Last week, we discussed leasing your home during the COVID-19 crisis.
This week, let’s switch gears and discuss an equally important component of successful property management: renewing the Lease.
Keeping a Tenant in place, especially in this unstable environment, is a very good thing. We’ve always taught that vacancy is a cashflow killer.
Below are a few basic points to consider when renewing a lease during the COVID-19 crisis. In a lot of ways, we will continue to operate in the same manner, but there is one big change along with some trends that you need to understand:
- Both Parties Must Agree to Renew. As is always the case, both Parties (our Client and the Tenant) need to agree to renew. Generally speaking, and this is certainly subject to change, we’re seeing more Tenants who want to renew since the outbreak of COVID-19. That’s certainly understandable. The thought of moving in this environment is a daunting task for most people.
But, some people need or have to move, so we’re still receiving some notices to vacate.
- Prepare a Comparative Market Analysis. We will continue to provide Clients with a comparative market analysis (CMA) of their property. It’s too early to tell if this crisis has had any impact on rent rates.If you read our last blog, we currently aren’t experiencing any significant slow down in our leasing activity, so demand is still there. What will happen to rents and the overall housing market – long term – is still very much up in the air.
Our fiduciary responsibility to our Clients is to ascertain the current, fair-market rent for the property and get as close to that number as possible. We will continue to operate under that premise.
- Walk-Thrus are Suspended. We’ve always coupled our annual walk-thru with the renewal process. As we’ve discussed in previous correspondence and, due to obvious reasons, we are no longer conducting renewal walk-thrus.
So, as you can see, other than eliminating the walk-thru, not a lot has changed with the actual renewal process.
However, here are a few things to keep in mind while renewing your Lease during this crisis…
- Holdovers. We have heard from several Tenants toward the end of last month who needed additional time to move. In these cases, we will process a simple Lease Extension and notify our Client of the new date to vacate. Obviously, the Tenants are responsible for rent during the days they occupy the property.
- Owner Recommended Month-to-Month Renewal. This is a key point to consider. As you may know, evictions for non-payment of rent are off the board in Indiana until at least May 5th. For those homes with federally backed mortgages, evictions are halted until the end of July.So, if you have a Tenant who is behind on rent, or has had a bad payment history, it might not make sense to enter into a 12-month Lease. In this case, converting to a month-to-month scenario might be a better alternative.
Be aware that, even if you give a Tenant a legitimate notice to vacate, and they fail to vacate, you still can’t evict.
Our current process is to review month-to-month Leases every three months and make adjustments as needed. If we’re satisfied that the Tenant is stable, we can enter into a long-term Lease at that point.
- Tenant Requested Month-to-Month Renewal. We’re receiving many requests from Tenants to move to a month-to-month status at the conclusion of their Lease term. The reasons vary:
- They are unsure about the status of their job.
- They may want to eventually move but aren’t interested in moving during the pandemic.
In these cases, we will allow Tenants to convert to a month-to-month Lease at their current rent rate. Again, we’ll evaluate month-to-month Leases every three months and make adjustments as needed.
Since there’s no perfect way to predict what will happen, these processes could be fluid in nature. There’s no road map for Property Managers when dealing with a pandemic.
However, we feel these processes act in the best interests of our Owner Clients while being fair and flexible with our Tenants.