Collecting Rent in California During Covid-19 Pandemic

Before the scourge called Coronavirus turned our world upside down, we had time to ponder some of the more complicated questions of life. Does the universe go on infinitely and if it does, where did it all begin?

Now, we wake up every day embroiled in an epidemic that has the power to damage our lives for a long time.

One of the most difficult questions for property managers to answer during the COVID-19 outbreak is “How do I handle renters that have fallen behind on their monthly payments?” Unless you work inside the Beltway in D.C. or are lucky enough to work for a major media outlet, you have probably taken a serious hit to the pocketbook.

This includes you, the rental property owner.

At least a little financial pain can help you walk in the shoes of your renters. However, after a couple of months when little or no cash comes in to the rental property, what should you do to generate more cash flow. Do you don the hat of a heartless landowner as depicted in Steinbeck’s classic Grapes of Wrath? Conversely, do you play the role of a benevolent business operator by not demanding rent until the economy swings back into forward motion?

The answer, like most things in life, it a little balance when it comes to deciding whether to collect or not to collect rent during the COVID-19 pandemic.

Moratorium on Evictions

On March 27, 2020, the state of California banned the enforcement evictions. Governor Newsome’s executive order N-28-20 expires on May 31, 2020.It prevents landlords from evicting tenants for non-payment of rent if they are affected by the Covid-19 pandemic.

Renters must meet one or more of the following conditions to achieve rent relief during the COVID-19 crisis:

  • Tenant diagnosed with COVID-19 or has to provide medical care for a household member that contracted the virus
  • Tenant lost job because of the Coronavirus pandemic
  • Tenant lost income because of the COVID-19 outbreak
  • Tenant issued quarantine order
  • Tenant lost time at work to supervise a school age child

The emergency ordinance also allows tenants to make partial rent payments, as long as tenants notify landlords in writing before the due date for monthly rental payments. Tenants must submit documentation that substantiates loss of income claims, as well as pay off the balance dueon rent when the amount of income returns to pre COVID-19 levels.

The property managers at Utopia Management are guiding both tenants and landlords through this process. Tenants have up to 120 days after Governor Newsome’s eviction moratorium orders expires to pay their landlords any unpaid rent. The moratoriumdoes not apply to tenants that failed to meet rent payment obligations before the onset of the Coronavirus.

Be Creative When It Comes to Working with Tenants

Landlords and property managers have to see the big picture when it comes to tenant delayed rent payments. You have to ask is it important to squeeze renters for money they do not have now, instead of waiting it out to collect full and regularly schedule rent payments in the future. With the closing of many businesses, this might be a difficult question to answer. However, as a landlord or a property owner, you can do a few things that should not only help you through this crisis, but help you develop a long standing relationship with many renters as well.

No Communication Breakdowns

When they sit down with new tenants, savvy property managers say one important thing.

“Let me know if you ever have trouble paying rent.”

Communication is everything in a landlord-tenant relationship, and it is not just the tenant that need to keep open communication channels. During a crisis such as the COVID-19 pandemic, you need to maintain open lines of communication with each of your tenants. In fact, be proactive and reach out to every tenant to determine where they stand financially. Once again, your goal should be to cultivate long-term relationships with as many as tenants as possible.

Defer Rent Payments

A moratorium on evictions does not solve the ultimate issue: You need tenants to pay rent. With paychecks dwindling or not deposited at all, you should be creative by extending rent deferment offers to the tenants that need it most. You can take partial rent payments for a few months, and then pro rate the amount due on back rent to spread out over several additional months.

Follow StateDocumentation Guidelines

The California state edict on eviction moratoriums provide property managers with several guidelines to follow during the Coronavirus pandemic. One crucial guideline requires tenants to submit documentation to landlords that proves the pandemic has restricted their ability to generate enough income to pay rent. You need to have the paperwork, before you approve rent deferment or rent forgiveness plans.

Have Compassion

One of the stunning elements of Steinbeck’s Grapes of Wrath is the lack of empathy and understanding demonstrated by people that had it better than the downtrodden in search of work and a new way of life. As the saying goes, you can really get to know someone by discovering how he or she acts during a crisis. Make a positive impression on your tenants by managing your property with compassion. COVID-19 should be a temporary disruption. Make sure you take into account the longer term relationships that you develop with tenants.

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