Stay, go. Throw them out, keep them. Tenants and landlords will have to decide which route they want to go in these challenging economic times. The Covid pandemic has wrecked havoc on the real estate market and may continue to do so for awhile.
Tenants aren’t paying rent because they didn’t plan for these circumstances, or are just looking to renegotiate for better terms. Landlords with those nonpaying tenants are struggling as well. Some are over leveraged themselves with big loans to pay, taxes, other operating expenses, etc. that continue on irrespective of whether the tenants are paying. Without rent being paid, however, landlords risk default on their own obligations which can be crippling.
When disputes happen, there is always the landlord-tenant courts, but the pandemic has negatively impacted the court system as well. With a flood of nonpayment and eviction cases on hold when the court’s closed at the beginning of the year, there is an extreme backlog of cases and courts are still not open for in person appearances in many places, making virtual appearances the new norm. Judges, as well as the attorney bar, are slowly figuring things out, but cannot be relied upon as a quick fix to the economic and other woes of landlords and tenants.
We are seeing a lot of compromise across the negotiation tables. The parties are negotiating away rights. Sometimes deferring rent so that it will eventually become due, and in other cases, forgiving rent obligations. Tenants who want to stay in business, especially ones with personal guaranties backing their leases which are harder to run away from, are compromising as well. Sometimes, just turning over the keys to the landlord to allow for a new rental with a paying tenant is the best course of action. In those instances, landlords may recover possession but filling the space with a financially capable replacement is sometimes daunting; especially now.
As we progress through this pandemic, there is likely going to be a ripple effect on the economy from non-paying tenants and landlords who both aren’t willing to budge. Landlords who can’t easily get possession and still have to carry their debt and other business obligations, sometimes have to give in a bit in order to keep the tenants in business in hopes that they can start paying again. The word bankruptcy is being thrown around a lot these days, sometimes as a negotiating point by tenants. The risk of tenant bankruptcies is real and at the end the landlords are still left holding the bag of their own financial obligations.
Appreciating all of this, tenants and landlords are best to try to work out their differences early on and perhaps share the pain in renegotiation deals if it makes sense or negotiating early exists by a tenant if that makes more sense. Addressing the issues up front rather than kicking the can down the road to see what happens may be in everyones best interest. In the end, if too many cans are kicked it is going to get even more difficult to achieve a swift economic recovery which is in the best interest of both landlords and tenants.
