Now What? 5 Next Steps for Landlords

by | Apr 6, 2020 | Rental Property Management Tips

While the numbers are not yet in, it has been estimated that as many as 40% of tenants did not pay April rent, at least not yet. Financial relief may be weeks away, so for now, focus on the short-term, one step at a time:

1. Work out a payment plan with tenants.

If you haven’t already, work out a payment plan with tenants who were not able to make the April deadline. Show some compassion and be flexible but explain that all of the rent will need to be paid — eventually. There is no “rent moratorium” or government plan to bail out every tenant.

Here’s what is working for other landlords:

Allowing tenants to prorate April rent over the remaining term of the lease;
Prorating rent for six months;
Applying last-month rent deposit to April;
Paying partial rent — whatever the tenant can afford;
Waiving late fees;
Allowing skilled tenants to work it off; and
Promising to forego an eviction filing — for now.

What isn’t working:

Threatening to evict the tenant for failure to pay. Some tenants are betting that an eviction at this point will take weeks and, even then, the judge might side with them. They’re probably right. Besides, tenants may be more afraid of the virus right now than their landlord.

A landlord’s best talking points when negotiating a payment plan include:

The reality that the lease is still legally binding, and rent will be owed eventually. The tenant does not want to trash their rental history and then compete with all the other evicted tenants looking for housing this summer;
The landlord must be able to pay bills to keep the rental property in service. If the landlord folds, the property may no longer be available to rent;
The tenant may be entitled to government assistance, like unemployment insurance. The assistance the tenant is receiving is designed to cover rent; and,
Rent is the priority. Tenants may be able to negotiate forbearance on other bills like utilities, phones, or credit cards to free up enough money to keep a roof over their heads.

In multifamily properties, speak with tenants individually, and work out plans on a case-by-case basis.

2. Contact your mortgage servicer and explore the options.

Protecting your credit during this lean time is a concern, so find out what options might be available down the road if you think you might have to miss a mortgage payment. Paying late is the worst thing for your credit.

Once you know what your tenant’s situation is and you’ve worked out a payment plan, you can use that information to negotiate with your mortgage lender.

If your mortgage is government-insured, you likely will be allowed forbearance for as long as six months. Other lenders may or may not be offering this option. Make sure you understand all the terms and how the agreement will impact your credit score.

For instance, the plan may require a balloon payment at the end of the forbearance period or compound the unpaid interest. The priority is to avoid a late or missed payment and corresponding hit to your credit score.

3. Look at other forbearance options.

If necessary, check to see if your local utility company, service providers, or credit card banks are offering any financial assistance. Try to spread cash as far as it will go towards minimum payments on all debts to avoid late payment notations on your credit report.

Check with your bank to see if the federal stimulus or any state plans might apply to your rental business. Some lenders are offering lines of credit. That is an option of last resort because it can impact your credit score. But if it is necessary to take out more credit, be aware that it may be more difficult to obtain in the coming months if your credit score goes down. Explore your options now and plan ahead.

4. Keep your distance.

Even if you are not currently under a social distancing order, it is imperative to distance yourself and any employees or contractors from tenants. Take a pass on regular inspections or routine maintenance at the current time.

In multi-unit properties, restrict use of nonessential spaces, such as meeting rooms, fitness equipment, playground equipment, and picnic tables. These are believed to be sources of virus spread, and landlords have a duty to keep the property habitable.

Encourage tenants to avoid guests to the extent practical. Stay-at-home orders may designate the maximum number of people who can congregate in one place.

5. Get political.

The federal stimulus plan does not directly support landlords, except for stabilizing the economy as a whole. But several states and city governments are looking at ways of protecting their housing markets.

These governments have a lot to lose if landlords suffer financially:
Mass evictions this summer which could increase homelessness rates;
Lower property and income tax revenues; and
A worsened affordable housing crisis.

However, tenant advocates tend to be the louder voices, so landlords must speak up now, while lawmakers are still considering possible stopgap measures, like offering rent supplements to be paid directly to landlords.

Join and support a local landlord association. Write or call your city council member and state representative. Do it now and be persistent. Lawmakers need to hear your concerns. They need to understand that it simply is not possible to protect tenants without also protecting landlords.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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