Tenant Stopped Paying Rent... Now What?

[Matthew Lee]

Hi everyone, could use your input and help!

I have been house hacking a duplex in Oakland the last year. Tenants moved in January 2022. First few months were fine, but some issues started coming up. They're on a subsidy program, like Section 8, that pays a portion of their rent ($2k of $2700). The tenant stopped paying their share in August. Since then, it's been a nightmare scenario. 

The total balance for unpaid rent portion is up to $4800. The lease ends January 31st, but the tenant has already said that they will stay past that date. Since the lease is ending, it will automatically go month to month. 

The last few months have been an endless chase of the subsidy program (Hamilton Families) and the tenants. My only contact for the program has been the lady in charge of placing the tenant, but she just refers me back to the finance person. All my calls, emails, texts to their finance team have been ignored. Any attempts to find someone else in the company end with a voicemail or email that never gets returned. Eventually, somebody from the San Francisco Cal Works program reached out and said that they will pay the outstanding tenant charges. They will discontinue support after February though. So, even if I get the $4800 back, there's still a possibility that the tenant stays and stops paying their rent, with no subsidy coming in to cover.

My Property Manager hasn't been helpful during this process. At this point, they're recommending that I offer to PAY $2k-$4k to the tenant to get them to leave.  Obviously this is a situation I would like to avoid...
Unfortunately, it seems like this is pretty typical for California / Oakland, and I know there are countless moratorium / laws that help protect the tenant in this situation.

I'm overwhelmed and not sure what options I have left. Has anyone else successfully navigated situations like this in California? Any advice or recommendations are welcome. 

[Nathan Gesner]

Quote from @Matthew Lee:

Your PM should be leading the charge on this and they definitely shouldn't have allowed it to go this long before taking action. Prepare to fire them.

Cash for keys is a method of rewarding bad behavior. I would rather spend money on a good eviction attorney than to buy off a bad Tenant.

Start looking for a new property manager. Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!