On March 17, 2020, Kansas Governor Laura Kelly issued Executive Order No. 20-06, which directs all financial institutions to “temporarily suspend the initiation of any mortgage foreclosure efforts and judicial proceedings and any commercial or residential eviction efforts and proceedings until May 1, 2020.” Media reports regarding the Order have described it as suspending all eviction proceedings and efforts. But those reports may be overstating the reach of the Order in at least two respects.
First, although there is broad prefatory language in the Order to the effect that “now is not the time for creditors or landlords to initiate foreclosure or eviction proceedings,“ in the end the Order only directs “financial institutions” to suspend initiation of eviction proceedings and efforts. The Order does not define “financial institutions,” nor does the Kansas Residential Landlord Tenant Act. However, other Kansas statutes define a “financial institution” as “a bank, trust company, savings institution, or credit union, chartered and supervised under state or federal law.” See e.g. K.S.A. 38-1702(8).
Typically, landlords in Kansas are not banks, credit unions, or savings institutions. While many leased commercial and residential properties in Kansas are likely subject to a mortgage held by a financial institution, this does not give the financial institution an ownership interest in the property that would allow them to evict the tenant. Instead, the vast majority of property owners and lessors are individuals, property management companies, or limited liability companies. Landlords and tenants reading the language used in the Order are left to wonder whether the Order actually applies to them. While it seems clear that the intent of the Order was to provide eviction relief to all Kansans and small businesses adversely effected by the disruption resulting from the spread of COVID-19, the ambiguity of the Order calls into question whether that relief has actually been provided.
Second, the Order does not appear to address pending eviction proceedings (and there is some question whether the Governor, as the head of the Executive Branch, would have the authority to suspend the activities of the Judicial Branch). The language of the Order only prohibits the initiation of eviction efforts or judicial proceedings. Landlords and tenants that are engaged in a pending eviction proceeding may still be required to comply with their obligations in those proceedings, including responses to motions, discovery requests, and court-mandated deadlines. And as a completely separate matter, those activities maybe affected by the Administrative Order issued by the Chief Justice of the Kansas Supreme Court suspending all but the emergency operations of the courts.
Another issue is the meaning of the term “eviction efforts.” It is unclear whether this means that landlords cannot do things such as send tenants notices of arrearage or demands for payment.
Words matter, especially when the legislature drafts a statute or the Governor issues an executive order. In uncertain times, precise drafting is all the more important. Unfortunately, in this instance, many questions remain.
If you have questions regarding legal issues presented by Executive Order 20-06, whether you are a tenant, landlord, or a financial institution, contact any of Fleeson Gooing's real estate attorneys.
On March 23, 2020, Governor Kelly issued Executive Order No. 20-10 rescinding Executive Order 20-06 and address the uncertainties previously addressed in this article.
As discussed above, in EO 20-06, only “financial institutions” were prohibited from initiating eviction proceedings, which called into question whether any actual eviction relief was provided. As noted, the vast majority of landlords in Kansas are individuals, property management companies, or limited liability companies. Now, Under EO 20-10, the prohibition on evictions in Kansas broadly applies to “individual, companies, banks, financial lending entities, nursing homes, long-term care facilities, or other entities.”
Significantly, although the scope of the Executive Order has been expanded, EO 20-10 actually relaxes somewhat the prohibition on evictions previously set in place by EO 20-06. Previously, the Governor ordered the suspension of all evictions which, arguably, would include pending eviction actions (again, there is some question whether the Governor has the authority to suspend the activities of the Judicial Branch). Under EO 20-10, however, the prohibition on evictions is limited to evictions for defaults “due to a financial hardship resulting from the COVID-19 pandemic.” Moreover, the Order clarifies that the continuation of pending eviction proceedings is not prohibited by EO 20-10, which is consistent with the Order’s clarification that only evictions related to a COVID-19 related hardship are suspended.
But landlords should be cautious before initiating an eviction on the belief that the tenant’s default is not related to financial hardship from the COVID-19 pandemic. Under EO 20-10, landlords have the burden to plead and prove that an eviction is not being initiated “solely” because of a default “substantially caused by a financial hardship resulting from the COVID-19 pandemic.” (As with the general suspension, there is some question whether the Governor, as the head of the Executive Branch, would have the authority to establish a heightened pleading standard, but that is a topic for another day).
Tenants, too, should be cautious. Executive Order 20-10 does not stop monthly rental payments from accruing or suspend any penalties or fees associated with missed payments. And it does not require that landlords allow a tenant the opportunity to address or negotiate any defaults, missed payments, or late fees. Instead, it only encourages such negotiations take place. It would be prudent to begin such negotiations as soon as possible.
Again, if you have questions regarding legal issues presented by Executive Order 20-10, whether you are a tenant, landlord, or a financial institution, contact any of Fleeson Gooing's real estate attorneys.