Real Estate: Florida Moratorium on Foreclosures & Evictions
On July 29, 2020, Governor DeSantis signed Executive Order 20-180, extending the moratorium on foreclosures and evictions until September 1, 2020. However, this latest executive order carves out some exceptions of which you should be aware.
- Single-Family Mortgagor. First and foremost, the order only protects so-called “single-family mortgagors.” The Governor’s choice of verbiage leaves a bit open to interpretation, but it is likely the following types of mortgages are not subject to the moratorium:
- Commercial loans
- Residential loans on multi-family properties
- Affected by Covid-19. It might not be too difficult for residential borrowers to show they have been affected by the Pandemic, but there are some who might not qualify. For example, our firm represents some online businesses that have done just fine over the past months. Some may even have benefited from the shut-down. So, while the order is not clear, it is certainly possible that the onus will be on the borrower to prove a Covid-19-related hardship in order to avoid foreclosure.
- Other Grounds for Foreclosure. The order specifically states the Order will not prevent foreclosure on grounds other than non-payment of the mortgage. At this point, one would imagine some lenders, at least, are getting pretty desperate for their mortgage income. One strategy you might see is lenders getting creative about the grounds for foreclosure. Is the failure to provide funds for insurance and tax escrows considered non-payment of the mortgage? Maybe. What about other provisions in the mortgage that might have been breached?
- Final Action. Also, note the Governor’s Order only prevents the “final action” concluding a foreclosure action. So, that means lenders can go ahead and initiate their foreclosures anytime. They might even be able to get final judgments in place. While unclear, the “final action” referenced in Executive Order 20-180 probably means holding the foreclosure auction of the property. Or, maybe, “final action” means the property can be auctioned, but the owners cannot be removed under a Writ of Possession. In any event, you get the point. There is much the lender can do during the pendency of the Order. And, some aggressive lenders may well do so.
- Non-Forgiveness. As with the previous Orders, this Executive Order 20-180 does not make the past due mortgage payments go away. The past due balance continues to accumulate whether or not the lender is currently prevented from actually taking possession of the property. That is why many experts believe there will be a wave of foreclosures as soon as the Pandemic Relief measures are lifted. By that time, some borrowers, at least, will find themselves several months in arrears. If they were unable to make the mortgage payments on a monthly basis, they certainly will not be able to make a lump-sum payment for several months of past-due payments.
- Residential Tenants. First and foremost, the order only protects so-called “residential tenants.” So, commercial tenants are not protected at this point.
- Affected by Covid-19. It might not be too difficult for residential tenants to show they have suffered economically as a result of the Pandemic, but there are some who might not qualify. It remains to see how individual judges will handle this, but it is certainly possible that it will be up to the tenant to demonstrate a Covid-19-related hardship in order to avoid eviction.
- Other Grounds for Eviction. The order specifically states the Order will not prevent eviction on grounds other than non-payment of rent. Rental agreements generally have a fair number of provisions other than payment of rent, which a landlord could use as an excuse for eviction. It would almost certainly be easier for landlords to use this loophole than it would be for lenders. Given the level of frustration many landlords are experiencing, I would expect we will see some evictions for failure to maintain the property, excessive noise, parking violations, etc.
- Final Action. In the case of evictions, the “final action” is probably execution of the Writ of Possession. So, that means landlords can initiate their eviction actions and, probably, obtain a final judgment. They could have the Sheriff ready and waiting to remove the tenants the moment the moratorium is lifted.
- Non-Forgiveness. As with the previous Orders, this Executive Order 20-180 does not make the past due rental payments go away. The past due balance continues to accumulate whether or not the landlord is currently prevented from actually taking possession of the property. Since eviction is generally considered less traumatic than taking someone’s property, it is predictable that — while the State or Federal government may provide some protection to homeowners — tenants will be at the mercy of their landlords. Landlords may not see this as a great time to have their properties vacant, so that would be the only real incentive to work with their tenants. Still, it is hard to imagine that tenants will ever be able to catch up on several months of past-due payments. Many will probably walk away.
Whether you are a lender, borrower, landlord or tenant, you should consult your real estate attorney for information and strategies regarding the current Pandemic and the aftermath that is sure to come.