What to Do If Your Tenants Aren’t Paying Rent
Right now there’s still a moratorium on evictions in Long Island. In the wake of this economic crisis it’s not even clear how much an eviction might help struggling landlords pay their own bills.
After all, who will fill that tenant’s space? With unemployment high, occupancy rates are bound to be low.
31% of renters aren’t paying, either because they can’t or because they know they don’t have to. Normally, only 19% of renters don’t pay, and there are legal remedies to deal with them and a steady stream of potential occupants to take their place.
There are no perfect answers, but here are some suggestions.
Tap into your reserve funds.
If you have them, this might be the time to use them to keep your mortgages and utilities paid. If you can hold out long enough the economy might start to recover again.
Things won’t exactly go back to normal, but there’s a good chance you will survive them nevertheless.
Ask your lender.
If you have a federally-backed mortgage then you can get a forbearance on your mortgage so long as you agree not to evict tenants.
If not, your mortgage lender may have some programs of their own in place. It’s usually smarter for them to work with you than it is for them to try to foreclose on you, though some mortgage lenders are, of course, playing hardball.
Work on reduced rents.
Some tenants might be able to pay you a portion of the rent. Would you rather get 40% of what they owe, or zero?
If you take this option you might wish to figure out how to spread out their back rent throughout the rest of the year. You might also want to work with your real estate attorney. Create a “Covid-19” lease rider so that it’s clear this special deal isn’t meant to last forever.
You might also get tenants to agree not to ask you for expensive repairs right now while the crisis is ongoing. With good communication you and your tenants might be able to help each other out, especially if you can help them understand that (if you’re like most landlords) you’re really only getting 9 cents on every dollar and have bills of your own to pay.
Many tenants are under the impression that all landlords are rich and they can absorb not getting paid. If they understand that’s not the case they’ll want to help you, too. Most people are good people who understand we’re in this together.
Don’t raise the rent.
Keep occupancy rates steady by keeping rent rates steady. This isn’t the time to squeeze renters any harder. You might even consider lowering the rent a little bit if you aren’t going to consider asking for partial rents. Doing so can keep your occupancy rates high.
Avoid illegal self-help evictions.
The last thing you need right now is to face fines and criminal charges. As frustrated as you may be, it’s still unlikely that you’re going to get a bunch of new tenants right now to replace those who can’t pay.
Evicting someone out of spite and frustration just makes you look bad and gets you into legal trouble later.
Consult with your long island real estate attorney.
Before you make any sudden moves it’s a good idea to jump on a call with a real estate attorney. Actions you take now could have far-reaching consequences. Make sure you protect yourself now and in the future.