Coronavirus Updates

4 Rules Landlords Must Follow to Get Through the Pandemic

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Business Management
32 Articles Written
House with "For Rent" sign in front

It’s doubtful anyone in the world will make it to the end of the summer unaffected in some way by the COVID-19 pandemic. If not you personally, you probably will know at least one person who has been affected financially or been diagnosed with the virus or maybe even someone who was unfortunately defeated by COVID-19.

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The tragic dilemma is many of us will end up being touched by all of the above.

Although there is a lot to take in overall during these crazy times, I wanted to provide real estate investors some insight into how we as property managers are handling these unprecedented circumstances.

As a property manager firm for over 1,000 residential units and 350-plus owners, we are currently doing all we can to be sure the owners we manage come out of this situation in the best-case scenario possible. Below are a few rules landlords should follow to have the greatest chance of surviving the next six months with a limited hit to your bottom line.

1. Follow Local & Federal Mandates

Since the middle of March, there have been many changes to what we can do as everyday U.S. citizens. Most of us have been confined to our homes and neighborhoods for over a month now because our local governors have put mandates in place at the advice of the medical experts worldwide.

It’s important for us to all do our part to stop the spread, but some of these local and federal mandates have put in place some new rules for landlords to follow. Some even stop them from going about “business as usual.” These mandates are local, so we encourage you to seek information from your community to ensure you are compliant.

The CARES Act

On March 27, 2020, the U.S. government passed the CARES Act, which lays out many rules for landlords to follow, as well. The act put in effect a moratorium through July 24, 2020, which prohibits a landlord from not only filing evictions for nonpayment of rent or other amounts due under the lease, but also from charging late fees, penalties, or other charges related to nonpayment of rent.

Under this act, however, not every landlord is included. The CARES Act only applies to a property occupied by a tenant pursuant to a residential lease if the property participated in a covered housing program or other housing voucher program like Section 8. The other exception is anyone that has a federally-backed mortgage loan like Fannie Mae. Review the act in detail to see what else may apply to you.

Coronavirus Wuhan. US quarantine, 100 dollar banknote with medical mask. The concept of epidemic and protection against coronavrius.

State Tenant Protections

Even if your property doesn’t fall under the CARES Act, your local city or state may have a moratorium on eviction filings, late fees, and sheriff evictions. This is why it is important to understand what is going on locally and for how long.

For example, here in Illinois, we are not allowed to have open house showings, and you are not allowed to show a tenant-occupied rental unit to prospective new tenants. Real estate is, however, still considered essential. These types of decisions were made by the Governor’s Executive Order that most states have in place. But again, details will vary state by state.

Related: Landlord Emergency Preparedness 101: What Real Estate Investors Should Do Before Disaster Strikes

2. Have Empathy

If you’ve been poking around on the internet, you’ve probably read about landlords that are attempting to manage a property with a “business as usual” mentality. They want to enforce the lease and rent deadlines and are not open to making exceptions or concessions. From what I’ve observed, this method doesn’t seem to be working for those landlords, and they may actually trigger the opposite outcomes with their tenants.

As mentioned in the beginning, everyone is being touched by this pandemic in some form. Trying to aggressively or forcefully get what you want may not be the best approach in these times.

As a property management company, we hoped our tenants would be the exception—they wouldn’t be suffering financially or physically from coronavirus. But at the same time, of course, we went into April prepared for some tenants to be facing financial hardship.

We wanted to collect every dollar we could for our clients, but we realized right away it wasn’t going to be the usual 97 percent collected by the 5th of the month in the upcoming months. We first prepared our clients, the landlords, for this reality, and then went to work on how we can be flexible with our tenants while still maintaining the goal of collecting 100 percent of the rent eventually.

Going into April was difficult because we had yet to write a clear process for how to handle every scenario. But the framework for the process we did create started with the desire to work with people and approach each tenant’s scenario with empathy and consideration for their level of setback caused by the pandemic. We understand we are not the tenant’s only monthly bill, and paying rent is not always the first priority.

Young women worried about bills and debr stacking up. Unable to pay credit cards and loans

Over the last few weeks, we have seen all the ways in which our tenants have been affected by the pandemic and stay-at-home order. We have seen some tenants laid off with the inability to file for unemployment yet. Some are small business owners whose income has disappeared in recent weeks. Others fear losing their job. This is why it is crucial to keep in mind that many are likely dealing with bigger issues.

No matter what the current circumstances are for our tenants, we want them to hang up the phone or finish reading our emails with a little comfort in knowing we understand what they are going through. In addition to understanding, we want them to know we are here to help them get through the next few months.

There was an article published on CNBC recently outlining how to respond with empathy to a tenant. The article even provides a great template that you can use to create your own letter.

Related: Dear Tenants—I’m Sending This Letter to My Tenants Today

3. Know Your Options

Like our tenants, landlords are facing similar challenges and uncertainties in how to maneuver these next few months. It is important that all landlords are being proactive as opposed to reactive.

Talk to Your Lenders

In these last few weeks, lenders and loan servicers have been scrambling to do what they can to prevent a collapse in their operations. The last thing the government and lenders want right now is for the stay-at-home order to set off any sort of downward spiral of troubled loans. Prevention measures being taken by lenders are a good thing for borrowers and can be a source of relief for landlords experiencing timely rent collection issues.

If you have a loan on any of your properties, you should call your loan servicer to see what programs they are offering. Many lenders are offering payment deferment or forbearance programs and/or short-term loan payment conversion to interest-only. We have even seen reduced interest rates for the next three months to lower the borrower's payment short-term.

Most lenders have a plan for how they can help their borrowers, but most of them will not call or email about what they can do for you. It is up to you, as the borrower, to reach out to the lender to find out your options.

Landlords that have loans backed by Fannie Mae and Freddie Mac may have some of the best options available. You can visit the Fannie Mae website, KnowYourOptions.com, to understand all that is there to help both you and your tenant.

Unemployment

The unemployment rate is at its highest level since the Great Depression, and it is getting worse with each weekly report on the number of people filing. The CARES Act states that independent contractors can now be eligible for receiving weekly unemployment benefits. These changes to the current unemployment eligibility requirements may be an option for landlords.

Many landlords are also real estate agents, and for the first time ever, real estate agents that are not W-2 employees can now receive these benefits. Check with your state unemployment website to see if you qualify. Realtors looking for more information can visit the NAR website.

The process to file for unemployment can be stressful in and of itself, but fortunately, the date your benefits begin will be retroactive—even if it takes you a week to get into the system.

Related: The Fed Cut Interest Rates to 0% — What Does This Mean for You?

4. Don’t Try to Evict Your Tenants

Evicting your tenants is not even an option in most places right now. Even if you can start the process, you may hit a roadblock in the weeks to come when a state or federal mandate brings the eviction to a halt.

Small group of envelopes marked "PAST DUE" and "FORECLOSED". Suggesting tough economic times US.

For more on eviction and rent payment protections covered by the CARES Act, check out CRS Reports.

One scenario where we feel for the landlords right now is those who have properties with tenants-gone-bad before the pandemic hit. These tenants didn’t lose their job, get sick, or have a reduction in hours. They were just tenants struggling to meet their lease obligations.

Many landlords that were trying to work things out or be lenient with tenants in March are now stuck with that tenant in a legal system that is pretty much shut down. The new mandates have left those landlords with little power to remove the tenant at the current time.

Consider Cash for Keys

So, what do you do with a tenant that already owes you a few months’ rent and knows they cannot legally be removed through the eviction process?

Here in Chicago, we are still able to negotiate with tenants using the “cash for keys” option. This is a legal agreement between the tenant and landlord drafted by an attorney, which offers the tenant a specified amount of money to vacate the premises on a certain date.

In these cases, we lay out the total expenses a landlord may incur between now and when we could utilize the court system to remove this tenant, then negotiate a number that is less than that.

How you remove a tenant that was already behind going into March or a tenant that is violating the lease in other ways is of course determined on a case-by-case basis. It is important to consult with an attorney on what options you have locally, in addition to potential risks you may open yourself up to. Make sure you have a plan you can see through to the end before you start executing it, because these are uncertain times. The legal system may not have too much empathy for landlords trying to remove tenants, even if it is a justifiable circumstance.

Seek Legal Advice Locally

Everything stated above, like most other info you can find on the internet, is not legal advice. This blog is merely a framework for options you should explore but still have confirmed by the legal community.

If you don’t have an affordable attorney you can consult for legal advice, it’s very important you start building professional relationships in the industry like these. Ultimately, it will benefit your career. If you have a property manager, ask them about someone you can talk to in their network.

Most leases are not built to be accountable for a global pandemic, so the decisions you have to make may go outside the boundaries of your current lease guidelines. Therefore, the decisions you make over the next couple of months just might lead to legal issues down the road.

As a landlord you should make sure that you or your property manager are seeking legal advice on decisions, forms, and negotiations that are happening throughout this situation. While attorneys might not even have exact right or wrong answers to questions pertaining to the coronavirus crisis, they can assist you in reducing long-term risk by guiding you through short-term decision-making.

It’s very important to remember that during this difficult time of fear and confusion, we are all in this together. Typically when a tragedy or natural disaster occurs, the effects are limited to a city, state, or country. When something happens, we hear about it in the news or read about it online and think about how horrible it is that it happened.

We may even relate it to something that has happened close to us. But almost immediately we return to our own day-to-day with the overall event having little short- or long-term effect on us. In this instance though, there aren’t many corners of the world that will not be affected by this pandemic, which means everyone is truly in it together.

As investors and property managers, we hope all of this passes as quickly as possible, and we genuinely believe we all have the ability to work together for the best possible outcomes. Please remember to be kind to one another, be responsible, and most importantly stay healthy and safe.

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Questions? Comments?

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Mark Ainley is an investor, managing broker, and property manager with almost two decades of experience in real estate. Mark found his way into real estate by purchasing and flipping condominiums p...
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    Jason Marcordes Investor from Chicago, Illinois
    Replied 5 months ago
    Great read Mark - well said!
    Dave Rav from Summerville, SC
    Replied 5 months ago
    I do agree with the humanity approach. Unlike those landlords online you referenced, I am not aggressively or forcefully doing "biz as usual." I am however, checking in with my tenants regularly (with NO talk about rent monies or stressing financials). Just a straight up "how is everyone, and are you safe?" I truly believe this has lead to my rent collection being very positive to-date during this crisis. I am prepared to offer concessions if need be, but haven't had to go there yet. I disagree with some of your points though. You seem to be leaning toward not enforcing rent collection to a degree (at least thats the feeling I get after reading). Lets not forget, those stimulus checks are going out (plus its tax time and the majority of tenants, not all, get some kind of refund). This money should be used to pay rent! You also stated that you "realize the rent isn't their only bill they need to pay." No maybe its not, but it IS in the top 2 most important bill they should pay! Probably 2nd to food, the rent should be paid, as this pays for their home where they hang their hat. They should first let go say, their cell phone bill or even their car note. Lastly, I want to say I agree with the Cash for Keys approach!
    Terry Lowe
    Replied 5 months ago
    Wonderful article! We have to take the time to understand each circumstance. So far, so good! We got all of our rent except our commercial property that was shut down on March 15. I am worried about April and going forward. We had rent requirements set up well. Tenants had to make 3 times the rent to be accepted to rent our properties. If.... and when.... they get their unemployment payments, they should be in good shape to pay for food and rent. The government needs to realize just how important these payments are to those who have lost their jobs.
    Mark Faustrum Rental Property Investor from Elgin, IL
    Replied 5 months ago
    Great article Mark, as usual you are spot on with your advice.
    Natalie Kolodij Accountant from Charlotte, NC
    Replied 5 months ago
    Great article- Thanks for sharing this!
    Christopher Smith Investor from brentwood, california
    Replied 5 months ago
    I'm glad my property managers have always placed the greatest emphasis on selecting the very best tenants.
    Monica Ross
    Replied 5 months ago
    Great article. I, as a tenant, wish there were more information on what landlords are allowed to put in writing when making tenants make payment options. I am one of those that work for a essential buisness but so slow hours have been cut. No unemployment or supplemental income. The stimulas check would be enough to cover a car payment, insurance, food and partial rent. My landlords made me sign a pre payment agreement with amounts that i may not be able to adhere to. When they give you the finalized document it states that if i dont make the payments it would equate to breaking the lease and give cause to evict. Its a vicious cycle. Without more black and white rules...it seems property managers can bully you into signing something that someone may not be able to do.
    Sterling Stone
    Replied 5 months ago
    Are there any rights for people that are in Hotels with Weekly rentals that have become unemployed not due to Covi 19, but can't find employment because of it.
    Sunicha Houseworth
    Replied 5 months ago
    I'm live in quincy ma and i have 7 year's kid and my husband him can't work and i not work like now to but i not lose job just stay home for safty from covid 19 and i have small dog we rent home and i pay my rent on time every month but my contact have to an on may in this year and my landlrod they not want give we stay any more i very upsad about my kid school yes now school still close for now but if open be for an school year what i can do i not want make my kid have a hard time for school on this year's and my landlrod they want eiviction me out an may i try looking and apply a lot apt or home but hard for me to apply because my low incom So can some 1 plz tell me or give me idea where i can get helping a bouth that i not want my family stay out side and no roof for my kid and have virus is not safety it all. Thank you so much.
    Richard Nieves
    Replied 5 months ago
    OUTSTANDING INPUT. THANK YOU, IT SURE HELPS TO KNOW THESE THINGS...😎🇺🇸
    Stacey Lynn
    Replied 5 months ago
    I wish my landlord was understanding in this time. My husband lost his job due to COVID-19. We have been struggling since then and unemployment has yet to kick in. Our lease was up end of January and the landlord never came to us about renewing therefore under the lease terms the tenancy becomes month to month. We just received a letter stating that effective June 1st our rent was going up by $450 per month! Imagine our shock. I've tried contacting the landlord and they won't even return our calls or messages. It's crazy. We've always paid our rent up until April this year. We are yet to pay April's rent since we are waiting on unemployment. Right now it's either rent or food! We have 3 children to feed! Nonetheless we are trying to look for another place to rent bit during these trying times it's so difficult. Florida is where we reside and not much has been said about rents being paid etc. I understand the landlords point of view but I think it is so insensitive for them to raise the rental amount especially in this time. I'm just at a boiling point and don't know what to do. It's cause me to have multiple anxiety attacks and not knowing what our next step is. Anyone familiar with Florida laws right now about rental payments? Thanks. Hope everyone is staying safe!
    Danielle Lacourse
    Replied 5 months ago
    My tenants subleased from another tenant they didn’t have a security deposit and promised to clean And paint 4 years later they moved in another couple. Rent is passed due And I reached out 3 times no communication my kindness has gotten me nowhere. Communication is key and avoiding responsibility is not the answer; The State is hello g with essentials and I feel this shows how u grateful people can be and taking advantage of the entire situation.
    Ken Duncan
    Replied 5 months ago
    My experience. Tenants will use ever available excuse to not pay rent but continue to pay cable and wifi, keep beer in the fridge, smoke, eat out, and make car payments on cars they couldn't afford in the first place. If you gave chances or made concessions they almost never follow thru on their part. When you eventually realized they needed to be legally removed the courts would give them 60-90 days, but they would owe you wink, wink for the rent. Pay for keys. ha!, Once word got around that by not moving out you could get paid, ha again. I get tenants all the time that have deposit and first month from the "pay for keys program." It's not the only thing they get. They also get glowing recommendations from the landlord.
    Felicia Sims
    Replied 5 months ago
    I'm glad you was able to break everything down. Thanks
    Arturo Matamoros Property Manager from Orlando, FL
    Replied 5 months ago
    These are the guys to hire in Chicago! I really enjoy the content. Always full of good information :)
    Daniel Huffman
    Replied 5 months ago
    great advice! I'm glad to see a side of compassion for renters in tough times like this. Hopefully, they're as reasonable as the owner/manager.
    Crystal Smith Real Estate Broker from Chicago, IL
    Replied 5 months ago
    Good job here.