How are landlords dealing with tenants who can’t pay May rent due to coronavirus?
Last September, Giovanna Calimano, a Realtor with Luxe Properties, helped her father, Jorge, rent out his investment property on Northwest 193rd Lane in Hialeah he had bought in 2010 for $107,000.
The new tenants, a family who had relocated from Georgia, seemed perfect: a man who works for a medical supply company in Doral; his wife, who works as a tax preparer; and their two kids. Their rent was a reasonable $1,800 for a three-bedroom, two-bathroom townhouse with 1,093 square feet of living space.
All was well until April 6, when the tenant called the landlord to inform him he would not continue to pay his rent.
“He stated that times are tough all over,” Calimano said. “He didn’t say he had lost his job. He just said he wasn’t going to pay his rent. I guess he knows because evictions aren’t going anywhere right now due to the coronavirus shutdown, he thought he could get away with it.”
He won’t. Despite Miami-Dade Mayor Carlos Gimenez’s suspension of eviction proceedings on March 12, tenants who live in privately owned apartments or homes that don’t receive any government subsidies are still required by law to pay their rent on time each month — even if they have been furloughed or lost their job during the COVID-19 crisis.
Statistics show that the majority of the 55,000 South Florida renters who were already living paycheck to paycheck when the coronavirus outbreak took their jobs managed to pay at least a portion of their April rent.
But as the next due date of May 1 approaches, and the state’s overloaded unemployment system struggles to keep up with snowballing demand for help, renters and their landlords are bracing for another round of financial scrambling.
“In April, we achieved a 93 percent collection rate,” said Enrique Teran, co-founder of Avanti Way Realty and CEO of Propfolio Management, which manages two million square feet of residential properties around South Florida for private landlords. “Granted, some people used credit cards to pay, and others were only able to pay a percentage of their rent.”
But Teran said that May will bring a whole new set of complications, especially for renters who were barely able to scrape by in April.
“Getting by the first month was easy, because people will do whatever they can to keep a roof over their heads,” he said. “But unemployment has increased dramatically. I’m expecting a decrease of 10-15 percent of payments, bringing us down to a 78 percent collection rate. This is like being in the middle of the longest hurricane we’ve ever experienced in Miami. We don’t know how this rental market is going to recover.”
A national crisis
According to the National Multifamily Housing Council (NMHC), 89 percent of 11.5 million professionally managed renter households in the U.S. made a full or partial rent payment by April 19, 2020, down from 93 percent over the same period last month.
But NMHC President Doug Bibby warned that the number of non-payments may continue to increase as the national lockdown remains in place.
“Their financial security is unclear as many may not qualify for federal relief, while others are drawing down savings and facing greater financial challenges, including higher health care costs,” he said in a statement. “For that reason, lawmakers need to act now to enact a direct renter assistance program.”
The federal CARES Act, which was approved by Congress on March 27, placed a 120-day moratorium on eviction proceedings and interest fees on late rents in buildings that receive any sort of government subsidy or are backed by federal loans. But while the law provides some direly needed protection for residents of affordable housing, it does not provide any help for renters of market-rate housing.
On April 22, the nonprofit National Rental Home Council released a rental assistance plan that asks Congress to include support for the 43 million renter households across the country in its next stimulus package. The plan argues that 95 percent of single-family home rentals are owned by individual “mom and pop” landlords who typically own between one and four properties and rely on timely rent payments to cover their mortgages.
By assisting renters, the plan argues, the federal government can avoid a wave of foreclosures and defaults on the 23 million homes currently used as rental properties. The relief funds would only go to renters who are experiencing financial hardship due to job loss, furlough, work stoppage or illness related to COVID-19. The money would go directly to landlords and would be repaid via the renter over a period of up to 10 years through their annual tax returns.
Locally, the governments of Miami and Hialeah have announced plans to provide financial assistance to renters who live within their respective city boundaries.
Talk to your landlord
But while the wait for financial assistance goes on, what should renters do if they’re not able to pay their May 1 rent? The most important priority: Talk to your landlord instead of going rogue.
Dania Diaz, a real estate consultant at RE/MAX Advance Realty, manages eight rental properties in the Fontainebleau area for an investor. She said all the tenants have been able to pay their rents, which range from $1,400 to $1,550, except for one, a nail salon worker who was laid off in March.
“She’s been living there for two years, she’s very diligent, and she paid three months’ rent when she moved in,” Diaz said. “She called me and said ‘I don’t know what to do.’ So we let her use part of her deposit to pay the April rent. If she can’t pay in May, we can use another part of her deposit. We want to keep the good tenants.”
But Diaz said not all renters take the proactive route, choosing instead to not pay rent — a decision they will eventually regret.
“Ignorant people don’t know all the rules,” she said. “I know landlords whose tenants are taking advantage of the no-eviction moratorium. They think they don’t have to pay and nothing will happen. They don’t understand that’s not an option. When the economy opens back up, not only are they going to receive an eviction notice, but that report will show on their record forever, which is going to make it much harder for them to rent another place.”
According to county records, 522 evictions have been electronically filed in Miami-Dade court as of April 24 since Mayor Gimenez suspended eviction proceedings. The records don’t show exactly how many of those filings were for non-payment.
Regardless of cause, those proceedings will begin the moment the court system reopens.
“The thing that most tenants don’t understand is the thing that has been suspended are judicial proceedings, not their rent payment,” said Diamelyn Cepero, a Coral Gables attorney who specializes in real estate law. “Your rent is still due. If your landlord has posted a three-day notice on your door and you have not come to an agreement with them, they can file an eviction. Once the courts reopen and the eviction is processed, the landlord doesn’t have to accept your rent or even talk to you. That’s why it’s so important for tenants to come to an agreement if they can’t pay.”
Skin in the game
Part of any agreement with a landlord will require proof that the tenant is doing everything they can to pay their rent, even if they have lost their income. Justine Jimenez, a broker for Countywide Properties, manages rental properties for out-of-town landlords. She also owns four properties, two single-family homes and two duplexes, that she rents out herself.
“I’ve had two tenants who haven’t been able to pay their full rent,” she said. “One is a couple who are restaurant workers and were laid off. They pay $1,800 a month for a three-bedroom two-bath on Flagler Street and 34th Avenue. They have lost work and hours. They’ve been my tenants for six years and they’re legitimate.
“But I have another tenant who hasn’t been that good and asked me if they could pay half of their $2,400 rent on the first of the month and the other half on the 17th,” Jimenez said. “I don’t know the particulars because they haven’t lost their jobs. I need to pay my mortgage, so the tenant has to have some skin in the game. I need to see a worksheet of what their monthly bills are and help them budget and make sure they are taking advantage of all resources, including food stamps.”
Christopher Zoller, a broker associate with Berkshire Hathaway EWM Realty, also moonlights as a landlord, renting out 12 properties around Miami-Dade County. All of his tenants were able to pay their rent on April 1, and only one asked for a discount.
“She pays $1,700 for a two-bedroom two-bath ground-floor condo with an enclosed backyard and asked if she could pay $1,200 in April instead,” Zoller said. “She works at the marketing department for a real estate developer, but her hours have been cut back and she has three kids.
“My advice to landlords is to be kind and sympathetic, but make sure you are taking care of your business. We rely on these rent payments to pay our mortgages. The worst thing that can happen is you have a vacant property sitting on the market with no income at all. So what’s the better option: collecting 40 or 50 percent of the rent now, or collecting nothing at all?”
This story was originally published April 28, 2020 at 10:25 AM.
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