600.5718. Effective immediately and continuing until April 17, 2020 at 11:59 pm, demand for payment may not be served by personal delivery. Emphasis added.
Order 2020-19 expressly states that it does not relieve tenants of making rental payments. It states that it does not do away with provisions of the RJA which address the form and contents of a demand for possession or payment (MCL 600.5716), or the service of that demand upon a tenant (MCL 600.5718). It does, however, expressly prohibit service of that demand in person. Therefore, other methods of service under MCL 600.5718 are still acceptable.
WHAT GOOD IS A DEMAND IF A LANDLORD CANNOT EVICT?
Tenants may indeed be financially strapped during this time. However, landlords relying on rental income may soon find themselves in a similar position, if they are not already. Demands can still be served, so long as they are not served in person. However, tenants cannot be evicted during the stay period, and many Courts are currently only accepting emergency filings for the foreseeable future.
Many landlords may also be asking what should be done about tenants that attempt to use Order 2020-19 as a reason to stop paying rent? The Order offers little guidance in this regard. Landlords may find it best to consider payment plan options for their tenants. We suggest keeping the following in mind:
1) Not every tenant will be struggling financially. Attempt to contact tenants in writing and clarify Executive Order 2020-19 and the fact that it does not waive a tenant’s obligation to pay.
2) If tenants are already behind in payments, or contact you to indicate they do not plan on paying rent, have a frank discussion as to what their plans are. Let them know immediately that any payment plans will require their cooperation to properly document, but they may still be subject to additional fees in the lease for the amounts already delinquent. It may be a good idea to explain to the tenants that you want to help those who are truly struggling, but have to also watch out for those trying to take advantage of the situation.
3) Executive Order 2020-19 does not address administrative and other fees, but consider waiving them for tenants that have been impacted by COVID-19 and cooperate with your payment plan requirements. Anticipate that that the courts will not look favorably upon additional fees imposed during this period.
4) Any and all payment plans should be in writing, whether set up as an addendum to the lease, or otherwise. All parties should sign and date the payment plan(s).
5) A payment plan should set forth specific dates & amounts of future payments, even if they are partial payments, such as a spreadsheet that starts with any past due balance and adds future rent charges and their payments.
6) When entering into a payment plan, consider requesting the following information from tenants:
a. Acceptable proof their income has been decreased due to job-related issues tied to COVID-19. If they’ve been laid off, they will likely already have a letter from their employer or can easily get one.
b. Proof of filing for unemployment benefits, or that they’ve been denied unemployment.
Be ready to adjust payment plans as new challenges develop in the coming weeks and months.
If possible, gather sufficient information to identify whether tenants are truly having financial issues due to COVID-19, rather than those looking to abuse the current situation. There will surely be a wave of eviction cases once the April 17 deadline passes – if it is not extended with another Executive Order. It will be to the benefit of both landlords and tenants to adequately document those tenants who need assistance rather than those that are taking advantage of the situation and “game the system.”
WHAT ABOUT PROPERTY VACANT AND FOR RENT?
There is no specific Executive Order in place addressing this specific issue. However, Executive Order 2020-21 of March 23, 2020, “Temporary requirement to suspend activities that are not necessary to sustain or protect life,” commonly known as the “Stay Home, Stay Safe” Order, makes it clear that non-essential activities must be suspended. The property should not be shown in person. If you have a virtual tour on a rental website, that should be the only showing done until Order 2020-21 expires or is lifted.
WHAT ABOUT INSPECTIONS AND MAINTENANCE?
Surely most municipalities will suspend interior property inspections for the time being, if they have not already done so, to avoid city worker potential exposure to COVID-19. Most municipal websites should have updates on rental and other inspections. We recommend suspending all noncritical maintenance until the current health crisis has passed. If you have non-critical maintenance scheduled, we recommend notifying your tenants, in writing, that the maintenance will be postponed for everyone’s health and safety, and pursuant to emergency issues. Critical / emergency items, such as lack of heat, etc., should be addressed on a case-by-case basis.
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This is not meant to be a comprehensive guide to every landlord / tenant problem arising out of Executive Order 2020-19, but we hope this will assist you with the issues noted here. We will continue to monitor these and related matters.
