Moratoriums and eviction bans are on the rise because of COVID-19 and many renters are pushing for leniency from their landlords. It feels like every day we wake up to news that is flipping the world upside down. All of a sudden, people can’t go to work. All of a sudden, homemade face masks should be worn when going outside. All of a sudden, you can’t evict people for not paying their rent.
Having open and strong communication with your tenants is more important than it has ever been before.
When people cannot work, they cannot pay their rent. On top of the very real fear of loved ones getting sick from a mass pandemic just outside their doors, they also have the fear of bankruptcy, of running out of money, and of losing their home. As a landlord, you are probably facing a similar fear, especially now that you cannot evict. You may not have a paycheck this month, and not receiving rents could cut deeply into your own operating and capital expenses (CapEx). Everyone needs a plan here, so what is it?
Communicate with Your Tenants
Avoidance is a legitimate reaction many use when facing new trauma and difficulty. If you’ve ever heard a child say ‘if I can’t see you, then you can’t see me’ then you understand. People hide: it kept humanity safe in caves and throughout human history, and the instinct never went away. That is why the memes of not leaving bed for weeks now are so relatable. While not talking to your tenant may feel fine right now, I promise, getting it over with will be relieving. At least you can say you did something today.
Communicating with your tenants about their current situations and providing them with guidance to reach out and discuss any challenges they may be facing that could impact their ability to pay rent is critical before they fall too far behind. Obviously, this conversation shouldn’t happen in person. Not only would it break social distancing, but it is in your best interest to have this conversation with date stamps and in writing so you can back check and have personal notes. This includes if you send any memos that may not receive a direct response so you have the opportunity to document what was said and when you sent it in the event you find yourself in a difficult situation months from now. Finding some way to get a receipt that confirms your tenant received your memo is ideal.
Modify the Lease Safely
Are you forgiving the month of April specifically because of COVID-19? Are you utilizing a re-payment plan, or deferring rent for a period of time? These are details that need to be ironed out, and then everyone can feel better about the financial bubble of dread that has been building. Consult a lawyer for the best way to handle this in your state our county, how to select the right addendum for your tenants’ needs, what time frame it should be done in, and what penalties there could be if ignored or if the current lease is violated. Find a way to utilize digital signatures like e-signatures or digitized forms.
While you have this discussion, bring up roommates. Some tenants may have brought their elderly parents in to take care of, others may have some bigger issues at play. Because COVID-19 is contagious, our prison system is showing its flaws. The Federal Bureau of Prisons (also known as the BOP) has sent out its own memorandum to release its nonviolent prisoners to home confinement. Naturally, for this to work, they need a home to go to.
Home confinement has been in the works for a while because of COVID-19. Since March, it has increased to 40% federally, letting pre-approved inmates finish their sentences at home where they have a reduced risk of infection.
This means reviewing your guest policy with your tenants. If you do not have a guest policy, now is the time to add one. Add a reminder in the addendum that additional roommates need to be screened, and be aware that your rental criteria may need to be modified to accommodate these unique situations. Guests who stay beyond a pre-approved period of time may need their own set of rental criteria to clarify whether it’s COVID-19 related, and how this may impact your rights given various protections in place for these renters.
If a lease addendum is needed due to challenges your tenants might be facing, make sure you have a lawyer from your area go over it. From there, you can have your quarantine in peace.
What information do you need for COVID19? Let us know how we can help you in the comment section below.
2 Replies to “Protecting Your Property with Addendums in the New COVID-19 Reality”
Very good article. I am a landlord and I have the same situation with renters not paying rent and I have the same fear of my short of cash flow. I want to communicate with my renter for not paying rent but they all have the same answer to me: I stay home and I have no money to pay rent. How can I continue the communications with this? What do I say? Any suggestion?
Thank you for your suggestion and advice.
Ying
Hi Ying,
This is a tough situation for everyone to be in. It’s understandable that tenants may be having difficulties paying their bills if they’ve suddenly lost income, and you’re in a tough position of not being able to respond as you normally would. I recommend you clarify to them that rent is still do, and is not being waived, however you can setup a rent deferment for a period of time (1 – 3 months), and they can pay it back over the duration of the lease. If they agree to this then you should put the terms in writing and be sure that they sign it as well. Depending on how long they have left in their lease you can also consider an extension to accommodate their situation, and help spread out the deferred rent so it reduces the monthly expense.
Another way to do this would be adjusted rents. Ask them how much they could afford if the rent were reduced. Maybe it’s 75 – 50% of the normal rent they could come up with, and you do a rent deferral for the remainder to also cut down on their expenses when everything returns to normal.
And as always, you should double check with state/local legal experts for where your properties are located as nothing we provide should be taken explicitly as legal advice.