In the wake of the coronavirus pandemic, more than 30 million Americans have filed for unemployment benefits. In fact, the unemployment rate today teeters near Great Depression levels. In turn, this widespread job loss has created another crisis: Tens of millions of tenants can’t afford to pay rent.
More than 43 million people rent their homes, according to 2016 Census Bureau data. Nearly half of rental units are owned by “individual investor landlords” — regular people who depend on rental income for their livelihood.
If you’re unable to pay your rent in full, you may be able to negotiate a deal with your landlord. After all, “a lot of people are struggling during the COVID-19 pandemic; landlords are likely to appreciate some type of payment rather than nothing,” said Michael Foguth, founder of Foguth Financial Group in Brighton, Michigan.
Here’s how to go about it:
1. Know your rights.
The first step is understanding what your options and rights are as a tenant, especially in light of new rules set in place by the stimulus package enacted in March, known as the CARES Act.
For example, a 120-day moratorium on evictions and late fees was placed on federally subsidized housing and properties financed through Fannie Mae, Freddie Mac or the Federal Housing Administration. However, this only applies to about a quarter of renters, as most rental properties are financed by private lenders.
Some states and cities have instituted their own eviction moratoriums. Additionally, if your lease is coming to an end, you may be able to stay longer without facing eviction.
Keep in mind, though, that just because you might be protected against eviction, it doesn’t mean you’re free to skip out on rent. Tenants are still expected to reach out to their landlords and work out an agreement for coming up with what they owe within a reasonable amount of time, though there isn’t any official guidance on how long that is, exactly.
2. Communicate early.
“While a 90-day period was invoked to prohibit initiating eviction proceedings, any late payments would still be due to landlords leading to a back-rent pileup; not to mention that landlords have bills and mortgages to pay as well,” said Jeremy Kamm, an agent with Warburg Realty in New York City. As a result, many landlords were forced to prepare for a serious lack in rental income. “I advised my clients to reach out to their landlords and ask for a rental adjustment solely for a period that made the most sense for them financially.”
If you can afford it, it’s preferable that you pay at least some of the rent rather than skipping it completely. After all, there’s a good chance your landlord isn’t some faceless corporate entity ― just another person trying to get by, too. And if they don’t receive rental income for an extended period, there’s a high risk that the electricity, gas, mortgage, insurance and other bills won’t get paid ― bad news for everyone involved.
If you can’t afford to pay your rent due to the COVID-19 crisis, it’s important to contact your landlord right away to work out some sort of resolution. Kamm said that proactively reaching out will show your landlord that you have every intention of making good on your obligation, and it will increase the likelihood that they’ll grant some necessary financial relief if you’ve faced a salary adjustment, furlough or temporary unemployment.
3. Be respectful and honest.
Understand that in order for any negotiation to work, it must be a win-win for both parties. If you aren’t flexible or make unreasonable demands, you probably aren’t going to get much help.
“Refusing to pay a landlord their due rent, or requesting a discount that is completely unreasonable, does not often get you very far,” Kamm said. “It shows hostility and a lack of respect for the landlord, and ignores the fact that we are all in this together and are all suffering one way or another.”
A face-to-face meeting would normally be appropriate. However, in light of the pandemic, making a phone call is acceptable. “Remain calm, respectful and appreciative when discussing rent with your landlord,” said Leslie Tayne, a debt resolution attorney and author of the book “Life & Debt: A Fresh Approach to Achieving Financial Wellness.” “Common courtesy and mutual respect go a long way, and they are likely struggling due to the pandemic as well.”
If you’re still employed and can afford your current rent payments, Tayne warned you shouldn’t take advantage of current events and use it as leverage for a rent reduction. Be prepared to show proof of your financial hardship, such as the loss of your job, a salary reduction letter from your employer, unemployment benefits statements or recent pay stubs.
4. Come to the table with a plan.
When negotiating a short-term change to your rental agreement, you should go into the conversation with a goal in mind.
“Know how much you can afford to pay and what kind of assistance would be ideal from your landlord,” Tayne said. She suggested looking online for similar rent rates in your area, which can provide you with leverage when negotiating. “If you’re struggling to pay rent because of the financial impact of COVID-19, provide some information about your hardship,” Tayne added. “Mention that you have been a good tenant and remind them how long you’ve lived there. Don’t threaten to move out, but propose a rent reduction and see what they say.”
Foguth suggested you could negotiate a lower payment for the next few months with an escalation clause. That means paying less now while you’re struggling but more later when you are hopefully back on your feet. For example, you could agree to pay 75% of your rent for the next six months, and then pay 125% of the rent amount for the following six months.
He added that as a renter, you may have some leverage if you agree to extend the lease by a few months or even a year. Your landlord would likely appreciate this because they know somebody would be in the property longer, guaranteeing them rental income for a longer period.
Whatever you do, don’t negotiate blindly or agree to payments that you cannot afford to make, Tayne said.
5. Ensure roommates are held responsible, too.
If you have roommates, the situation might be a bit more complicated. After all, you rely on each other to come through on financial obligations, otherwise everyone’s living arrangement is at risk. It might be tempting to front them the money to avoid coming up short on rent, but that puts you in an awkward and potentially expensive position.
Roommates are considered “co-tenants” if they are listed on the lease, Tayne said. That means they have equal responsibility for upholding the terms of the lease, which is why all roommates should be made co-tenants. In fact, Tayne said it’s a good idea to have your rental agreement spell out each individual’s portion of rent in writing in case you end up in housing court.
If a roommate can’t afford their share of the rent, it’s essential to have a conversation with them right away since you could be on the hook if they fail to pay. “If you don’t have this agreement in place and one of your roommates is refusing to pay after you’ve tried to work something out, speak with your landlord to see what your options are,” she said.
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