We know that the eviction moratorium from the CDC has been extended till at least March 31st, Joe Biden’s gotten behind that and even though we’ve got groups like the NAR, NARPM, various real estate and landlord advocacy groups that are fighting against this, it still is there and in my opinion, it’s not going anywhere. March 31st is going to come, and that extension is going to go, I believe, until at least till the end of the year. Who knows if we’ll go beyond that, but we have to respond to it right now in a way that we’re, we’re assuming it’s going to be here potentially forever, or at least for a year or two, who knows. And so we’ve got to change as innovative landlords and investors. We need to change our approach a little bit here.
So there are a few questions. One. How do we handle a situation where a tenant’s not paying rent right now? How do we move forward in the future to ensure that we’re going to be protected? because on one hand, the CDC doesn’t want homelessness, right? they don’t want people living on the streets and no one does, right? No one does. For that matter, we have empathy for people who can’t pay when it’s because of COVID reasons, and we work with them. But on the other hand, there are situations where tenants are digging in their heels and saying they can’t pay. The courts aren’t willing to do anything with it. I talked to one of our offices down in Texas that says that one of their owners hasn’t received rent since May of last year and the courts won’t do anything about it. And there’s not a lot of options for them, but there are some options. And so I want to talk about those things with you today.
Now, the question, how do I handle a situation where my tenant is not paying rent? And if you’re in that situation, I empathize with you because right now it’s not fun. The first thing we need to address is what not to do. You can’t go and try and, and process an eviction through the court system on your own. If you try to do that, you can be subject to up to $200,000 in fines. So the first thing I would do is talk to one of us at Keyrenter or an eviction attorney, a landlord attorney, and say, here’s my situation, what are my options? What can I do? Can I go through with an eviction? And if it’s for issues not related to non-payment of rent, yes. If it is related to non-payment of rent, yes, under some circumstances, and we can explore those with you, however, you don’t want to just go out and do it alone on your own.
That can be a problem. But what you can do is work out a payment plan with the resident if their situation is temporary, we’ve done that successfully with various residents where we work out a payment arrangement and a payment plan.
We don’t usually under normal circumstances like to do that, but under these circumstances, it can be important. The other thing you can do is approach your resident and see what their plans are. If they are looking to potentially move in with mom and dad as an option, or family or friends or something where they can afford it or get some help, that can be an option, exploring all the solutions.
If your state, or if your city has different resources for your residents, community action groups that are set up, collecting funds, millions of dollars in various areas to help support your residents, make sure you’re exploring those and you’re helping your resident with those sort of resources.
In a worst-case scenario, or I should say last case scenario, if your resident isn’t able to move willingly on their own because they understand the situation, they’re digging in their heels and they’re almost taking advantage of it.
That’s one of the problems I’ve had with this, as we’ve seen this across the country. There are people taking advantage of the situation of not paying rent. Now, the thing they’re not keeping in mind is that it’s not rent forgiveness. It’s not a rent-abatement. It’s actually a deferment. So they’re still going to have to pay, and it’s most likely gonna kill their credit. But let’s just say someone doesn’t care about credit or any of those sorts of things, they just want to save some money now or they don’t want to deal with it so you can sue the tenant. It’s not ideal. I’m sure you’re not waking up every morning wanting to file a lawsuit, but you can sue the tenant for non-payment of rent.
You can’t evict them, but you can sue them. So you can actually file a suit and you can be awarded a judgment. Now, why is that good? You can’t get blood from a stone, right? Well, right now you can’t, but at some point in time, a judgment follows them, and even though it’s good for seven years, it can be renewed. And the likelihood of getting money under a situation of judgment is far greater than having them eventually move out and then trying to chase them down. So that could be an option for
How can you prevent this from happening? If you have an existing tenant with a lease there, they’re paying rent on time, but you’re kind of in the back of your mind worried, Oh, what if something were to happen or you’re looking to rent out your place and you want to find a new tenant, but you’re also concerned about this issue.
One of the things that are being talked about on a national level is lease agreements and the terms of those leases in terms of timeframe, should I do a 12-month lease with my tenant? Should I do a six-month lease? Or should I keep it month to month? And obviously, there’s a risk on one side of a month to month lease, your tenant could literally pick up and move with short notice, right? A 30-day notice in some markets, like here in Utah, for example, getting a notice that the 1st of December or November 30th, that they’re moving out December 31st, January 1st, isn’t ideal because that’s a difficult time to place a tenant, but is that better or worse than a resident that is able to dig in their heels for nine months or so and not pay rent? that can be a difficult situation.
There is some help on the investor side, on the landlord side, if you are in a situation where your tenants are not paying, where you can get some help from the mortgage company. Get some deferment of payments and those sorts of things, but it’s not ideal. So strategizing on lease terms and length of the lease can be one way to mitigate things in the future in your current situation. So if you have a lease that’s coming up for renewal, you may just want to ask, is this the time to do another 24-month lease or 12-month lease?.
I hope these suggestions and tips are helpful for you. And I hope that you’re able to find the resources that you need in your situation.