The COVID-19 pandemic has impacted nearly every aspect of life in America and across the globe. While the long-term economic impact of the virus may take years to understand, the short-term impact on real estate is mixed. In short, buyers and sellers are still able to transact business, but landlords and lenders may be handcuffed by the system, or lack thereof.
Real estate services are an essential service. As such, buyers and sellers can still hire real estate professionals to engage in the buying and selling of property. I have spoken with several REALTORS® regarding the impact of the shutdowns on their business, and most have reported business has not slowed. It is not exactly business as usual, however.
CDC guidelines and governmental orders have impacted the methods by which properties are viewed and closings conducted. Many buyers today are purchasing properties they have never set foot in, opting instead for virtual tours and video conferencing. The ink pen and “wet ink” signature was already losing popularity to a plethora of e-signature options well before the term “corona” conjured thoughts of anything other than drinking a beer on a beach. Yet, there was always the prospect of huddling around a closing table to execute and notarize the final closing documents in person. Now, even the time-honored tradition of signing your name in front of a Notary Public has gone virtual. Governor Laura Kelly has temporarily relaxed the in-person requirements for notarizing and witnessing signatures. Those tasks too can be completed by video conference. Clearly, the real estate industry has found a way to keep buyers and sellers moving forward.
While buyers and sellers may be able to move forward, landlords and lenders are not so fortunate if housing payments dry up. There seems to be a misconception among many tenants and borrowers that the various aid packages or executive orders have eliminated any obligation to make rent or mortgage payments. This is not the case. Tenants’ and mortgagees’ obligations, both contractually and statutorily, remain unchanged during this time. What has changed is the ability of landlords or lenders to do much about a breach for the time being.
Governor Kelly issued Executive Order 20-10, which provides no landlord or lender may evict or commence a foreclosure when the default is substantially caused by a financial hardship resulting from the COVID-19 pandemic. The burden is on the landlord or lender to show that a breach is not resultant from such a hardship. However, that question will likely never get asked, as the Kansas courts are not currently conducting trials on new evictions and foreclosures. Even where a tenant or borrower is in default of their lease or mortgage as a result of something completely unrelated to the pandemic (i.e. a tenant bringing six new dogs into a one-room pet-free apartment), there is likely little a landlord or lender can do. The Kansas Supreme Court has issued Administrative Orders 2020-PR-016 and 2020-PR-024 which effectively shut down all but the “Emergency” or “Essential” functions of the court system. The Supreme Court does not define evictions or foreclosures as emergency or essential functions, despite what the neighbors of the tenant with six new dogs may think.
On April 30, 2020, Governor Kelly announced her Ad Astra plan to reopen Kansas and on May 1, the Kansas Supreme Court issued new Administrative Orders to address how courts will begin to resume more normal operations. We do not yet have guidance on when eviction and foreclosure actions may resume. However, with courts re-opening with the specter of evictions and foreclosures looming, we may get our first real glimpse of how the virus has impacted Kansans’ ability to “stay at home”.
Michael Heptig is an attorney licensed to practice in state and federal courts in Kansas. Mr. Heptig's practice includes real estate, including landlord-tenant matters and foreclosures. If you have questions about this article or other ways the COVID-19 pandemic may impact your rights in a real estate transaction, call Mike at 785-357-6311.
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