With the new payment plan requirements in effect for Washington D.C. as a result of the COVID-19 pandemic, you may be wondering how to approach this issue with your renters if you operate a multi-family property.
While you might be able to delay some things like regular property inspections, other aspects of owning rental property must go on to address overhead. Even if you own a single-family property, it's likely that you don't operate without costs.
Rent collection must still take place every month. However, we know as an expert in D.C. community association management that landlords and investors now have to contend with these unique requirements if their properties house five or more units.
In some ways, this move by the D.C. Council is understandable: a crisis like COVID-19 hit our economy hard, even in the Capital—and it has left many renters out of work. Yet property owners must still pay the mortgage and other expenses involved with owning investment properties if they do not fall under the protections of the CARES Act.
Before you misstep and demand lump-sum payments from struggling tenants, consider the merits of the new, required payment plans. A well-structured payment plan can help you keep rental payments coming in while offering a compassionate option for your renters during the continued shutdowns.
As a note: This post is not a substitute for proper legal counsel. When in doubt, it's best to reach out to your D.C. community association management partner or obtain guidance from a skilled attorney.
You're Within Your Rights to Collect
Contrary to popular opinion, property investors are not only 'allowed' to continue collecting rent during a crisis. As a D.C. community association management provider, we highly recommended that you encourage your tenants to follow their lease agreements that detail the rules about their rental payments.
As difficult as it might be for some tenants to keep up with rental payments, a financial crisis or change in the economy doesn't change that the rent is still due. When your tenants agree to a monthly lease, they agree to pay the rent on time every month. While a universal economic meltdown of this magnitude is out of everyone's control, renters in your building still need to find a way to meet the requirements of their lease.
However, an empathetic approach to payment reminders coupled with the right payment plan (as needed) can encourage your renters to prioritize their payments. A payment plan allows you to affirm your tenant's financial challenges due to the impact of the economy on their job while making sure you receive rental income every month.
That said, you are not required to hand out a payment plan to every renter, even though you are required to notify them of the option. The legislative update from the D.C. Council to their previous COVID-19 emergency bill allows landlords to request that their renters demonstrate a direct or indirect financial difficulty as a result of the pandemic.
Set the Rules Case By Case
As we noted before, even with a widespread financial crisis, not all of your tenants may need the same kind of help. You are required to give notice to all of your renters about the payment plan availability and outline how they may apply—but not every renter in your building will qualify.
That said, as you reach out to tenants who have found themselves behind on their payments, find out more about their financial situation. You are allowed to request evidence that supports a demonstrable financial need on the part of your tenants. This will also make it easier to craft a payment plan within the new guidelines imposed by the D.C. Council when you are working with your residents.
How Much Can Your Tenant Afford To Pay?
Even with the emergency legislation now in play for landlords, your renters still have to pay some amount towards their past-due rent.
While receiving some of what you are owed is better than not receiving anything at all, we would like to stress again as a professional in D.C. community association management that you cannot demand lump-sum payments from your renters during this time. Your payment plan can span an entire year after the crisis requirements are lifted, so take this into account when plotting your course.
How Much Can You Afford?
Property owners in D.C. must also be able to pay the expenses demanded by rental property ownership, even when considering the needs of their renters. While foreclosure prevention is currently being considered in future legislation at the time of this article's posting, little protection currently exists for property owners outside of the CARES Act.
Be sure you can afford the terms of whatever plan you draft while still staying within the new guidelines.
Let an Expert Be Your Guide
It can be challenging to know how to help your renters while managing your own finances during a financial crisis brought on by a disaster of COVID-19's scope. Let EJF Real Estate Services be your guide: we've been serving the Washington D.C. community for over 25 years, and we have the experience you need to navigate this issue head-on.
Learn more about how we handle tough financial times while protecting your real estate investment income by getting in touch with us! We also recommend that solo landlords use some of the immediate insight provided by our Collecting Rent in a Crisis Handbook. You can download your own copy for free, whether you own a multi-family property or single-family home.