Rent crisis has only just begun – What to expect in upcoming months.
February 18, 2021
While increasing legislation has helped tenants through this pandemic, landlords are left to sit and wonder why almost nothing has been done to help them.
Commercial landlords have had to be especially patient. For many of their tenants, its been over six months since they have been able to earn an income. Others have the money but are taking advantage.
The latest eviction moratorium for commercial tenants gives many companies an excuse not to pay their rent. Landlords are left to face the burden. They need to find another way to collect or face potentially losing property.
Eviction Moratorium Extended
Governor Cuomo recently extended the eviction moratorium for commercial tenants until at least 2021.[1] This is the fourth time the New York governor has extended the moratorium since the virus first hit New York in March.
“We are going to extend the commercial eviction and foreclosure moratorium through Jan. 1. That will now align with our residential eviction and moratorium rule so they are both extended to Jan. 1,” Cuomo said during a recent press call.[2]
The moratorium is meant to give these tenants time to catch up on late payments or potentially renegotiate their deals. Without the threat of eviction, landlords have been put in a tight spot.
Past rental debts are a major problem, but are only half the issue. The upcoming winter months have many experts worried about an increase in Covid-19 cases. The fear of future closings due to Coronavirus would further hurt landlords and commercial tenants alike.
It would not be surprising if another closing were to occur, landlords were to push their tenants to stay open.
The majority of landlords have been patient with their commercial tenants, understanding the difficult situation. To cope, many landlords have renegotiated their deals with commercial tenants.
Some commercial tenants have suggested rents linked to revenue. In the event of future closings due to Covid-19, tenants want lower leases they can afford.
Many landlords have worked out rent abatements or deferrals to cope with the difficult times.
Negotiations between landlords and commercial tenants have been tough. The future is so uncertain that many don’t want to make a deal.
No matter what deal is made, there will always be commercial tenants who can afford their rent but use the pandemic as an excuse to live rent-free. Small business owner, Roni von Henschen says, “I know people who aren’t paying even though they can afford it. I don’t know why. Maybe they figure they can live month after month for free since evictions are banned.”[3]
What This Means for Landlords
Eight months since the pandemic hit New York, it is still a struggle for landlords to collect their rent. A survey of the Community Housing Improvement Program (CHIP) revealed that 16.41 percent of residential tenants paid no rent by the middle of October.
The overall drain of this pandemic has had its toll on landlords. Many have made negotiations with their commercial tenants, but still many will have to delay their own bills and may even lose property.
Many landlords fear that the pandemic is only the beginning of their problems. New York City landlords fear property values will continue to decrease immensely. The pandemic is not only hurting landlords now, but for the long-haul.
There is no sympathy for the landlord, either. For many, the landlord is seen as vicious monster who takes their money. In actuality, most landlords just want to put food on their family’s table.
One D.C. real estate investor who requested anonymity to avoid backlash from tenants explained that “It just feels like, ‘Suck it up. Figure it out.’ I don’t think they recognize that landlords have to eat, too.”
The majority of landlords are mom and pop operators who rely on rent payments to pay their own bills. These are people with mortgages and families. Yet, many still see them as the enemy when they come to collect their rightful money.
Many experts wonder if this is the end of the small landlord. This will not only hurt them, but also real estate at large. The majority of small landlords own smaller, cheaper properties. If the small landlord becomes extinct, experts worry that Corporate investors will swoop in, renovate these properties and raise tents. This will leave smaller businesses without an affordable space.
“We are in the eighth month of depressed rent collection and tens of thousands of people have fled the city leaving apartments vacant. While some owners can sustain this type of hit, more than one in ten cannot—and that is a crisis for affordable housing in New York,” said Jay Martin, executive director of CHIP.[4]
Help Isn’t Coming
New legislation has been passed left and right since march. PPP loans for businesses, eviction bans for tenants; yet, none has been passed to help the also-struggling landlord.
Property owners need help now or they will face property losses. Without help from the government, more than 15 percent of respondents say they do not think they’ll be able to make property tax or water and sewer payments in January.[5]
Landlords must seek outside recourse or face property loss. Jonathan Abenson of Oxygen Recovery Group believes that “the squeaky wheel gets the grease and with leveraging a collection agency to assist with rental collections, it can significantly increase arrears collected.”
Collection agencies and landlords have gone together like peanut butter and jelly throughout this pandemic. It is essential that landlords choose a collection agency that has deep industry knowledge and experience with rental debts. An experienced collection agency will use industry knowledge and analytics to determine the best way to collect debt.
Landlords have had a tough run through this pandemic, like everybody else. But unlike everybody else, landlords have had no support from the government. The government has made it clear they are not looking after the interests of landlords. It is time for landlords to look towards outside recourse to collect the debt they deserve.
[4] https://rew-online.com/one-in-ten-nyc-landlords-on-brink-of-default-says-chip/
[5] https://rew-online.com/one-in-ten-nyc-landlords-on-brink-of-default-says-chip/