Why Efforts to Cancel Rent Payments Won’t Hold Up

Efforts to cancel rent payments are hotly discussed at the moment with several drafted bills circulating at both the federal and state levels. However, don’t expect these bills to move forward. An Allen Matkins attorney says that they do not pass legal muster.

Each drafted bill takes a different approach to rent cancelation. Some, provide funding to cover rent payments for qualifying renters. In those versions, the government would make a partial or full payment directly to the landlord. Other versions would cancel rent completely without compensation to landlords. According to Tony Natsis, chair of Allen Matkins’ Global Real Estate Group, these more extreme versions could be considered an illegal reclamation of property by the government. “This is legislating owners out of existence. If you forgive rent totally, I think that it will come under attack under a number of legal theories. I don’t think it is supportable,” Natsis tells GlobeSt.com.

Natsis believes that rent cancelation bills are a long shot, saying, “I don’t think that it will pass. I can’t imagine it will pass at a national level, but it could pass at a state level.” However, if they did manage to make it through, he expects the apartment market would quickly mobilize to push back, whether nationally or locally. “You are going to see a coalition of people bring a lawsuit [if those bills pass] immediately,” he adds. “There will not be hesitation from national and regional organizations for apartment building owners.”

Eviction moratoriums are already in place nationwide and have also been implemented by states and municipalities. Under these restrictions, landlords are blocked from evicting tenants for non-payment. While most landlords are working with tenants experiencing hardship due to the pandemic, Natsis also views eviction restrictions as a potential infringement on private property rights. “There are going to be issues if and when landlords start to lose their properties while they are waiting to get money from tenants,” he says. “That is right at the edge of—not being declared unconstitutional but—the taking of personal property by the local municipal or state entity.”

He predicts that some owners will move to sue governments enforcing eviction moratoriums, and certainly will under rent cancelation. “There will be some owners that sue—although that isn’t happening right now,” he says. “Also, right now, everyone is trying to play nice and show deference. If rent cancelation happens, no one will care if they are labeled as a bad actor.”

According to Natsis, there is a misconception that landlords are well capitalized and able to foot the bill for both renters and the federal government. “The federal government is already tapped. This is a movement to get the private sector to foot the bill, but those guys are also hurting,” he says. “I don’t have any ownership clients that are happy about what is going on right now.”

So far, there hasn’t been a movement or mobilization within the industry to fight against any legislation or to lobby the government to provide more relief—which would go a long away in increasing rent collections. “I haven’t seen that, but it could be happening beneath the surface. I don’t think they are making an overt attempt because they would be in the spotlight too much,” says Natsis. “It is the same reason that we haven’t seen anyone fight the eviction moratorium. They don’t want to appear to be callous and uncaring, and they hope that is the worst of it.”