United States: COVID-19: Governor Lamont Issues Additional Protections For Residential Renters

As discussed in our prior alert on Mortgage Forbearances and Moratoria on Evictions and Foreclosures, Connecticut has stayed all executions on evictions and ejectments through May 1, 2020, and rescheduled all foreclosure sales to June 6, 2020. On April 10, 2020, Governor Lamont signed Executive Order 7X, the first section of which extends further protection to many Connecticut residential renters affected by the COVID-19 crisis.

Specifically, the order contains, among other things, the following provisions:

• A prohibition against residential landlords from issuing a notice to quit or serving or returning a summary process action for any reason, except for serious nuisance, before July 1, 2020.
   
• An automatic grace period for tenants who did not pay all rent due in April 2020, to pay it within 60 days after the due date without being in default. In such cases, landlords are not allowed to deliver a notice to quit or serve or file a summary process action for nonpayment of rent, impose late fees, interest or penalties, report such rent as late to any credit bureau or tenant screening service, or retaliate against the tenant in any other manner.
  
  It appears that the order inadvertently creates a gap period between the end of the 60-day period and July 1, during which gap period no landlord could issue a notice to quit or commence a summary process action, but could theoretically impose late fees, interest or penalties, report such rent as late to any credit bureau or tenant screening service, or retaliate against the tenant. Because the gap period appears to be inconsistent with the announced purpose of the order, it is likely to be corrected and/or, as a practical matter, a landlord's attempt to assess late charges and the like is not likely to be enforced by courts, and could prove problematic in any attempted summary process action initiated after the grace period.
   
• A grace period for tenants who did not pay rent due in May 2020, to pay it within 60 days after the due date without being in default so long as the tenant communicates to his or her landlord in writing the need for a delay of all or some payment of the rent due. The tenant must assert (but need not prove) that the needed delay results from the tenant's full or partial unemployment, other significant loss of income or increase in expenses as a result of the COVID-19 crisis. Importantly, the notice must be provided on or before the ninth day after the due date of the rent.
   
• A right for tenants who are not enrolled in the security deposit guarantee program established by the Commissioner of Housing under General Statutes § 8-339, who have become fully or partially unemployed or otherwise sustained a significant loss in revenue or increase in expenses as a claimed result of the COVID-19 crisis and whose security deposit exceeds one month's rent, to request in writing that his or her landlord withdraw from his or her security deposit an amount equal to the excess of one month's rent and apply it against rent due in April, May, or June 2020. The landlord must comply with this request and may not require a restoration of such security deposit amount in excess of one month's rent until the date the lease is extended or renewed, or at the end of the COVID-19 emergency as declared by the governor, whichever is later.

This order covers all residential tenants, including residents of mobile manufactured home parks, including owners of their homes. The order states that both landlords and tenants remain obligated to comply with their leases or applicable Connecticut law and that tenants remain liable for any unpaid rent.

Residential landlords should be keenly aware that certain provisions of the order appear to conflict with Section 4024 of the CARES Act to the extent the order concerns real property with a federally backed mortgage (referred to as "covered property"). Under Section 4024, covered property is residential property for which the mortgage is insured, guaranteed, supplemented, protected or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program or the Violence Against Women Act of 1994.

Section 4024 provides that a landlord of covered property (whether or not a recipient of a forbearance) may not initiate a legal action to recover possession of the dwelling, nor charge any fees, penalties, or other charges to a tenant for failure to pay rent, until July 25, 2020 (which is 120 days from March 27, 2020, when the CARES Act was enacted). Further, a landlord of covered property may give the tenant a notice to vacate not sooner than July 25, 2020. Finally, a landlord must give a tenant at least 30 days' notice to vacate before requiring the tenant to vacate. This means that Section 4024 prohibits ordering a tenant to vacate for failure to pay rent due on April 1, 2020, until at least August 24, 2020.

Because the CARES Act is federal law, at least with respect to covered properties the longer extensions with fewer conditions provided under Section 4024 will preempt shorter deadlines with additional conditions prescribed by the order. As such, residential landlords of federally covered property should disregard the following provisions of the order as being directly inconsistent with the CARES Act and therefore preempted by it:

• The July 1, 2020 deadline as being the first lawful date to issue a notice to quit or to serve or return a summary process action;
   
• The automatic 60-day grace period for rent due in April 2020, which contradicts Section 4024 of the CARES Act to the extent that it allows a landlord to initiate an enforcement action and charge late fees, interest or penalties if a tenant fails to repay the April rent within 60 days after it has become due. For example, if April rent is due on April 1, the order would allow a delay of enforcement activity only until July 1, 2020 -- 25 days sooner than the July 25, 2020 date prescribed under Section 4024 of the CARES Act;
   
• The 60-day grace period for rent due in May 2020, which lasts only until July 1, 2020, whereas the Section 4024 of the CARES Act prohibits the initiation of enforcement activity until July 25, 2020;
   
• The requirement that a tenant request the referenced 60-day extension for May 2020 rent within nine days after the rent due date specifying that such an extension is necessitated by the COVID-19 crisis, whereas the CARES Act does not require any such notice.

In the United States, federally backed mortgages exceed 50% of all residential mortgages. Thus, the majority of residential mortgages are subject to the CARES Act. The preemption rules and interplay between the inconsistent and sometimes conflicting provisions of the order and the CARES Act can make their application to real life circumstances confusing.

Shipman & Goodwin attorneys are available to help landlords and tenants navigate difficult situations in light of the ever-changing rules and orders being issued on the state and federal level during the COVID-19 pandemic. We will endeavor to analyze and explain the relevant law in these areas and related considerations, and update our Coronavirus Resource Center (specifically, the Real Estate Leasing page) periodically to include relevant Connecticut, New York, federal and local laws, rules and regulations that are enacted during this crisis, as well as court filings and relevant precedent or other topical information, which are being circulated on these matters.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.