Tenants these days are experiencing uncertain times, whether they’re in the residential or commercial space. With limited funds and an uncertain future, it’s easy to dream up visions of landlords with an angel on one shoulder and a demon on the other—one side telling them to continue collecting rent like normal and the other encouraging them to give renters a break.
As we all know, there’s not an “evil” mindset behind every bill. Let’s take a look at commercial property rent collection from the perspective of tenants and landlords during the pandemic to find the right balance. (Plus, how much faith, if any, can we put in government lifelines?)
Times are tough for the commercial tenant. Unemployment skyrocketed in the United States to 14.7 percent in April and traffic for restaurants, retail spaces and other commercial properties has dropped off significantly as people are ordered to stay home or practice social distancing. The tenant may not have consistent income or may have even been forced to furlough employees.
How are you supposed to pay rent if you have nothing to pay it with? Government aid has helped (more on that later), but tenants right now often feel stuck between a rock and a hard place. Any sort of relief, whether it’s a waiver of late fees or an alternate payment plan, is welcome. The tenant has the least leverage among the groups discussed here.
Landlords are also in a tough situation. They also have bills to pay and employees to consider. During these times, it’s important to remember that building and maintaining good relationships with tenants is one of your biggest priorities. Can you evict a tenant or continue to collect normal rent? Maybe. But is it in your best long-term interest? It has the potential to damage your reputation. Even if you evict a tenant, it may be difficult to fill that vacancy during this time. Here are a few ideas for you to consider that benefit both you and your tenants:
– Communicate. Keep communication lines open with tenants and keep them informed. There are few things more frustrating than a lack of information.
– Verify. If allowed by your local laws and regulations, verify a tenant’s income loss to ensure you are being flexible with those that really need it. Offering relief to a tenant that hasn’t been affected will only hurt your finances.
– Adjust. Consider deferring, reducing or adjusting the timeline for rent payments. Any sort of rent collection is better than no rent collection! Make sure these follow local guidelines as well, as they can vary from city to city.
– Reach out. Both the government and your lender are opportunities to seek relief, which you can pass on to the tenant. The former can potentially provide a loan while the latter has the power to adjust payment or interest rates.
– Be proactive. Get some relief for your payments and try to fill vacancies by pursuing digital marketing activities and offering better incentives for new tenants. While times are tough for many industries, others are doing just fine (or even better than usual).
– Upgrade. We’re talking about your marketing stack here. While it may seem counter-intuitive to make investments at this time, a small one that can tremendously improve your long-term outlook is CRE software. Solutions like Quarem can help you better keep track of any adjustments you’re making to rent, review reports of how your numbers are changing and make better business decisions based on market trends.
Finally, many governmental bodies are having their say in the rent collection argument, with states like New York enacting a moratorium on evicting tenants for both residential and commercial properties and cities like Philadelphia implementing emergency rental assistance programs. Furthermore, recent stimulus packages from the federal government have put some money in many tenants’ pockets.
Both parties can’t place total faith in future assistance, however, as these can quickly change or be eliminated. There are lots of changes these days, which is why communication between the tenant and landlord (and consideration of each other’s perspective) is of utmost importance. To maintain the right balance, it might be wise to handle each renting situation on a case-by-case basis.
If you’re interested in seeing how commercial real estate software can help with your rent and other aspects of lease management, request a demo today.
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