GOING
FORWARD
AS A LANDLORD
IN SOUTHERN
CALIFORNIA
N
ew lease agreements fell substantially in April, with
tenants opting to sit on current leaseholds until the dust
from the COVID-19 pandemic begins to settle.
With millions of household incomes impacted by
COVID-19, the pandemic has out-of-work tenants across
the nation rallying for rental relief. Some tenants have made it clear
to landlords that they will not pay May rent regardless of Government
regulation on this issue.
Because interest rates are so low, investors with capacity are avidly
sourcing new rental investments amid pandemic markets. On the other
hand, many landlords are making the decision to dispose of rental
properties altogether, saving having to navigate the turmoil that lies
ahead.
NATIONAL RENT RELIEF
The effects of the pandemic have left millions with insufficient income
to pay basic living expenses. With quarantine requirements and
workplace closures putting much of the labor force out of work for the
foreseeable future, the collection of April rent has proven a challenge
for some landlords.
On average, 20 percent of the tenant
population is unable to pay rent on
time each month, according to a
National Multifamily Housing Council
survey of 13.4 million housing units.
According to the same survey, 31
percent of tenants were unable to pay
rent on time in the first week of April.
Some tenants in arrears have refused to leave, aware that removing
them will be difficult under the circumstances. Several states and
regions have already implemented eviction bans for the duration of the
pandemic.
For example, the City of Los Angeles has implemented a temporary
ban on the eviction of all tenants, both commercial and residential,
unable to pay due to circumstances surrounding the coronavirus.
Tenants will have 12 months following the end of the state of
emergency to repay any overdue rent. Los Angeles has also
implemented a temporary ban on evictions for certain other reasons
not directly related to COVID-19.
There has been mass rallying pushing the government to enact rental
relief on a national scale for at least the month of April. Rent strikes
have been organized throughout the United States where groups of
tenants have collectively withheld their rental payments and made
demands. This trend—originally coordinated by activists—has gained
traction in Los Angeles.
At this time, rent strikers are targeting loopholes in the eviction
legislation that enable landlords to evict for reasons other than
nonpayment, like remodeling or withdrawing the unit from the
rental market. Activists are pushing legislators to temporarily ban all
evictions regardless of the reason.
If further action is taken to stop rental payments completely, landlords
stand to lose a minimum of one month’s income on all rental units.
REAL ESTATE AS AN INVESTMENT
Most tenants believe that, for the investor, the risk of loss should be
with the property owner, not the property user. Some landlords tend to
disagree.
In situations where the COVID-19 pandemic has impacted a
commercial tenant’s ability to pay on an investment property, the
nature of the landlord-tenant and tenant-property relationships should
be assessed from a business-to-business standpoint. What are the
obligations of the lessor and the lessee?