Definition of "Moratorium"

Norma L. Rodriguez, PA <br> Broker Associate real estate agent

Written by

Norma L. Rodriguez, PA
Broker Associate
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Berkshire Hathaway Florida Realty

Generally speaking, a moratorium covers a provisional or limited activity suspension. Temporary financial troubles or funding constraints can trigger issuing a lull. This postponement lasts until a future consideration enables the moratorium’s cancellation. 

A government, various regulators, or even a business can issue a moratorium. Note! Don’t confuse a moratorium with a grace period! The term grace period describes the period between the termination of the credit card billing cycle and a payment’s due date.

Financial moratorium

A company can place a moratorium on new staff recruitment if it has overstepped its budget. The delay can remain in effect until the next fiscal year. During bankruptcy, legal authorities can impose a moratorium on debt collection. Virtually, it functions as a delay permitted to repay an obligation. For example, a financial institution allows a real estate company another month to repay the balance due to a loan.

In short, the purpose of a moratorium is to lessen short-term financial troubles. Additionally, it safeguards time to address these economic hardships. In other words, your lender approves that you can discontinue your payments for a well-defined period until you get back on your feet.

A delay in the completion of a work assignment

Also, we call a moratorium a lull permitted to carry out particular legal responsibility. For instance, a homeowner gives the contractor two weeks to complete work beyond the contract completion date stipulated in the service contract.

Special cases

In exceptional cases, such as holidays, the contractor does not permit the finalization of a specific activity. For example, a homeowner does not allow work on their property during the Jewish holidays.

Another essential real-life example is when a crisis or disaster discontinues a business’ everyday routine. Governments can grant a so-called emergency moratorium on business activities in a flood or earthquake’s direct aftermath. 

A third example is the Center for Disease Control issuing the CDC Eviction Moratorium when the global pandemic broke out in 2020. According to this, people should stay indoors at home to stop the Coronavirus from spreading under any circumstances. Thus, landlords could not evict indebted tenants during the pandemic.

Real estate moratorium

We all know that the mortgage payment starts once the lender has granted the loan. Now, a moratorium puts the equated monthly installment (EMI) on hold for a certain period and under extraordinary circumstances (see COVID-19.) Therefore, the property owner has obtained a so-called EMI holiday, a delay before paying off their monthly mortgage.

Comments for Moratorium

Daphne Burgess Daphne Burgess said:

when does moratorium end in mass?

Jul 02, 2021  07:22:26

Real Estate Agent

Hey Daphne! Thank you for getting back to us. Regarding the eviction moratorium in Massachusetts, while it was enacted last year, the State Moratorium expired on October 17th, 2020. However, the CDC enacted a Moratorium at a Federal level before, which is still in place and became effective in Massachusetts after the date mentioned above.  The Federal Moratorium is established to end on July 31st. There was also a bill signed into law last month by Gov. Charlie Baker that means to prevent evictions for tenants unable to pay rent because of COVID-19 - this is set to remain in place until April 2022.

We hope this information helps!

Jul 05, 2021  10:44:19
Daphne Burgess Daphne Burgess said:

when does moratorium end?

Jun 29, 2021  16:10:46

Real Estate Agent

Hey Daphne! Thank you for reaching out to us. A moratorium can be for different situations and based on those situations there can be different end dates. If you are referring to moratoriums in place because of the Covid pandemic, I'm going to require more information as they might differ based on location, type of moratorium (for gas, electricity, rent, evictions, etc.). If you could please get back to us with the state you are inquiring about and the type of moratorium, we'll try to reply as soon as possible.

Jul 01, 2021  12:11:34
Renee Bryan Renee Bryan said:

I have a land contract on a deed to the property I want to purchase. It is directly through the prior owners, not a financial institution. Does the current moratorium apply to me?

Apr 30, 2021  17:07:25

Real Estate Agent

Hi Renee! I'd love to help you answer that question, but I'm going to need a bit more info first. Can you explain the situation in more detail? Thanks in advance! 

May 05, 2021  18:08:19
Melody A Queen Melody A Queen said:

If there is a moratorium on a lot for sale, what does that mean? If I buy the lot am I now responsible for the debt owed if any is owed?

Feb 17, 2020  02:55:06

Real Estate Agent

Hey, Melody! Think of a moratorium like a grace period. A period of time during which borrowers don’t have to pay their monthly installments, credit card dues, or loans. Note that it’s not a waiver so it will most likely end up in a higher interest rate after the payments are resumed. So, the moratorium doesn’t refer to unpaid debt. For example, during the COVID-19 outbreak, some banks and financial institutions offered a few moratorium months for term loans and credit card bills. We also have some advice on our website on how to sell your home during a pandemic so if you’re interested, you can check it out.

Apr 09, 2020  13:24:15
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