Iowa Residential Landlords Need to Understand Their Limited Options for Non-Paying Tenants in Light of State and Federal Covid-19 Orders

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The various state and federal COVID-19 orders and legislation enacted within the last week have resulted in a more complicated analysis of the implications for Iowa residential landlords, which is detailed herein.

Iowa Orders

The latest state order affecting landlords is Governor Reynolds' March 26, 2020 Proclamation, which, in short, suspended all service of process in regard to the previously suspended evictions. The legal and practical implications for Iowa residential landlords based upon all of the state orders, including Governor Reynolds and the Iowa Supreme Court’s respective Proclamations and Orders (collectively, “Iowa Moratorium”) is set forth below and will remain valid throughout the time the Proclamations remain in effect and Iowa remains under the declared state of emergency (“Iowa Moratorium Period”). The Proclamation Period currently lasts until April 17 but is likely to be extended.

Federal Legislation

In addition, further analysis of the recently implemented federal legislation (“Federal Moratorium”) has revealed the broad application of such legislation, as “covered properties” under the federal legislation is a broadly defined term that includes rental properties with a federally-backed mortgage, which in turn is defined to include, among others, rental properties with mortgages secured or purchased by Freddie Mac and Fannie Mae.

Landlords should know that the same type of suspension of evictions by landlords as seen under the Iowa Moratorium appears as part of the Federal Moratorium, but with the Federal Moratorium lasting until July 25. In addition, the Federal Moratorium includes the following additional restrictions:

(a) prohibits landlords from charging, now or in the future, any type of late fee or penalty for any rent unpaid during the 120-day time period of the Federal Moratorium (“Federal Moratorium Period”) and

(b) requires that landlords may not require a tenant to vacate a leased premise once the Federal Moratorium Period has expired until after the landlord has served a 30-day Notice to Vacate and given tenant another 30 days to vacate.

For further information, see the language on pages 561-564 of the federal CARES Act and this memorandum from the National Housing Law Project. Seek counsel for further information and analysis if you own or manage a “covered property,” as the analysis of the Federal Moratorium continues as of the writing of this blog.

Specific Implications for Iowa Residential Landlords under the Iowa Moratorium and Federal Moratorium

1. Termination of Leases for Breach NOT Permitted: Under the Iowa Moratorium, residential leases cannot be terminated for nonpayment of rent, material non-compliance with the lease/rules, or otherwise under Iowa Code §§ 562A.27 or 562B.25 during the Iowa Moratorium Period.

Practical Advice:

  • Landlords should not send the standard notices of non-payment of rent/noncompliance, as those notices mandate termination of the lease if the default is not cured, which is prohibited under the Iowa Moratorium. 
  • Instead, for tenants who fail to pay rent in April, or otherwise during Iowa Moratorium Period, we recommend landlords send a reminder notice, a non-legal Notice of Delinquent Rent merely reminding the tenant of his or her obligation to pay rent and expressly noting that the landlord is confirming all rights to later evict based upon such default.
  • Instead, for tenants who fail to pay rent in April, or otherwise during Iowa Moratorium Period, we recommend landlords send a reminder notice. This is a non-legal Notice of Delinquent Rent merely reminding the tenant of his or her obligation to pay rent and expressly noting that the landlord is confirming all rights to later evict based upon such default.

2. Eviction/FED Actions CANNOT be Commenced/Filed: With the Governor’s most recent Proclamations, Iowa landlords are no longer permitted to commence eviction/FED actions under the Iowa Moratorium. A similar suspension of evictions by landlords for nonpayment of rent is part of the Federal Moratorium, but with the Federal Moratorium lasting until July 25. To reiterate, while the prior Iowa Supreme Court Orders had allowed for the commencement of FED/eviction actions with hearings being scheduled after May 4, those Orders have been superseded by the Governor’s Proclamations, such that eviction/FED actions can no longer be filed or served upon tenants. Landlords should also remember that self-help evictions have never been allowed under Iowa law.

Two Exceptions for Evictions are still PERMITTED under the Iowa Moratorium:

  • Clear and present danger/emergency evictions
  • Evictions for “squatters” and others under Iowa Code section 648.1(1)

These two types of FED/eviction actions may still be commenced, but note that county practices appear to vary, with some counties scheduling immediate telephonic hearings and other counties scheduling these hearings to occur on or after May 4.

3. Non-Renewal of Leases still PERMITTED: Most practitioners view the Iowa Moratorium and Federal Moratorium to still allow landlords freedom of contract regarding non-renewal of residential leases, particularly when a non-renewal notice is not used to circumvent the suspension against termination based upon non-payment of rent. However, tenants may argue otherwise, and, most importantly, an eviction action based upon a holdover tenant after a non-renewal/cancellation of a lease is not permitted to be filed until after the Iowa Moratorium Period, as described in section (2).

Moreover, if a landlord chooses not to renew a lease and then necessarily allows a tenant to holdover and remain in possession (based upon the current suspension of evictions), the result could be a disadvantageous scenario for landlords after the moratorium is lifted. This may be especially true for landlords of manufactured housing communities, due to the statutory presumption of verbal lease agreements being for a term of one year.

4. Landlord’s Permissible Options for Dealing with Nonpaying Tenants:

  • Landlord Options for Now:
    • Ask nonpaying tenants to sign a rent deferment agreement or rent payment plan. Seek counsel for further assistance regarding such agreements.
    • File a money judgment action for the unpaid rent. Such actions can be filed, with the hearing on such actions being scheduled on or after May 4. However, such actions should only be pursued in very limited circumstances after a thorough review of your lease agreement and the fact scenario involving the tenant, and upon advice of counsel.
  • Landlord Options for Later:
    • Notice and Eviction After the Iowa Moratorium Period Expires: Most practitioners, including myself, believe that after the Proclamation Period has ended, landlords will have the right to send out a formal 3-day Notice of Non-Payment of Rent for all past due rent that has accrued during the Proclamation Period—including a Notice that would include multiple months’ worth of past due rent—and file an eviction action if the tenant does not timely cure the default after receipt of the 3-day Notice of Non-Payment of Rent. In particular, because landlords do not have the right to terminate or otherwise invoke its rights during the Proclamation Period, landlords should have a strong argument to rebut any tenant’s claimed argument based upon the 30-day peaceable possession and/or waiver for past due rent that is greater than 30 days old.
  • Notice and Eviction After the Federal Moratorium Period Expires for Covered Properties: The Federal Moratorium provides that a landlord (of a covered property) may not evict a tenant after the moratorium expires except on 30 days’ prior notice—which may not be given until after the Federal Moratorium Period. For landlords of covered properties, further analysis will be required as to the interplay of the Federal Moratorium and Iowa’s 30-day peaceable possession statute and waiver doctrine, after the Federal Moratorium Period expires.
  • Money Judgment Action for Unpaid Rent: Now or at a later time, landlords can file a money judgment action for the unpaid rent, with those hearings being scheduled on or after May 4. 
  • Options for Landlords with Pre-Proclamation Period Eviction Orders and Writs of Removal
    • County magistrate and sheriff department practices have varied regarding whether writs of removal for pre-Proclamation Period Eviction/FED Orders may still be issued by the court or served by the sheriff. Seek counsel for further assistance.

The full language of the pertinent section of Governor Reynolds’ Proclamation is below. Finally, Iowa Legal Aid has put out an Eviction Flowchart to assist practitioners with the interplay between the various state and federal orders pertaining to evictions.

SERVICE OF PROCESS FOR SUSPENDED EVICTIONS

SECTION THIRTY-TWO. Pursuant to Iowa Code §§ 29C.6(6) and 135.144(3), and in conjunction with the Department of Public Health, I temporarily suspend the regulatory provisions of Iowa Code §§ 648.3 and 648.5 requiring service of a notice to quit or service of original notice before commencing an action under Iowa Code § 648.1(2)-(6). Suspension of these provisions shall apply during the duration of this Proclamation and in conjunction with the suspension of regulatory provisions allowing for the termination of a rental agreement or eviction of a tenant in certain circumstances pursuant to Iowa Code chapters 562A, 562B, and 648.

As this is a situation that continues to change, please contact your attorney before you take any action involving notices or evictions. She may be able to provide you with a sample notice of delinquent rent.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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