Today’s rental market has been a teeter-totter of gains and losses for both tenants and landlords. Sound relationships welcome a pleasant balance of security for landlords and quiet enjoyment for the tenant. However, when money is tight or sudden job loss occurs, there is more teeter than totter.
Here are some common stories that seem to repeat nearly like a broken record. Below you will also find some ideas on how to make the best of the challenging circumstances:
- Good for Landlords: Market rents in Chicagoland have stayed up due to the influx of home owners losing their homes to foreclosure, short sale, divorce and the like. If a husband and wife were to break up and lose their home, that may add 2 new rental prospects.
- Bad for Landlords & Tenants: The couple used in the previous example just went through a divorce, which also may have entailed home loss through foreclosure or short sale. Therefore their credit is most likely less than favorable. Landlords may need to look deeper into the paying habits reflected on credit, and perform an employment verification to ensure the tenant can pay their bills.
- Really Bad for Landlords & Tenants: Once the landlord determines that you maybe a worthy candidate for a 12 months tenant relationship, it is understood that you will pay your rent, on time, in exchange of renting the premises. However, in troubled times and being in a survival mode, sometimes tenants find themselves unable to pay their rent on time, if at all. Just like the mind-set of short sales where home owners stop paying their mortgage and hope for lender forgiveness via short sale, tenants may sometimes feel that if they can just make a promise to get caught up, they can continue to live in the home as long as possible. This sounds good in theory, but seldom does it turn out this way.
Here is a common set of events that commonly lead to the deterioration of a landlord/tenant relationship, (all hell braking lose) and how you can prevent it:
- Tenant suffers monetary distress (doesn’t have enough cash) and cannot afford to make an entire month’s rent payment. The rent is coming due within a few days so tenant calls the landlord and suggests to make a partial payment which will follow the remainder of the rent – usually with a specific promised date. During this phone call the tenant will often elaborate on what the circumstances are, how financially difficult things have become, but that their intent is to do what ever they can to make things right. (Usually this discussion will not entail next month’s rent)
- Tenant makes the partial payment. Now, let’s do some math: June 1st Rent Due: $1200, July 1st Rent Due: $1200. On June 1st tenant pays $600 and promises to pay $600 in 2 weeks (June 15th – My Wedding Anniversary ;o)) Tenant is expecting to come up with $1200 within 2 weeks from that, however if money was tight the month prior that means the most the tenant may be able to pay is probably $600 on July 1st.
- If a $600 every 2 weeks was the consistent new way to make payments, that would work for most landlords, however reality usually means this: June 15th arrives and the tenant doesn’t have the $600. Landlord follows up and within a day or so, the tenants returns the call to say “I have your money” and I will drop it off on the 21st. (What is happening is that the amount due increases while the amount of time to come up with the money decreases, making it harder for the tenant to pay they rent, not to mention stressful. During this time, the Landlord’s patience is losing steam and fear tactics are getting introduced).
- The 21st of June arrives, and the tenant pays the $600, but now only has 9 days to come up with $1200. That could be tricky, so offers to use the security deposit as the next months rent. This seems like a win/win for everyone because the tenant get a “free” month, the landlord doesn’t have to return $1200 and everything should be back to normal by August 1st, right? Unfortunately, this seldom is the case.
- As August 1st approaches the tenant is realizing that $1200 is too much to handle, and depending on the amount of time left in the lease, the landlord may have some significant recourse towards unpaid rent. Communication begins to grow in tension, while certified mail letters arrive with 5 to 30 day notices. From friend to foe, words like “eviction”, “you owe”, and “I can’t” are becoming common words in your conversations.
Although there are legal approaches to escalate these matters (and we are not lawyers, so this is not legal advise), here are some suggestions to prevent these situations:
- Advice for Tenant: In our experience, the following statement is the Holy Grail of advise: Communicate Diligently. If the landlord is chasing you, he/she is also calling an attorney.
- Work out a payment plan of some sorts. Keep in mind that money is money regardless how it gets there. If you take $1200 / 30 days = $40/day.
- “Break rent” discussion could be the best option. The reason a landlord may like this option is because they can try to find a new tenant to fill the gap and not lose too much money. If you stay in the unit, not pay rent, then the landlord is being forced to take legal action to recoup marketing time loss, rent loss, and much more. Remember that the landlord may also be facing their own financial challenges and has to make mortgage payments on the home the tenant lives in, not to mention taxes, association payments, etc. No money from the tenant means more out-of-pocket for the landlord. Communication and disciplined action is key.
- Consult an Attorney. If nothing else works either party has the right to consult their legal counsel.