COVID, Lease Renewal, and Divorce: What would you do?

General Landlording & Rental Properties
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COVID, Lease Renewal, and Divorce: What would you do?

Briana Bean
Rental Property Investor · Springfield, MO · Member since 2018 · 32 posts · 6 votes

We have some tenants that divorced, and one moved out. Their renewal is this June. I have let the tenant know that a new lease will need to be drawn up, and that he would need to meet our income requirements. He works in a non-essential industry and has picked up a temporary job. I don't think he's income will meet the requirements, and he's asking for us to base things on what he was and hopes to be making once things re-open. Typically, we would be strict to our policy, but these are new waters for us. What are your thoughts? 

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Robert Posta
Rental Property Investor · Roselle, IL · Member since 2020 · 30 posts · 12 votes
6y

Maybe ask that person to go on month/month agreement for the next 60 days and then once he gets his job back you can re-sign an annual lease.. 

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    6y
    Originally posted by @Briana Bean:

    We have some tenants that divorced, and one moved out. Their renewal is this June. I have let the tenant know that a new lease will need to be drawn up, and that he would need to meet our income requirements. He works in a non-essential industry and has picked up a temporary job. I don't think he's income will meet the requirements, and he's asking for us to base things on what he was and hopes to be making once things re-open. Typically, we would be strict to our policy, but these are new waters for us. What are your thoughts? 

    You utilize screening requirement such as income to lower your shot at loosing money due to non payment and costly turnovers. However, this is only effective when done BEFORE the tenant is in your property. There is no reason for you to give him a hard time about income requirements now as he's already in there and paying. If you remove him you've got a turnover and vacancy to deal with. If he pays rent, you don't. If he stops paying rent you just evict him and deal with the turnover and vacancy at that time. You should never be in a hurry to remove an income stream.

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  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    6y

    @Briana Bean 

    I would really wait another thirty days before offering a lease renewal and see if he picks up a job again. No need to create a problem for someone that cant qualify for paying the rent. 

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    2Reply
  • Robert Posta
    Rental Property Investor · Roselle, IL · Member since 2020 · 30 posts · 12 votes
    6y

    Maybe ask that person to go on month/month agreement for the next 60 days and then once he gets his job back you can re-sign an annual lease.. 

    4Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    6y
    Originally posted by @Robert Posta:

    Maybe ask that person to go on month/month agreement for the next 60 days and then once he gets his job back you can re-sign an annual lease.. 

     If he doesn't pay you'll be able to evict him for non payment. There is no reason you would need his lease to expire monthly.

    2Reply
  • Briana Bean
    OP
    Rental Property Investor · Springfield, MO · Member since 2018 · 32 posts · 6 votes
    6y

    @James Wise 

    I totally agree. You should always screen your tenants prior to move-in. In June 2019, he and his wife were income producing and met our requirements. Now he is recently divorced and wanting to renew his lease. Should we be in the middle of the lease, I would leave as is, but since he is wanting to renew and it is just him, we need to write up a new agreement. What do you do when roommates, a partner, or spouse leave at lease renewal? Do you re-evaluate your requirements again before signing up for another year with this person? Or do you let it ride knowing they don't make enough by themselves? Turnover and vacancies are expensive but so are evictions. 

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  • Briana Bean
    OP
    Rental Property Investor · Springfield, MO · Member since 2018 · 32 posts · 6 votes
    6y

    @Kim Meridith Hampton @Robert Posta

    I like that idea! We were avoiding a month to month scenario, but could look at doing a month or two given the circumstances to avoid turnover. 

    However, while due to COVID the tenant's income has been reduced, there's also the fact that the other tenant's income is not coming in. Based on just his income when there was no COVID, he would not be eligible. So what do you do at lease renewal when tenants leave and one remains, but the income does not meet requirements? 

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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    6y
    Originally posted by @Briana Bean:

    @James Wise 

    I totally agree. You should always screen your tenants prior to move-in. In June 2019, he and his wife were income producing and met our requirements. Now he is recently divorced and wanting to renew his lease. Should we be in the middle of the lease, I would leave as is, but since he is wanting to renew and it is just him, we need to write up a new agreement. What do you do when roommates, a partner, or spouse leave at lease renewal? Do you re-evaluate your requirements again before signing up for another year with this person? Or do you let it ride knowing they don't make enough by themselves? Turnover and vacancies are expensive but so are evictions. 

     Just sign him up to a new 12 month lease....What do you have to lose? He can either pay or he can't. If he can't pay you've got a turnover. So do you want a 100% chance of a turnover right now or a lower chance of a turnover down the road?

    0Reply
  • Briana Bean
    OP
    Rental Property Investor · Springfield, MO · Member since 2018 · 32 posts · 6 votes
    6y

    @james wise Good point. Thanks for your response! 

    0Reply
  • Andrew B.
    Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
    6y
    I would screen him based on the idea that he needs to qualify to receive a 1 year lease agreement. Since he is already there, if he doesn't qualify let his lease become month to month. To be honest, even if he does qualify, you might consider going month to month. Many landlords prefer month to month for many reasons.
    0Reply
  • Marlen Weber
    Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes
    6y

    I would follow @James Wise advice on this situation. Whether they can pay or not, there's a solution for both and you have a guaranteed tenant that has otherwise been okay. Best of luck. 

    1Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    6y

    @Briana Bean. When was his divorce? When did the ex move out? How has he been paying the rent? How long has he been paying the rent on his own? Is he getting unemployment benefits and/or the $600 "bonus"? What evidence is there he will be back to full income, and when? What is the likelihood that he will not be able to make the rent payment, and on time? 

    I wouldn't necessarily just go with "what have you got to lose" or "evict him if he doesn't pay". You have a lot to lose, and evictions take time and money and nobody wants that. But, if he's been paying the rent, he is likely to continue paying the rent. 

    1Reply
  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    6y

    @Briana Bean

    If he is unemployed due to covid he qualifies for roughly $1000 a week in unemployment. I believe it’s over 6 months.

    0Reply
  • Jose Clavijo
    Contractor · NC · Member since 2017 · 45 posts · 26 votes
    6y

    I was in the same situation 8 months ago. Tenants divorced and one decided to stay, this took place precisely at the time of lease renewal. These tenants were on a 1 year lease when i bought the house and came from a renewal with good payment history. We signed a new lease with only one tenant, no issue with payments until now due to Covid 19 and reduced work hours. 

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