If you’re an owner or manager of a rental property, the usual steps to take when a tenant stops payment rent are pretty straightforward. But since the COVID-19 pandemic struck, there haven’t been many things you could describe as “usual.”
Tenants failing to pay rent can happen at any time. During stay-at-home orders, when people lose their jobs or suffer a loss of income, it’s likely that more people will struggle to pay their rent.
If you’re a property owner and don’t work with a San Jose property manager, here’s what you would need to do when your tenant stops paying rent.
How it normally works
In normal times, the owner or manager of a rental property would think about whether missed rent was a frequent occurrence or more of a one-time thing. If it’s not a habitual practice, they would contact the tenant and work out something amicably. If you have a good tenant who rarely pays late, you probably don’t want to lose them over one past due payment. In this case, the tenant would typically pay a late fee if they pay rent after the 4th or 5th day of the month.
On the other hand, if late rent is a chronic issue, you might want the tenant to leave. You can give them a short time period in which they can move out without penalty. If they don’t agree, the property manager must post a three-day notice to vacate. The tenant has three days to pay in full, move out, or face eviction.
To evict a tenant who doesn’t voluntarily leave, the property owner or manager must file what’s called an unlawful detainer lawsuit. If the tenant has an unlawful detainer judgment against them, the court will issue a writ of possession, which is an order for the sheriff to remove the tenant from the property.
How things have changed
Millions of Californians have become unemployed during the pandemic, so it shouldn’t be surprising if tenants can’t come up with the money for rent. That changes things compared to non-payment of rent that occurs in normal times.
The first big change is the issuance of eviction moratoriums. Santa Clara County and the city of San Jose have halted evictions through the month of May, and those bans may be extended. Without the leverage of eviction, landlords have a harder time trying to force someone to pay.
As in ordinary circumstances, property owners might be better served to work something out amicably. Keep in mind that they are going through a very difficult time, too.
What a tenant must provide
If a tenant is going to miss a rent payment because of COVID-19-related circumstances, they must inform their landlord within seven days of the due date and show proof of “substantial” hardship related to the virus. Hardships would include job loss, reduction in hours, a business closure, or a significant loss of business revenue due to the stay-at-home order.
The California Apartment Association (CAA) website has a sample letter that renters can use to inform their landlords or property managers of their hardship. Once the moratorium is lifted, tenants will have 120 days to pay all rent due. The CAA is also urging landlords and renters to work together to get through the pandemic.
What Property Owners Can Do
When tenants suffer a loss of income and can’t pay their rent, property owners also lose income. If the owner has a mortgage on the property, the owner can check with their lender to see if they can get forbearance for COVID-19 hardship. Forbearance usually results in a pause of mortgage payments, and a payback either in future monthly installments or by tacking extra months onto the end of the loan.
Property owners and managers, as the CAA suggests, could work together to come to a solution. Reduced rental rates or longer grace periods for repayment, for example, could be negotiated. It’s likely going to take some cooperation for everyone to weather this storm.
If you own a rental property and need the help of an experienced San Jose property manager to communicate with your tenant to negotiate reasonable terms contact Valley Management Group. They have 40 years of experience managing properties in San Jose and Santa Clara County and have many highly rated customer reviews from owners and tenants alike. Call them for a free quote and get one month of free property management services when you sign up for their services.
Reviewed and Approved by Lloyd Kipp
Property Manager and Owner of Valley Management Group