Rents may move up and down, but our commitment to your bottom line is unchanged.

An awareness of the needs of both owners and renters are the hallmarks of good property management and this balancing act has proven to be delicate in these challenging times.

Bay Property Group and Bornstein Law has always kept a pulse on rents, but never have we been so hyper-focused on the numbers than during the pandemic. With widespread unemployment and residents leaving the Bay Area for greener pastures, there is undoubtedly a downward pressure on rents.

There are other tenants not in dire straits and have been relatively insulated from the crisis. Perhaps they are working remotely with no interruption of income. Many of these savvy, well-to-do tenants who are not staring at the risk of displacement are nonetheless looking for deals in what has become a renter’s market.

We were intrigued to come across this article that says that the price of rent is increasingly up for negotiation because of the fallout of COVID-19. With the permission of our clients, Bay Property Group has made concessions on a case-by-case basis, but we are not giving away the store. We have to understand market forces, but we are not beholden to them — each situation is unique.

Our property managers cannot predict the future, but we can do the next best thing by providing a framework of how to structure conversations with tenants in light of the public health crisis.

Is the tenant paying the whole rent and asking for a rent reduction?

We understand that the value of a tenant who is religiously paying rent has just gone up. With a glut of rental housing inventory, the market has been tilted in the favor of renters.

We keep an open mind and seriously consider any requests for rent reductions, but will keep an eye on many factors. Some of the considerations include the value of the unit, the desirability of the tenant, legal options available to transition the tenant out if any, and just get a gut feeling if the tenancy is sustainable, or if a more suitable tenant could be found. Is there acrimony in the rental relationship? That is one of many questions to put a finger on.

Generally speaking, a premium should be placed on responsible tenants who are dutifully paying rent on time. When a rent reduction is asked for, you should at least consider the request and mull it over. The first rule of negotiation is to seek what the other party is looking for. If the current rent is unaffordable, what can the tenant afford? When there is a hard and fast number, you can digest it and determine whether or not it is reasonable.

Key word is reasonable. When a tenant is already in a rent-controlled jurisdiction and currently paying below-market rents, we are hard-pressed to come to the negotiating table. If a substantial reduction is asked by a tenant who has the low bar of paying a nominal amount of rent, we will likely not even entertain the request and politely, in the most humanistic way possible, tell the tenant the amount is equitable.

Is the tenant paying no rent?

We have found these cases to be far and few in between, but if you find yourself in the unfortunate circumstance of having a tenant who is not paying any rent, there are limited options.

Although lawmakers and Governor Newsom have inked the COVID-19 Tenant Relief Act of 2020, a law that has begun to open up the court system for non-payment of rent cases, this can be a protracted process, especially when the tenant asserts a hardship and returns a declaration to the landlord. We discuss the newfangled law in our next post.

Keep in mind, as an inefficient court system scrambles with staffing issues and faces a huge backlog of cases, landlords should be realistic and not expect non-payment of rent cases to be aired out anytime soon. The Sheriffs have been lethargic, as well.

We have no easy solution, except to say that the relationships we have built with tenants matter, and we have leveraged some of this personal capital to work out agreements with residents who have experienced a shortfall in income. On a positive note, most of the tenants who are short of rent are down but not out. By and large, distressed tenants are very engaged, openly communicating with us, and attempting to fulfill their obligations in a payment arrangement.

We would be remiss not to mention tenant buyouts

If a tenant is chronically late on rent during the pandemic and they remain unemployed after emergency orders are lifted, you might consider a tenant surrender of possession of agreement. This is an understanding that the tenant voluntarily vacates the premises in exchange for compensation, a rent waiver, or both. However painful it may be to part with money, tenant buyouts are one of the few vehicles left to transition out residents in the age of COVID.

We know that other things being equal, we would rather have a vacant unit than one occupied by a tenant who is bereft of income and cannot pay rent. There are several benefits to a voluntary buyout, including the ability of the owner to reset the rent to market rate, eliminating any residue from claims that arise from the tenancy, and increasing the value of your rental property. There are some potential pitfalls and challenges, as our broker of record, Daniel Bornstein, explains in this webinar.

A word about roommate arrangements

Clearly, with the high costs of living in the Bay area, some tenants need roommates to chip in. Yet some roommates have fled, leaving others to hold the bag. Bay Property Group recognizes the hardship placed on residents who remain in the unit as their roommates seek greener pastures, and we take a balanced approach when roommates abscond.

When tenants fly the coop, Bay Property Group seeks a forbearance agreement as remaining tenants look for new roommates to pick up the slack. We use a combination of carrots and sticks to incentivize residents to find roommates, sometimes discussing forgiveness or favorable repayment terms once a new roommate arrives.

Is a unit vacant?

We understand that now is not the ideal time to find new tenants, but when a vacancy arises, we continue to aggressively market the apartment listing and conduct virtual tours. In every season, we put a finger on what comparable units are renting for and this has not changed. As we said earlier, every rental is unique and we do not have any blanket policy of slashing rents. Indeed, some units are renting at a premium if there is home office space and backyards, both amenities in high demand now.

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As we all deal with new realities, the fundamentals of the landlording business have not changed. We remain steadfast in achieving the goal of optimizing your investment while improving the living experience of residences and complying with myriad regulations.

The pandemic has engendered many questions. We may not have all the answers, but in partnership with Bornstein Law, can provide informed guidance and serve as a sounding board on how to survive and thrive in these most bizarre of times.