How to Work with Tenants on Rent amid COVID-19 and an Update on Court Closures

So here we are at the end of March. Rent and mortgage payments will come due in a couple of days. According to the most recent polling, one-third (1/3) of Americans have lost their jobs or been laid off and one-half report that they’ve had either a pay cut or reduced hours. So, we’re looking at over 70% of the population that has less income than usual, some of which may have ZERO income. Here's a video with my thoughts on things to consider as you try to work with tenants, as well as an update on court closures.

COURT CLOSURE EXTENDED

The Courts were originally scheduled to reopen on April 13. Late last week, the closure was extended another two weeks. The new reopening date for the courts is April 27. However, the thing to keep in mind is that evictions have been suspended statewide by the Governor’s latest Executive Order until the State of Emergency is lifted. Now, the Order could get replaced or modified by upcoming orders, but that’s the current status. So, don’t plan on filing any evictions in April.

My advice is not to give any termination notices for non-payment of rent in early April, as we know we can’t file for a while. Instead, you’re going to want to work with your tenants as best you can, then deal with non-payers later in the month.

STIMULUS MONEY

The good news is that the federal government has passed a stimulus bill that gives individuals rebates of up to $1,200, with married couples potentially receiving $2,400, plus $500 for each child. So, that will provide some temporary relief. I’m not sure when that money will hit people’s hands, but hopefully a portion of that money be used to pay rents and mortgages.

Because we know that people are losing income, but we also know that people are getting stimulus money, now is an excellent time to plan for the next couple of months. One idea that I’m seeing a lot of is to reduce rent for April and May for anyone who has been laid off, lost a job, had hours cut, or otherwise lost income due to COVID-19, with the unpaid amounts being spread out over the next few months, the life of the lease, or even agreeing to lease extension.

As you’re thinking through this, you have a few primary questions to consider:

• What kind of relief are you going to offer?
  1. Waived rent
  2. Reduced rent – if so, by how much?
  3. Waived late fees
  4. Deferred payment date
  5. Other

MY ADVICE: I don’t have any clear advice on this one, as your options are different depending on your situation, but there are two options I like.

1. Waiving Late Fees - I do suggest everyone waive late fees for anyone affected. The NAA has put out a notice that its members may use for waiving late fees for everyone at your property. You just define how long the fees will be waived, sign it, and deliver to your residents. Because this changes the lease, it needs to be in writing, but because it’s changing the lease in favor of the resident, they do not need to sign it.
2. Reduced and Deferred Rent - An option that I’m seeing a lot of people use is to reduce rent for April and May by a certain percentage – let’s say half – then spread the remaining balance over the next several months or over the remainder of the lease. Another option is to add an additional month to the lease term for each month that rent is deferred or something along those lines.

This seems to be an excellent option given that we know tenants have less income than ever, but also that the stimulus money is going to allow them to pay something.

• For how long will the relief last?
  1. Just for April
  2. April and May
  3. Other

MY ADVICE – Go ahead and do it for April and May. While some are calling April 1 the “Rentpocalypse”, I’m think May is really going to be worse. At this point, many people worked for a good bit of March, so they will have their paychecks for that month. But the layoffs from mid-late March are really going to be felt during mid-late April, which means May rent is going to be an issue. I’m hopeful that the Stimulus Money helps with that, but I think it’s going to be tough.

So, my advice is go ahead and plan on giving relief for both months.

• Who qualifies for relief?
  1. Anyone who lost their job?
  2. Anyone whose hours were reduced?
  3. Anyone who’s had COVID-19?
  4. Anyone at all?

MY ADVICE – This is another one where you’ll have to decide what you think you can absorb, but I think that granting relief to anyone who requests it is going to be the best idea. The second and third order effects of the virus and the shutdown are going to affect nearly everyone, so my guess is that your time would better be spent addressing these issues, rather than trying to distinguish between those who are and are not affected. This plays into the next question you have to consider.

• Are you going to require verification that a person qualifies? If so, how?
  1. Letter from employer?
  2. Letter from physician?

MY ADVICE: Don’t require verification. Just grant relief for anyone who requests it. You can require a written statement of need, but I wouldn’t spend much time trying to communicate with employers or medical professionals (who are going to be too busy to respond) trying to verify someone’s need for rent relief.

At most, perhaps require a letter from their employer. Beyond that, just assume that everyone is affected.

WHATEVER YOU DECIDE, GET IT IN WRITING:

Nearly every lease has a clause that requires any changes to the terms of the lease to be (1) in writing and (2) signed by all the parties. At the very least, it needs to be signed by the party that it works against.

MAKE IT CLEAR

But the main thing is that you make the terms and any time frames CLEAR. Because you’re creating the document, any ambiguity, any lack of clarity, will be interpreted against you by a court. So make your documents clear. And sign them. If logistically possible, have your tenants sign them as well.

ENCOURAGEMENT – Don’t wish your life away right now.

We’re hitting the point where the newness of the quarantine and self-isolating is wearing off and the pains of the job layoffs are starting to hurt.

Our kids are getting bored.

We’re getting cooped up.

We miss our friends.

We want to go out and hang out.

We just want this all to end.

But I’m here to tell you – it’s not going to end for a while. So here’s the problem. If we spend our days being miserable and “just wanting it to end”, we’re going to miss out on a good chunk of 2020. It’s going to be become a wasted year for us.

And, folks, we don’t get enough years to waste any of them. Cherish your days. We’re living through history. And, at times, it sucks. But you can’t let that be the story of these days, weeks, and months.

Cherish your days. Enjoy your time with your family. Make memories that you won’t forget. Come out of this time a better person.

I’m sure all this stuff will continue to develop – and you can be sure I’ll keep you posted.

If you need help drafting any of these documents that I’ve mentioned today, I’ll be glad to help.

Just send me an e-mail to smarshall@tripleslaw.com or call my cell phone.

Have a great day!