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When a Tenant Won’t Pay and You Can’t Make Them Leave

April 9, 2021 by Staff Reporter

There’s some new uncharted territory for landlords these days because of COVID-19, which has become the reason given for many unprecedented and possibly unconstitutional activities.

The eviction moratorium is the policy real estate investors need to pay attention to. This order makes it illegal for landlords to evict certain tenants who stop paying rent if they say they’re having financial difficulty due to COVID-19.

What’s happening?

The Centers for Disease Control and Prevention (CDC) has never before become involved in private property ownership, but it has now. The CDC operates under the Department of Health and Human Services, and this government entity has issued a federal order directed at landlords of residential property.

Under this order, a landlord “shall not evict any covered person from any residential property in any jurisdiction to which this Order applies during the effective period of the Order.” As if this order isn’t difficult enough for landlords, the order has been extended. It was originally put in effect Sept. 4, 2020, and was supposed to end March 31, 2021. But it’s been extended to June 30, 2021, “subject to revision.” This does not bode well for residential landlords.

What can landlords do?

What can landlords do if they have tenants who aren’t paying rent and they can’t evict them? Do landlords need to continue to pay all the expenses they have from owning property — taxes, insurance, maintenance, and in many cases, mortgage payments — and not collect any money? If any businessperson, including landlords, is losing money by running a business, that model becomes unsustainable.

If you’re a landlord, you need a Plan B — and pronto — if your tenants aren’t paying rent. Here are four ideas.

1. Look into rental assistance for your tenants

The CDC won’t provide rental assistance but points landlords and tenants to another government agency where it might be possible to get rental assistance: the U.S. Department of Housing and Urban Development (HUD). HUD offers emergency grants and other programs that might be helpful.

2. Offer to let tenants out of their lease

Let your tenant know that you understand renting has become a hardship, so you’re willing to let them out of their lease early without penalty and without needing to pay any back rent owed if they leave by, say, the end of the month. If they don’t want to do that, remind them they will owe all back rent they haven’t been paying.

3. Pay your tenant to leave: cash for keys

If you offer to pay your tenant to leave, called “cash for keys,” they might. Although it often goes against the grain for many landlords to offer to pay their tenants to move out, doing so might make the most economic sense. Weigh the costs and benefits to help make this decision, and then offer maybe $1,000 to get them out. Again, remind them that if they don’t take the deal, you will expect to receive all the back rent owed.

4. Sell the property

It’s currently an extreme seller’s market. Although it’s normally a tougher sell when a tenant is occupying the home, in this market, people have been buying under all sorts of conditions that aren’t ideal, such as waiving contingencies, paying all cash, and having a due diligence period of only a few days. Selling with a tenant in the property might not be as big of an issue in today’s seller’s market as it normally is.

When landlords don’t have eviction as a recourse for tenants not paying rent, there are other solutions, but none as good. Being able to evict is the best solution if tenants don’t pay rent. If evictions are never allowed to happen, landlords will have no protection. The eviction moratorium has already been extended. If this continues, landlords might need to take drastic measures, such as paying tenants to leave or selling property.

Filed Under: BUY HOME, INSURANCE, NEWS & TRENDS

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