If you can maintain your health, the largest challenge presented by COVID-19 for landlords will probably be economic. Your rental income could become disrupted. With early unemployment claims already skyrocketing across the U.S., it is inevitable that some tenants will not be able to pay their rent. The economy in many sectors has ground to a halt and people are not able to earn an income. And, as a landlord, the tenant's paycheck is your rent check. So, how can you handle the inevitable call or text from the tenant? Be ready when the call comes or the rent doesn't.
You'll benefit from working with tenants early on to avoid loss of rent caused by the COVID-19 crisis. Although terminating a tenancy (and ultimately evicting the tenant) might normally be your response when tenants don't pay rent, many states, courts, and counties have placed a temporary hold on evictions. Even if there isn't a specific hold on evictions, most courts are delaying trials, extending deadlines, holding hearings remotely, and even closing altogether.
Practically speaking, regardless of your official ability to do so, do you really want to evict a tenant and try to find a new tenant in this crisis? Finding and securing new tenants can be challenging under normal circumstances, and finding and securing new tenants during the COVID-19 pandemic will pose extraordinary challenges and risks.
Before you hear from your tenants that they can't pay rent, consider reaching out proactively. Shoot them an email or give them a call to check in and see how they're doing. Let them know that you're around, and it can't hurt to give them a gentle reminder that you share many of the financial, social, and day-to-day challenges they are experiencing due to the COVID-19 outbreak.
In the meantime, as you approach a rent due date, you can take the following steps to prepare yourself and your landlording business to tackle tenant COVID-19 hardships.
Plan now what you're going to discuss with tenants when the rent doesn't come. Why? It is rare you can make the right plan or lay or a process for the individual tenant and situation off the cuff. This is the theme of Chapter 9 in Nolo's book, Every Landlord's Guide to Managing Property. Consider responding to late or unpaid rent due to COVID-19 by:
After you have heard about the tenants' current prospects and situation, determine if the tenancy can be salvaged. Look back at their rental application and review their sources of income, outgoing debts, and other financial obligations. Also, keep in mind some sectors of the economy might spring back when lock down measures lift—while others might not. If you have done a good job screening tenants for the ability to pay, there is a good chance the tenancy is redeemable even with a short interruption in the rent.
If a tenant can't make the rent as laid out in the lease, consider working out a specific schedule to get the tenant back on track. Again, it will depend on each tenant's circumstances. In fact, my most successful plans in the past have been developed after I've asked tenants to tell me what can work for them. Asking for the tenant's input has always given us a realistic dollar figure and schedule to work with, and it's made the tenant more invested in carrying out the plan. For example, you might hear from tenants that although they can't make the April rent on the normal due date, they do anticipate being able to pay the rent when they get a coronavirus stimulus check later in the month.
Whatever the agreement is, be sure to work out all the details. Document the agreement in writing with an addendum to the lease or rental agreement (use Nolo's form,Coronavirus-Related Amendment to Residential Lease, which you can complete for $1). Make sure the tenants know their obligations—and that you'll need to move forward if they can't follow through with the plan.
For landlords large and small it would be bad—probably terrible—public relations to evict tenants who can't pay rent due to COVID-19 related hardships. It's in your best interests to work with tenants when at all possible. Online review sites and social media groups give aggrieved tenants access to an audience of thousands (maybe even tens of thousands), and their side of the story could be damaging to your rental business if you get labeled the coronavirus eviction artist. If there is even a marginal chance of getting a tenant back on track, think about retaining them to protect reputation and goodwill. Or, at the very least, delay the process until society and court systems normalize. Similarly, you might want to waive any late rent fees for current tenants impacted by the crisis. If you treat tenants right, you might have very long term, loyal customers.