Getty
Now that April 1, 2020 has come and gone, I have a question to ask all landlords: Was the rent check in the mail? I also have one for tenants: Did you send the rent? In a more normal time, this would not be such a serious thing to write about.
This is not a joke question, but an urgent matter that needs to be sorted out. If it’s not, going forward, the alchemy of valuation and the transfer of real property are going to be major feats. We are in new territory here. Let’s look at the facts of what we face.
On the one hand, our economy has taken an unparalleled hit. Large businesses and mom and pops alike are stunned and treading for clarity. The business of America is closed for an undetermined period as people and industry alike must find ways to survive. We humans tend to do just that, and we will now. How?
The first thing is to look at where we are as a business and as a family. The fact of the matter is the relationship between landlord and tenant is something of a marriage, and like any other, it will go through difficult times. This pandemic is likely a major difficulty in this marriage. You need a pragmatic plan to weather and recover from this storm. I suggest a meeting between landlord and tenant.
Try to have a straightforward discussion about the problem, acknowledging that you both have one. Tenants have protections in some areas of the country where evictions and foreclosures are on hold for varying durations of time. This was and is needed to bring a measure of calm to the issue. Now you need to work together according to the facts of the situation and try to be fair. Moral hazard, the idea that offering a protection will change the behavior of the protected party, is certainly a real thing. And in real estate, it’s easy for people to hold different convictions on the same subject based on which side of things they sit.
Communication is the key to the collection or future recovery of rent. Any government programs on the way that may help should not be the first thought here. If you are a tenant, call your landlord to discuss a rental survival plan. As a landlord, you should also get ahead of the tenant by checking to see how much abatement would be economically possible. After ascertaining how much you can bear to forgive or delay, send out the understanding tenant memo (I have seen many types of form letters for this very purpose. Search out some examples, and tailor them to your situation). Invite anyone with a true problem to call and discuss it. There is going to be a lot of misinformation spread online and by way of word of mouth, so make it your goal to not let incorrect assumptions take precedence in your tenants’ minds.
Any agreement to modify or recapture rent should be issued in writing and vetted by an attorney if possible. In regards to lenders and borrowers, essentially the same course of action is in order. If you are really challenged as a borrower, seek out a forbearance agreement with your lender until you can set things right.
After all, in a situation like this, it’s better to step into the light than let the light find you.