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How the Eviction Diversion Program Will Work (And How Evictions Will Be Different)

After (if) the moratorium is lifted July 16th at 12:01 a.m., landlords can begin the eviction process for non-payment of rent—however things will be a little different than normal. Landlords may evict for reasons other than non-payment, but we’ll get more into that later. Landlords with properties under the CARES Act (e.g. Section 8) will still be under the federal non-payment eviction moratorium through July 24th.

First, the process for evictions has been modified by Michigan Supreme Court orders with a few minor changes that will add one additional step and lengthen the timeline. The order also sets priorities for eviction cases to enable those landlords facing the most months of non-payment of rent to get into court sooner. Second, the state legislators budgeted $50 million dollars to fund an Eviction Diversion Program (EDP) with varying amounts allocated by county across the state depending on perceived need—taking into consideration the typical number of evictions for non-payment in each area.

Let’s look at the EDP first since many landlords may want to pursue that route as soon as possible to avoid going to court altogether.

Eviction Diversion Program (EDP)

 
Using the funds allocated to the Housing Assessment and Resource Agency (HARA) located in each county, the HARA will be able to provide direct payments to landlords where the tenant is eligible for assistance for past due rental payments incurred after April 30th, 2020. (The great news is that the RPOA and other agencies were able to convince MSHDA and SCAO to enable access to the funds upon the issuance of the Demand for Possession, Non-Payment of Rent instead of the summons or judgement form as required by many other rent assistance programs.) Here’s how landlords should begin the process of acquiring assistance:

Step One: Send the tenant the Demand for Possession, Non-Payment of Rent form.

Step Two: Contact the local HARA and ask for any forms that may be needed to get the process rolling. At this point, we believe there will be two application forms required—one for the landlord and one for the tenant. A copy of the Demand for Possession will also be needed along with the payment history of the tenant. (Landlords should understand that many HARA’s are rushing to staff up and provide assistance for the EDP and may not be up and running until around August 1. Contacting the local HARA will be the best way to determine when they believe that they will be up and running. The RPOA in Grand Rapids will provide contact information for the Kent County HARA as soon as it is available.)

Step Three: After all the paperwork is complete, meet with the HARA representative and tenant. This will likely be via online through Zoom or some similar online meeting tool and scheduled by the HARA. The goal here will be to verify all the information submitted and verify need.

Step Four: If the tenant is eligible, the HARA will determine what portion of the rent will be paid with EDP funds, what portion of the balance of the rent will be paid by the tenant and how much of the remaining rent owed the landlord will be asked to forgive. (At the very least, under the program, the landlord will be asked to forgive 1/9 (.111) of the rental assistance provided by the EDP and waive any late fees or penalties. The total amount to be forgiven by the landlord will vary based upon the unit rental cost and how that compares to Fair Market Rent (FMR) in your area and the cap on rental assistance funds for the tenant. Rental assistance will only be provided for up to 150% of FMR.)

In addition, the total rental assistance available and what percentage the tenant must pay and the amount the landlord must forgive will depend on the tenants earned and unearned income (wages, salary and unemployment) and what percentage the total income is of the Area Median Income (AMI). The CARES Act stimulus check is not considered income. Here’s a table showing the total amount of assistance that can be provided based upon the tenant’s income:

Tenant Income as a Percentage of AMIRental Assistance Available as a % of Rent Owed% of Tenant’s Obligation for Rent Owed% Landlord Must Forgive to Receive EDP FundsAmount Tenant is Eligible for Advanced Payment of RentRental Assistance Cap
Under 50% AMI90%0%1/9 of Rental Assistance to Be ProvidedUp to One Month’s Rent or $1,200, Whichever is Less$3,500 for Past Due Rent, $1,200 for One-Month Advanced Rent Payment
50-80% AMI75%16.66%1/9 of Rental Assistance to Be ProvidedNone$3,000
81-100% AMI65%27.77%1/9 of Rental Assistance to Be ProvidedNone$3,000

Depending on the tenant’s income, they may be eligible for additional assistance through ESG or SER program funds that may enable them to pay rent arrearages prior to March 1st. Case management will also be provided for three months for those tenants earning less than 50% of AMI.For the amount the tenant owes, a 12 month or other payment plan will be negotiated with the landlord.

With all of that said—the EDP is completely voluntary for landlords. If a landlord does not wish to participate, they can follow the NEW eviction summary proceedings process for non-payment of rent, obtain some form of money judgment and go through the normal physical eviction and collection process.

New Court Procedures for Evictions Starting July 17th (If the Moratorium is Lifted)

 
 All evictions will start with the proper notice, e.g. the Demand for Possession, Non-Payment of Rent form for non-payment of rent. The same notice period will apply, generally speaking, 9-days if the notice is served via first-class mail. Once the notice period is up and the landlord has not negotiated a settlement utilizing the EDP, the complaint along with other necessary documents must be filed in the appropriate district court. These documents must include a CARES Act disclosure for non-covered properties.

Now, here’s where things become different from the previous eviction process. Once the complaint has been filed, it will be prioritized based upon the amount owed or other circumstances related to the case. The priority for how cases will be heard will be based upon the following, from first to sixth:

First priority: complaints alleging illegal activity under MCL 600.5714(1)(b), and complaints alleging extensive and continuing physical injury to the premises under MCL 600.5714(1)(d), complaints alleging that the tenant or someone in the tenant’s household has caused or threatened physical injury to an individual while on the leased property under MCL 600.5714(1)(e), and complaints alleging that the tenant is trespassing or squatting under MCL 600.5714(1)(f).

Second priority: complaints alleging nonpayment of rent for 120 days or more.

Third priority: complaints alleging nonpayment of rent for 90 days or more.

Fourth priority: complaints alleging nonpayment of rent for 60 days or more.

Fifth priority: complaints alleging nonpayment of rent for 30 days or more.

Sixth priority: All cases described in first priority through fifth priority that are filed after a court has moved to the next priority designation, and any case for recovery of possession of premises where the complaint alleges nonpayment of rent of less than 30 days. Cases filed in a lower numerical priority designation (e.g., a second priority case filed during a court’s priority five period) shall be given first consideration in order of priority.

Landlords may request that a court consider an earlier termination case if the landlord can substantiate could good cause for reasons of public safety or other just causes, including but not limited to matters brought under MCL 600.5775. In other words, if the tenant is carrying out illegal activities or where the police have been called numerous times to the property for activities not included in priority one.

All cases filed will be heard in order of this prioritization—meaning that, for example, a case with 60 days past due rent will be delayed until ALL cases for priorities one through three have been scheduled. One can only imagine how long this process will take and will likely depend on which district court must hear your case…it could be weeks or months. The good news is that the cases with the most rent due will be heard first after the first priority cases have been filed and scheduled for hearing.

In addition to the above prioritization of complaints, once a complaint reaches the priority phase to initiate the start of the hearing process, a summons will be sent to all parties for a “pre-trial” initial hearing. The pre-trail hearing IS NOT the normal hearing where the case is decided. The pre-trial will be held with the tenant and landlord to inform parties of their rights to counsel, available assistance (e.g. the EDP), availability of dispute resolution programs and the possibility of a conditional dismissal of the case.  Once this hearing has been completed, the case will be adjourned for seven days to allow for the tenant and landlord to seek counsel, resolution or assistance with past due rent. (The case will not be adjourned for seven days if the landlord dismisses the complaint or where the tenant fails to appear at the pre-trial and was personally served or where a consent agreement is reached where both the tenant and landlord have representative legal counsel.)

If the case is adjourned and seven days has elapsed, the hearing date will be set (the hearing that would normally be held to decide the case). Landlords should be alert to the fact that based upon the restrictions on the courts due to COVID-19, hearings may be delayed well beyond the typical 10-day period. Each court will be handling cases in their own way—some will hold all hearings via Zoom or similar remote meeting tools or in person or some combination of both. Where one or more of the parties to the case cannot participate remotely, an in-person proceeding will be scheduled.  (In-person proceedings will likely be delayed even longer due to restrictions.)

Once the hearing is heard a judgment will be rendered. Judges have been instructed to apply the law liberally—which means to give the tenant a lot of leeway. This could result in an increase in the number of days given to a tenant to move or pay past due rent. This also may mean that the judge may render decisions that include only part of the total rent owed.

Orders of eviction (the physical eviction of the tenant from the property) may also experience delays due to whatever the current COVID-19 executive orders allow or don’t allow regarding personal contact, distancing, etc.

At this stage of the game—which is very early—it’s really hard to predict exactly how all this will play out. Some courts have not yet come up with a game plan. Furthermore, tweaks for the EDP and how the courts will handle cases are likely to come as strengths and weaknesses in the process are discovered. With that said, keep in mind that anything included in this article could change—we’ll do our best to keep you informed as those things happen.

You’re probably asking yourself—should I negotiate a pre-court lump sum payment through the EDP if that is possible or go for the full judgment and eviction? That is a very good question—one that can only be answered by looking at your business needs and weighing your chances of success. We strongly encourage members with several months of past due rent or other issues involving drugs, threats of violence, or other activities that threaten the public or other tenants’ safety to seek legal counsel. Of course, if your properties are owned in an LLC, you’ll likely have no choice but to use an attorney. Two to three hundred dollars may be money well spent when attempting to collect several months of past due rent or where the tenant is a serious problem.

(A word about consent judgments under the current executive and administrative orders: A consent judgment will only be allowed where the tenant AND the landlord have legal counsel. The reason given to the RPOA for this is that under current law, if the parties are not represented by legal counsel, either party could decide that they didn’t understand the consent agreement and challenge it to have it overturned or reheard sometime in the future. The RPOA’s understanding is that if both parties have legal counsel when the consent agreement is entered into and filed as part of the case that neither party can “appeal” the consent agreement. This sounds like a good thing.  If a tenant fails to abide by a consent agreement in this case, the landlord or their attorney can file an “Order for Reinstatement of Case and Entry of Judgment.”)

 

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