On April 3, 2020, Governor Larry Hogan issued an order providing guidance on evictions and failure to pay rent actions and, until the state of emergency and health emergency are over, prohibiting: repossession of cars, trucks, and mobile homes by self-help, and the initiation of residential mortgage foreclosures. The order also revises lending limits for certain financial institutions.
Commercial landlords should take note that until the state of emergency is terminated, the order essentially creates a new defense to a failure to pay rent action: If a tenant can show a substantial loss of income from COVID-19, courts may not award any judgment for possession. The order applies to commercial, industrial, and residential leases. As the Governor has closed all non-essential businesses, it is likely that many tenants will have suffered a substantial loss of income, creating a potential defense to an eviction action for the duration of the state of emergency. Tenants will continue to accrue rent according to the lease. Although failure to pay rent complaints may still be filed in local district courts, landlords may want to consider waiting to file such actions because of the limited ability to obtain judgments, due to both court closures and a tenant’s potential substantial loss of income.
Until the state of emergency is terminated, residential foreclosures may not be initiated. However, borrowers are not relieved from paying their mortgage. The order also allows for the suspension of certain lending limits. Currently, Maryland law provides a limit for the amount of loans that state-chartered banks and credit unions may lend to their customers. The order gives Maryland’s Commissioner of Financial Regulation the authority to allow these institutions to engage in lending that exceeds that amount, within reason. The order does affect commercial foreclosures.
Ballard Spahr attorneys remain ready to assist clients during this uncertain time. We continue to monitor developments and will report on them as they arise.
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