Legal Update: New Clarity Regarding CARES Act Requirements
New Clarity Regarding CARES Act Requirements
By: Chris Loebsack & Will Brownlee l Loebsack & Brownlee, PLLC
If you are a Property Management professional, you know that few questions have been as common over the last 3 years as those regarding whether or not the 30 Day Notice to Vacate requirement in the CARES Act (codified as 15 U.S.C. § 9058(c)) is still in effect for “Covered Properties” (those with federally-backed mortgages or that participate in government-assisted housing programs like Section 8).
On May 15, the newest party to weigh in on this important question was the Colorado Supreme Court. It issued an important legal ruling where it confirmed that the CARES Act 30-day “Notice to Vacate” requirement remains in effect for all “Covered Properties.” In the Supreme Court's opinion it said that the “Notice provision [of section 4024(c) of the CARES Act] did not include an expiration date" and that the Court could not "insert an expiration date where Congress omitted one." Just as importantly, though, the Court noted that this is the FOURTH State in which this same conclusion has been reached, stating that “Courts in Washington, Oklahoma and Connecticut (the only other jurisdictions that we are aware of to consider this issue) have come to the same conclusion.”
What does all of this mean for us here in NC, though?
The CARES Act applies EVERYWHERE. In EVERY state. In EVERY court.
- It is Federal law. That means it applies in all 50 states.
- It is permanent; it did not sunset in 2020. The U.S. Department of Housing & Urban Development (HUD), and its related agencies, have published several FAQs over the past three years (links below) confirming that the 30-day rule still applies.
- Fannie Mae/Freddie Mac Require It Since 2022 at least, both Fannie and Freddie now include a Loan Rider that makes compliance with the 30 day NTV a condition of the mortgage loan itself. Failure to comply with this 30 day NTV obligation, then, could even constitute a default of the Mortgage Loan(!!)
- Every appellate/higher Court in the US that has considered this issue reached the same conclusion: the Notice to Vacate Requirement has not expired and remains in effect until modified by Congress.
Our greatest concern for our Industry is the practice of some management companies who have been basing their compliance with the 30-day requirement on the State(s) in which they operate -- where they ignore the law in some states, while honoring it in others. This practice is highly disturbing, as it could be easily claimed to show intentional, systematic noncompliance with federal law. This approach cannot go on forever without significant legal and regulatory backlash.
Unfortunately, neither the ending of the declared COVID national emergency at the signing of HJ Res. 7 on April 10, nor the expiration of the Executive Order that declared the National Emergency on May 11th have the effect of doing away with the entire CARES Act. In fact, it only ends very narrow portions of the Act specifically tied to the ending of the declared national emergency (the Forbearance issues). The way-too-short text of HJ Res 7 sounds fantastic but in reality, it does very little:
To truly help our Industry, the Resolution should have said, “the ‘Coronavirus Aid, Relief, and Economic Security Act’ (CARES ACT) is hereby repealed.” But it didn’t.
Amid this mounting collection of adverse opinion, then, it would be unwise to listen to anyone who tells you that the CARES Act 30 day NTV requirement somehow no longer applies to them or to you. There is simply no judicial support for that conclusion, and there are now 4 different High Courts that say the opposite: unless your Property’s mortgage loan is NOT “Federally Backed”, then a 30 day Notice to Vacate is still mandatory.
- Colo. Sup.Ct. Opinion: www.courts.state.co.us/userfiles/file/Court_Probation/Supreme_Court/Opinions/2023/23SA34.pdf
- HUD FAQ published in April 2021 (see Question #25).
- HUD FAQ published in May 2021 (see Question EM1).
- HUD notice published October 7, 2021 (see Page 2).
- Federal Finance Agency Special Report on March 24, 2022. See Footnote 18 on Page 12).
- The same report memorializes (on Page 14) how Freddie Mac, in August 2021, directed primary loan servicers "send reminder notices to borrowers regarding the CARES Act’s 30-day eviction notice requirement."
- Also see: Congressional Research Service, November 10, 2022: See Page 17 (14 of original doc).
- Congressional Bill (H.R. 802) to End CARES Act Notice Obligations: https://www.congress.gov/bill/118th-congress/house-bill/802/text?s=1&r=33