Tenant Stopped Paying Rent... Now What?

Oakland, California
General Landlording & Rental Properties
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Tenant Stopped Paying Rent... Now What?

Matthew Lee
New to Real Estate · Oakland, CA · Member since 2021 · 4 posts · 5 votes

Hi everyone, could use your input and help!

I have been house hacking a duplex in Oakland the last year. Tenants moved in January 2022. First few months were fine, but some issues started coming up. They're on a subsidy program, like Section 8, that pays a portion of their rent ($2k of $2700). The tenant stopped paying their share in August. Since then, it's been a nightmare scenario. 

The total balance for unpaid rent portion is up to $4800. The lease ends January 31st, but the tenant has already said that they will stay past that date. Since the lease is ending, it will automatically go month to month. 

The last few months have been an endless chase of the subsidy program (Hamilton Families) and the tenants. My only contact for the program has been the lady in charge of placing the tenant, but she just refers me back to the finance person. All my calls, emails, texts to their finance team have been ignored. Any attempts to find someone else in the company end with a voicemail or email that never gets returned. Eventually, somebody from the San Francisco Cal Works program reached out and said that they will pay the outstanding tenant charges. They will discontinue support after February though. So, even if I get the $4800 back, there's still a possibility that the tenant stays and stops paying their rent, with no subsidy coming in to cover.

My Property Manager hasn't been helpful during this process. At this point, they're recommending that I offer to PAY $2k-$4k to the tenant to get them to leave.  Obviously this is a situation I would like to avoid...
Unfortunately, it seems like this is pretty typical for California / Oakland, and I know there are countless moratorium / laws that help protect the tenant in this situation.

I'm overwhelmed and not sure what options I have left. Has anyone else successfully navigated situations like this in California? Any advice or recommendations are welcome. 

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Matthew Lee:

Your PM should be leading the charge on this and they definitely shouldn't have allowed it to go this long before taking action. Prepare to fire them.

Cash for keys is a method of rewarding bad behavior. I would rather spend money on a good eviction attorney than to buy off a bad Tenant.

Start looking for a new property manager. Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    They are section 8, report them to their case worker.

    0Reply
  • Matthew Lee
    OP
    New to Real Estate · Oakland, CA · Member since 2021 · 4 posts · 5 votes
    3y

    Just providing an update here to everyone. Woof, what a nightmare.

    I've reached out to the lawyers referred here as well as a few others. Unfortunately, due to the eviction moratorium, nobody will even take me on as a client at this time since there's nothing they can do. Many of these offices have a backlog of hundreds, if not thousands of potential clients like me, waiting to get some kind of legal action for unpaid tenant rent. Unfortunately, the only course of action I can take is to write my city board of supervisors, as they're the ones who will not lift the moratorium. Not really something I'm optimistic about...

    One of the lawyers also said that if I do offer cash for keys, they recommend going through the "proper channels": I'd need to file documents with the city first to discuss the potential buyout, file with the rent board and keep them in the loop, provide specific language in the documents, allow the rent board and tenant time to rethink or cancel, etc. They warned that if I don't follow the correct procedure, there's a risk of possibly getting sued. If I go that route, the cost of buyout is more like $11k (not the $2-4k my pm told me), on top of the outstanding $6k+ the tenant already owes.

    At this point, I'm basically out of options. If the tenant squats and decides to continue not paying rent, all I can do is ask them nicely and wait out the eviction moratorium. Might be obvious, but this definitely discourages me from ever buying in Oakland or California again... Would love to hear how others have rebounded from their past failures though!

    0Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    3y

    What about reaching out to nonprofits? See if they'll help cover the rent of the tenant?

    0Reply
  • Chad HalePro Member
    Property Manager / Investor · San Jose, CA · Member since 2013 · 779 posts · 301 votes
    3y

    @Matthew Lee does your insurance have a loss of income clause?

    0Reply
  • Osazee Edebiri
    Realtor · San Jose, CA · Member since 2015 · 318 posts · 154 votes
    3y
    Quote from @Matthew Lee:

    Just providing an update here to everyone. Woof, what a nightmare.

    I've reached out to the lawyers referred here as well as a few others. Unfortunately, due to the eviction moratorium, nobody will even take me on as a client at this time since there's nothing they can do. Many of these offices have a backlog of hundreds, if not thousands of potential clients like me, waiting to get some kind of legal action for unpaid tenant rent. Unfortunately, the only course of action I can take is to write my city board of supervisors, as they're the ones who will not lift the moratorium. Not really something I'm optimistic about...

    One of the lawyers also said that if I do offer cash for keys, they recommend going through the "proper channels": I'd need to file documents with the city first to discuss the potential buyout, file with the rent board and keep them in the loop, provide specific language in the documents, allow the rent board and tenant time to rethink or cancel, etc. They warned that if I don't follow the correct procedure, there's a risk of possibly getting sued. If I go that route, the cost of buyout is more like $11k (not the $2-4k my pm told me), on top of the outstanding $6k+ the tenant already owes.

    At this point, I'm basically out of options. If the tenant squats and decides to continue not paying rent, all I can do is ask them nicely and wait out the eviction moratorium. Might be obvious, but this definitely discourages me from ever buying in Oakland or California again... Would love to hear how others have rebounded from their past failures though!

    Hi Matthew, 

    Yes sorry your update is not great.

    Have you had conversations with the tenant directly? If not, what has your PM said about the conversations they have had, although at this point I would circumvent them since they basically told you they can’t do anything anyway.
    0Reply
  • Tim Bee
    Investor · CA · Member since 2023 · 196 posts · 107 votes
    3y

    Buy an eviction package from a legal office.  Just bite the bullet and evict.

    0Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    3y
    Quote from @Matthew Lee:

    Just providing an update here to everyone. Woof, what a nightmare.

    I've reached out to the lawyers referred here as well as a few others. Unfortunately, due to the eviction moratorium, nobody will even take me on as a client at this time since there's nothing they can do. Many of these offices have a backlog of hundreds, if not thousands of potential clients like me, waiting to get some kind of legal action for unpaid tenant rent. Unfortunately, the only course of action I can take is to write my city board of supervisors, as they're the ones who will not lift the moratorium. Not really something I'm optimistic about...

    One of the lawyers also said that if I do offer cash for keys, they recommend going through the "proper channels": I'd need to file documents with the city first to discuss the potential buyout, file with the rent board and keep them in the loop, provide specific language in the documents, allow the rent board and tenant time to rethink or cancel, etc. They warned that if I don't follow the correct procedure, there's a risk of possibly getting sued. If I go that route, the cost of buyout is more like $11k (not the $2-4k my pm told me), on top of the outstanding $6k+ the tenant already owes.

    At this point, I'm basically out of options. If the tenant squats and decides to continue not paying rent, all I can do is ask them nicely and wait out the eviction moratorium. Might be obvious, but this definitely discourages me from ever buying in Oakland or California again... Would love to hear how others have rebounded from their past failures though!


     Matthew, you gotta stop talking with lazy persons/ agencies. There is nothing they can EASILY do, or maybe ideally do, but yes there is 100% something the CAN do. 

    Every lease, I should say a fully correct and complete lease, is a 2 PART legal contract. (1) is in reference of possession of said property (2) references FINANCIAL OBLIGATION. 

    I guarantee the Financial Obligation portion has not been completely waived by moratorium because that would touch into every industry and business and there is 0 political ability for such. So fine, they robbed you of your legal rights to property possession, fine, USE WHAT YOU HAVE LEFT, use the financial responsibility and recourse attached to such. 

    When I dealt with moratorium in MN, it was the exact same story, and all but nobody was using there legal remedies on the financial accountability side of things. And like magic, the moment discussed with non-paying tenants of there options, to either come current, make a mutual agreement to surrender unit and part ways, OR that we would file suite, sue them to get a judgement, than file for motion of discovery to seize assets like bank accounts, autos, crypto, whatever, and garnish wages, all but universally people would say "you can do that?", and yeah, yeah we could, and 100% would IF they forced us to. 

    I do NOT, ever, do cash-for-keys with tenants, full stop. I have never once had to and I have dealt with more tenant situations than the average 100 investors combined. I have successfully done the above dozens of times in moratorium. 

    When the straight path has a wall, you gotta get SMARTER. 

    Dig into the financial portion of the contract law, and I am willing to bet that court is operating just fine, no hinderance at all. While it does not directly get property back, it's interesting how much a non-paying tenant changes there decisions once find you CAN do something, and start that action path of suite and judgement. I let them know, there in the driver seat, I am just doing as they decide, it can be financial herpes with an interest rate, following them forever until paid in full, no bankruptcy to remove it, OR we can just be decent people to limit the damage and work things out together. Choose. 

    0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y
    Quote from @Matthew Lee:

    Just providing an update here to everyone. Woof, what a nightmare.

    I've reached out to the lawyers referred here as well as a few others. Unfortunately, due to the eviction moratorium, nobody will even take me on as a client at this time since there's nothing they can do. Many of these offices have a backlog of hundreds, if not thousands of potential clients like me, waiting to get some kind of legal action for unpaid tenant rent. Unfortunately, the only course of action I can take is to write my city board of supervisors, as they're the ones who will not lift the moratorium. Not really something I'm optimistic about...

    One of the lawyers also said that if I do offer cash for keys, they recommend going through the "proper channels": I'd need to file documents with the city first to discuss the potential buyout, file with the rent board and keep them in the loop, provide specific language in the documents, allow the rent board and tenant time to rethink or cancel, etc. They warned that if I don't follow the correct procedure, there's a risk of possibly getting sued. If I go that route, the cost of buyout is more like $11k (not the $2-4k my pm told me), on top of the outstanding $6k+ the tenant already owes.

    At this point, I'm basically out of options. If the tenant squats and decides to continue not paying rent, all I can do is ask them nicely and wait out the eviction moratorium. Might be obvious, but this definitely discourages me from ever buying in Oakland or California again... Would love to hear how others have rebounded from their past failures though!


     I'd also write your state representatives. They need to hear from landlords, so they know real people are being impacted and how much it is costing people.

    0Reply
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