What to Do If a Tenant Can’t Pay Rent

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What to Do If a Tenant Can't Pay Rent

Recent statistics show that 30 million Americans have sought unemployment aid since the onset of the COVID-19 crisis.

The financial implications of this will have knock-on effects for everyone in the economy, especially landlords. If you lease out a residential or commercial building, you may well find difficulty securing your rental payments in the coming weeks.

If your tenants can’t pay rent, there are a few different options available to you. Read on as we look at what they are.

Revised Payment Plans

If you have a good relationship with a tenant and you have the liquidity to survive without full rental payments for a period, you could consider making out a new payment plan.

You might allow tenants to pay a smaller percentage of their rent each month until they resume work or find a new job.

You could also grant a deferral. Under this system, a tenant lives rent-free for a time and pays the balance they owe once they can afford to. 

Most tenants who have suffered financial hardship due to COVID-19 will be eligible for relief under the CARES Act. If you revise your payment agreement, you might be able to require your tenant to transfer a certain percentage of this payment to you.

Finding a new tenant may be more difficult at this time. Demand for property is down in many areas, and holding viewings may not be safe.

With this in mind, a payment plan might be a better strategy than eviction.

Eviction

Nobody wants to have to evict a tenant. However, keeping a tenant on indefinitely while they aren’t paying rent is simply infeasible.

If you do have to evict a tenant, you should know that it is a much more difficult process with a residential tenancy.

Courts are reluctant to make families homeless. They also take the position that businesses signed up to a certain degree of risk when they signed their lease, while residential tenants may not have considered this risk to the same extent.

In all cases, you will have to serve tenants with a pay rent or quit notice. If no payment is forthcoming at this point, the tenant should leave.

If they refuse to do so, you can apply for a court order for eviction. This means that the tenant can be physically ejected from the property.

However, the rules on COVID-19 evictions vary from state to state. Some states have put a moratorium on evictions, making them unenforceable for a certain period.

What to Do When a Tenant Can’t Pay Rent

When a tenant can’t pay rent, a landlord is always left in a difficult situation. However, given current circumstances, it is especially tricky.

Nobody wants to be the “bad guy” in such a situation. However, your financial interests have to come first, especially in times as bleak as these.