Should You Help Your Houston Tenants Struggling to Pay Rent During a Crisis?

You bought your rental property as an investment to generate income. When a tenant can’t pay rent on time, it can set you back financially. If you rely on rent to cover your mortgage, you’ll need to dip into your savings account and that’s never a good situation.

Currently, the world is experiencing the effects of a stopped economy thanks to the coronavirus pandemic. Millions are out of work and struggling to pay rent.

While the majority of tenants are struggling to pay their rent, some are able to pay rent, but are violating their lease agreements in the process. For instance, some tenants are letting friends and family move in to help pay the rent. In many of these situations, tenants are in violation of occupancy and pet policies.

Before granting your tenant a free pass on late rent or ignoring lease violations, carefully consider the following 4 points.

1. Some tenants will take advantage of your help

Anytime you do a favor for a tenant, you risk being taken advantage of. You can mitigate this potential by being generous and firm at the same time. Make sure your tenant knows whatever favor you’re granting them is temporary and not to be expected on an ongoing basis.

Whenever you choose to help a tenant, let them know financial aid is available from the city of Houston if they qualify. For instance, on August 5, 2020, the mayor and the Houston City Council approved $20 million in rent relief for qualifying residents.

2. You could accidentally set the wrong expectations

Doing favors for a tenant has the potential to set the wrong expectations. No matter how firmly you remind your tenant that your favor is a one-time thing, they can still come to expect special treatment on an ongoing basis.

Here are some of the ways landlords attempt to help their tenants along with the possible consequences:

• Temporarily reducing rent. When a landlord temporarily reduces a tenant’s rent for more than one rental period, that tenant might get used to the reduction. When the rent returns to normal, the tenant may not be able (or willing) to continue paying the full amount.If you’re going to reduce a tenant’s rent, make sure you create an addendum to the lease outlining the terms noting that the reduction is temporary. Don’t skip this important step. If a tenant sues you later on, they might be able to convince a judge that the rent reduction was not intended to be temporary.
• Eliminating late fees. Late fees exist to deter late and partial payments. If you eliminate a tenant’s late fee, you’re essentially telling them there are no consequences for paying late.If a tenant is struggling financially, you can be lenient and accommodating and still charge late fees. If your tenant can’t pay the late fees when they finally pay their rent, allow them to make payments. However, never let a tenant off the hook for a late fee. Demonstrate your willingness to work with them, but hold them to their original agreement in the lease.
• Allowing lease violations to go unchecked for long periods of time. If your tenant is struggling to pay the rent, they might secretly allow friends and family to move in and help pay the rent. On the surface, this seems beneficial to you as a landlord. You’ll get your rent on time, so what’s the problem?The problem is that when a tenant violates the lease behind your back by allowing unauthorized occupants and/or pets, you could end up having to evict everyone at some point. What happens when the extra people lose their income? Even if your tenant gets a new source of income, if the other people in the house are out of work, they’re not going anywhere.If you suspect your tenant might be allowing other people to live in the unit to help pay rent, talk with your tenant to make it official. Get the other occupants on the lease so they are all legally responsible for paying the rent or at least listed as an occupant. If they have a pet and your lease doesn’t allow pets, make an exception if it feels right.
• Letting tenants skip rent now and pay later. It’s a nice gesture to allow tenants to skip rent now and pay later, but that doesn’t mean they will follow through. Even a legally-binding contract won’t guarantee you payment.Instead of allowing tenants to skip rent completely, ask them to pay whatever they can so they’re at least on the hook for something. Don’t give anyone a free pass unless their circumstances are dire and you really want to help out a good tenant.

3. Your tenant might not actually be struggling

Sometimes people have money for rent, but choose to spend it on other things. You can’t know for sure if your tenant is really struggling or if they’re prioritizing purchases above paying the rent.

If you choose to help a tenant who says they’re struggling to pay rent, be prepared for the possibility that your tenant might be taking advantage of your kindness. If too much time goes by and your tenant doesn’t seem to be in a better position, you may need to cut your losses and start the eviction process. You can only help people so much before it will take a toll on your own finances.

4. Is losing money short-term worth keeping your tenant long-term?

There are some situations where helping tenants is worth every effort. For instance, if you’ve got a reliable, responsible, long-term tenant, you can be fairly sure they’re not going to take advantage of your help. These are the kind of tenants worth going the extra mile to help.

Think about it this way. If you give your best tenant a break on the rent in the short-term, you’ll still keep them long-term. The other option is to have a vacant unit until you can rent to someone who may not be as reliable.

Turning over tenants costs money. Do what you can to keep your reliable, long-term tenants.

Need help managing your tenants?

Being a landlord can be overwhelming, especially when your tenants are going through hard times. If you’re in the process of evicting tenants for not paying rent, and you’d like to find a reliable replacement, we can help.

At Green Residential, our team of experienced property management professionals hold all applicants to high standards and will select the best possible tenants for your Houston property. Contact us today for a free analysis to learn more about how we can help.