In a special session on April 22, 2020, the Virginia General Assembly enacted House Bill 340 which imposes a stay or continuance of an unlawful detainer action or a foreclosure proceeding or a sale under any deed of trust applicable to any tenant, homeowner or owner affected by the COVID- 19 crisis during the COVID-19 state of emergency. The Bill goes beyond the federally imposed protection in the CARES Act, which protects only borrowers of federally-backed mortgages and tenants of properties financed with federally-backed mortgages.
Virginia homeowners and landlords are excluded from the provisions of the Virginia law if they are protected by a federal or local law or regulation enacted in response to the COVID-19 pandemic or by the Governor’s State of Emergency. It appears these types of borrowers would be limited to remedies under the CARES Act.On the other hand, tenants would under certain circumstances, have the ability to choose between federal, state, or local law for COVID-19 related remedies.
House Bill 340 Began as a Protection for Federal Workers and Contractors in Virginia Who Are Furloughed During a Closure of the Federal Government.
The original bill passed in February focused solely on relief for federal workers impacted by a future federal government shutdown. On April 11, 2020, the Governor proposed amendments to include protection for:
- Any ”tenant” as defined in the Virginia Residential Landlord Tenant Act,
- Homeowners who default on notes secured by one-family to four-family dwellings in the Commonwealth, and
- Real property owners who are landlords and who rent one-family to four-family dwellings.
The Governor is expected to sign the bill into law since all of his April 11, 2020, proposed amendments were incorporated into the enacted bill.
The Governor’s proposal expands relief the federal government advanced in March. In response to the collateral economic impacts of the COVID-19 outbreak on the federally backed mortgage market, the Federal Housing Finance Agency issued directive orders on March 23, 2020 providing loan forbearance and eviction protections for properties with federally backed mortgages.
Building on that momentum and initiative, on March 27, 2020, the CARES Act was enacted into law with provisions allowing landlords with federally backed multifamily mortgage loans to apply for forbearance relief in exchange for an agreement not to evict tenants during any forbearance periods.
The CARES Act generally enacted a sweeping 120-day eviction moratorium protecting nonpaying tenants of properties financed with federally backed multifamily mortgage loans, regardless of whether the owners of such properties apply for loan forbearance.
What is the effect of the stay or continuance?
Tenants will be afforded a 60-day continuance for any action for unlawful detainer. Borrowers will be afforded a 30-day stay for a foreclosure proceeding.
These COVID-19 protections are not clear about when the stay or continuance provisions begin or end. The new statute is drafted to apply the details of the stay and continuance periods that apply to a federal government shutdown to the Governor’s COVID-19 emergency order.
Applying the language in the provision for a federal government shutdown to the Governor’s State of Emergency Order, it would appear the stay could be requested up to 90 days following the period covered by the Governor’s State of Emergency Order. Similarly, a tenant affected by the COVID-19 crisis could effectively extend a continuance up to 60 days from the expiration of the tolling provisions under any applicable judicial emergency.
What do Tenants and Borrowers Have to Show to Demonstrate They Are Affected by the COVID-19 Crisis?
A party seeking relief would need only provide a paystub for a pay period within the duration of the state of emergency to qualify under the new law. The proposed change to Code of Virginia, Section 5 states:
“Written proof” means
- A paystub showing zero dollars in earnings for a pay period within the period for which the Governor has declared a state of in response to the COVID-19 pandemic public health crisis,
- A copy of a furlough notification letter or essential employee status letter indicating the employee’s status as nonessential due to the emergency, or
- Any other documentation deemed appropriate by a court or lender.
Virginia landlords subject to the Landlord Tenant Act and lenders with one-family to four-family dwelling mortgages in their portfolios will need to incorporate the implications of the new law into their strategies for defaulting tenants and troubled loans. Tenants and borrowers who may qualify will no doubt view these new protections as an opportunity to seek forbearance or at least some breathing room until the circumstances of the COVID-19 crisis turn more positive.
If you have questions or concerns about the effect the COVID-19 crisis may have on your rental properties, the Business & Corporate and Real Estate attorneys at Woods Rogers are available to help.
Read more legal updates on COVID-19 from Woods Rogers attorneys.