What to Do If You Can’t Pay Your Rent Due to the COVID-19 Pandemic

With the onslaught of the COVID-19 pandemic, you might be among the millions of Americans who find themselves in dire financial straits and unable to pay their rent. So what should you do if you think you won't be able to make your next rent payment?

Take Advantage of Any Applicable Eviction Stays or Moratoriums

At various times throughout the pandemic, the federal government, along with many states and cities, have placed emergency bans on residential evictions. Find out whether there's currently a moratorium on evictions where you live and how long it's expected to stay in place. Keep in mind that any such eviction ban is a temporary measure that will end at some point.

Even if your jurisdiction has a moratorium on evictions, your landlord might still be able to charge you late fees and other penalties under the lease for breaching the agreement. Plus, if you're behind on your rent payments and you haven't reached an agreement with your landlord about paying what you owe, your landlord will probably file eviction proceedings as soon as the moratorium ends. Because your landlord will likely be able to sue to collect unpaid rent and fees once the moratorium ends, it's best to try to pay as much of your rent as you can each month.

Take Full Stock of Your Financial Situation

You'll want to evaluate whether there are steps you can take so you can pay as much of your rent as possible. Here are some ideas to consider:

• Do you expect to a tax refund, a bonus, or some other significant amount of income in the near future? If so, it's worth letting your landlord know and seeing if you can work out a payment plan or make a promise to pay the funds to your landlord when you receive them.
• Do you have a savings account? Threat of eviction or having to pay a large sum when an eviction ban is lifted is exactly the sort of rainy day you've been saving for.
• Do you have assets you can sell? Consider selling any nonessential items you might have, or even essential items that you might be able to replace with cheaper versions. For example, could you sell your newer car and replace it with a functional but older model without hurting your ability to make a living?
• Can you take on a second (or third) job or temporary gig employment?
• Do you have family or friends that might be willing to assist you or loan you money?
• Would you be able to bring on a roommate (if your landlord allows one) to help share the rent expenses?
• Do you have nonessential expenses that you can live—at least temporarily—without?
• Would you be able to move into a less expensive rental? If you are a month-to-month tenant, near the end of your lease, or if you think your landlord might be willing to let you out of your lease early, finding a place that you believe you can better afford for the long term should be your top priority.

Finally, although most financial gurus don't recommend touching your retirement account until you reach retirement age, the Internal Revenue Service (IRS) does allow you to make an early hardship withdrawal from your 401K to prevent eviction. If you're still employed, but have been laid off or had your hours restricted due to the pandemic, you might be able to take out a 401K loan if your employer's plan allows for it. You won't incur IRS early withdrawal penalties or taxes on the loan and you typically have up to five years to repay it through withholdings from your wages once your job starts up again.

Review Your Lease for Helpful Clauses

Some leases have hardship clauses that allow you to end the tenancy early in times of financial difficulty. Although such a clause won't allow you to defer or skip a rent payment, it will allow you to find a more affordable place to live and move out—in some cases penalty free—depending upon the language. Also, keep in mind that you probably won't get a great rental recommendation from your landlord if you take advantage of the hardship clause, so be prepared to offer your new landlord other references.

Let Your Landlord Know About Your Situation and Try to Negotiate

Once you've come to the conclusion that you are going to have a hard time paying rent due to hardships caused by COVID-19, contact your landlord. Tell your landlord about your situation, and try to come up with an agreement that will work for both of you. If you've been a good tenant, your landlord will probably appreciate your reaching out sooner rather than later, and will likely work with you in an effort to mitigate the loss of rental income.

For example, if you're temporarily out of work but expect to get a job or an influx of cash soon, consider proposing the following:

• Skipping your next rent payment, and paying it back over the next six (or another number that you can manage) months
• Making more frequent payments at a lower monthly amount (for example, offer to make 3 payments of $300 every ten days, rather than one monthly payment of $1200), or
• A temporary reduction in the rent rate during the crisis.

Whatever you work out with your landlord, be sure to get it in writing to protect yourself in the event your landlord decides to later file for an eviction. You can use Nolo's Coronavirus-Related Amendment to Residential Lease to record your agreements and changes to the lease.

Other Options

If none of the above options are available, don't lose hope.

Look Into Rental Assistance Programs. You might be able to tap into a local, state, or national rental assistance programs. You might be eligible for assistance through the U.S. Treasury's Emergency Rental Assistance Program. Check HUD's coronavirus website for advice and resources. Also, visit your state's website and see if your state is offering any rental assistance programs during this emergency. State & Local Government on the Net is a great directory that can help you find your state and local government websites. You might also find other assistance programs by searching the Internet for "emergency rental assistance" and the name of your city, county, and state.

Look Into Obtaining Other Assistance. If you've been terminated or laid off from your job because of the COVID-19 outbreak, you can apply for unemployment compensation benefits. If you're a small business owner who was forced to close your doors by order of a governmental entity, and you have two or more employees, you can apply for a Small Business Association (SBA) loan. You might also qualify for a bank loan, a grant, or other financial assistance from programs created by private companies to assist those affected by the pandemic. Many governmental agencies are posting COVID-19 emergency assistance information online—for example, your state, your governor, and your local governments (such as your city or county) might have posted a special resource section on their websites.

Find Ways to Free Up Money for Rent. It almost goes without saying that shelter and food should be your top priorities during this crisis. Do what you can to pay for these essentials first, and then see what you can negotiate with respect to your other obligations. Your landlord is likely to be more flexible in if you can offer at least a partial rent payment. To that end, a number of banks, utility companies and other companies are offering relief as a result of the pandemic, ranging from waiving late fees to allowing you to skip or defer payments without penalties. Do a search for relief available from credit card issuers, insurance companies, utility companies, cell phone service providers, etc. Even small discounts or fee waivers can help free up funds you can put toward your rent.

The important thing is to do what you can to get in front of this issue now—before it becomes a personal crisis that could result in your losing your rental. Don't wait until your rent is due to get started.