One of the elements of the Senate relief bill (still to be passed by the House) is aid to individuals in the form of cash to be able to pay their rent and to avoid a default under an apartment lease.
If you rent an apartment, the organizational structure — the people or entities involved — is this:
Owner/landlord — The owner is the person or legal entity whose name is on the deed filed at the county courthouse. All power and authority is vested in the owner.
Lender — The owner has likely borrowed money to purchase or build the property. The document that formalizes that arrangement is the mortgage. It contains the terms of the agreement between the lender and the owner pertinent to the mortgage. A mortgage has the following elements:
Lender — a bank, insurance company, pension fund, REIT — the source of the money
Borrower — the legal vehicle through which the owner owns the property
Principal amount — the initial amount borrowed
Term of the loan — how many years the loan extends
Amortization schedule — the number of years over which principal is repaid which may differ from the term of the loan
Interest rate — the annual interest to be paid on the outstanding principal
Default provisions — what happens if the monthly loan payment is not met
Property management company — There may or may not be a property management company that manages the property on behalf of the owner. Property managers keep the records, maintain the property, and collect the rent — all on behalf of the owner.
On site management — The people who work for the property management company or the owner who are on site to run the property on a day-to-day basis
Tenant — You, the person who occupies the apartment subject to the terms of the lease
In any lease — a legal contract — there are typical terms:
Owner — The name of the legal entity or individual who owns the property
Tenant — You
Apartment — The specific apartment leased by you
Term — The length of the apartment lease in months or years
Rental rate — The monthly rent to be paid by you to the owner or the property manager on behalf of the owner
Payment date — The date upon which your payment must be received
Payment location — Where you pay the rent
Grace period — Rent is typically due on the 1st of the month (payment date) and subject to a late fee on a date certain such as 10 days later
Late fee — A fee added to the rent if you are late paying your rent
Renewal provision — Any pre-negotiated terms upon which the tenant may extend the term of the lease
Default — The actions — such as failure to pay the rent or a certain number of late payments — upon which the owner may terminate the lease and evict the tenant from the apartment together with any terms to be met to reinstate the tenant (not always)
In the situation we are discussing today, the default for failure to pay the rent is the issue with the necessity to vacate the premises being the real problem.
What do I do if I can’t pay the rent, Big Red Car?
The very first thing you do is to notify the property manager or the owner that you cannot pay the rent in its entirety. [Big deal: Make sure to pay something even if it is only $50 to ensure the owner knows you take the matter seriously.] Do this in writing explaining why you can’t pay the rent and when you think you can.
“I have lost my job due to the corona virus quarantine. I am unable to pay my rent. As soon as the quarantine is lifted, I will either return to work for my existing employer or seek employment elsewhere. I will keep you advised of my situation. Thank you for your indulgence in working with me. I will keep you informed as my status evolves.”
When you don’t pay the rent, the owner may not be able to pay the mortgage payment, so the problem rolls uphill. Understand this. The owner will project this angst onto your relationship with him.
The owner will be having a similar discussion with the lender.
There will be a lot of pissing and moaning, but one thing I can assure you is that lenders will not be foreclosing on properties if they can possibly avoid it. The last thing they want is to own depreciating assets in this market.
All experienced landlords have experienced this issue before. You are not the first person to ever lose a job and be under pressure to pay the rent.
If you can move to a rent free location — your brother’s basement — then be prepared to do that. If that is your choice, then notify the owner or property manager that you will move on a date certain.
If you have a security deposit with the owner, ask the owner to apply the security deposit to your rent. This forestalls the problem, but may not correct it. The owner will ask you to rebuild the security deposit. Offer to do it at a certain rate per month — rebuild it over time.
Offer to extend the lease and add the missed rental payments to the extended term — this, of course, requires you to have a job. You do not have to extend the lease, but if you do you have more time over which to make the payments.
If the owner notifies you that he intends to evict you, then review the State Property Code and understand the process. It differs from state to state. The State Property Code will supersede whatever is in the lease.
Do not ever lose contact with the landlord. Keep him constantly informed as to your status. Personalize the dialog. Don’t become lost in the crowd.
Ask for assistance. People make a huge mistake in landlord/owner–tenant relationships in failing to ask for assistance.