Tenants not paying rent and applied for Covid Rental Assistance

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Tenants not paying rent and applied for Covid Rental Assistance

Cathy S.
Rental Property Investor · San Diego, CA · Member since 2020 · 44 posts · 33 votes

Not sure if anyone has any advice on this situation / is in a similar one.

I have inherited tenants and they were great about paying rent since I got my property. They paid on time for about 4 months. Then they told me on the first of this month that one of them was in between jobs for a bit during Covid, and so they wanted to apply to the Covid rental assistance program for the city of San Diego

Essentially this Covid rental assistance program provides 80% of the past due rent and directly deposits it to me if their application is approved and I sign off on it. I would have to sign and say I am willing to forfeit the remaining 20%. However the tenants said that if / when approved, they would cover the remaining amount.

I called the city and they said they’re super backed up - it’ll take them maybe 2-3 months to review the application. This whole situation seems a bit weird. I have no proof but I feel like they are trying to tap into the “free money” from the government. Their lease ended end of April and they resigned a 1 year lease for May. They also started this application in April (I got notified), so they had been planning this for at least 2 months.

What does everyone think I do about this? There’s actually nothing I can do until the city reviews the application. This could drag onto September.

Thanks for reading!

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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
5y

Due to the current county rules passed by the board of supervisors (No. 101724), I think you have few options:

  • accept 80% rental assistance (and maybe get the extra 20% from the tenant)
  • Hold out for full rent, but possibly/probably collect nothing.

What you cannot do at this time is evict the tenant for non payment.

I would accept the 80% rental assistance and hope the tenant makes good on their offer to pay the 20% shortage. If they choose not to, there is nothing you can legally do as you agreed to accept 80% as payment in full.

The people who make the rules that comprise the rental assistance do not understand how poor the cash flow is on most San Diego units. Most San Diego units do not have positive cash flow of 20% of the rent (they may have negative cash flow of 20% of the rent).  80% of rent results in many LL losing money on their rental.  

Good luck

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  • Raquel David
    New to Real Estate · San Diego, CA · Member since 2020 · 6 posts · 7 votes
    5y

    Hi Cathy! I'm new to REI and am also from San Diego. I had a similar situation with an inherited tenant that claimed Covid hardship but never applied for rental assistance. Thankfully she was only around for 2 months, but that was 2 months of no rent. I don't have much advice for you but I'm following your post to see what other people reply with. Wishing you all the luck!

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y

    Due to the current county rules passed by the board of supervisors (No. 101724), I think you have few options:

    • accept 80% rental assistance (and maybe get the extra 20% from the tenant)
    • Hold out for full rent, but possibly/probably collect nothing.

    What you cannot do at this time is evict the tenant for non payment.

    I would accept the 80% rental assistance and hope the tenant makes good on their offer to pay the 20% shortage. If they choose not to, there is nothing you can legally do as you agreed to accept 80% as payment in full.

    The people who make the rules that comprise the rental assistance do not understand how poor the cash flow is on most San Diego units. Most San Diego units do not have positive cash flow of 20% of the rent (they may have negative cash flow of 20% of the rent).  80% of rent results in many LL losing money on their rental.  

    Good luck

    5Reply
  • Pam Schuster
    Investor · San Diego, CA · Member since 2014 · 36 posts · 13 votes
    5y

    I agree with Dan.  One lawyer I know calls this situation a governmental assault on landlords.  I feel totally taken advantage of by one of my tenants'.  I would take the 80% and be thankful that on paper your assets are appreciating.

    3Reply
  • Jane Schoensee
    Member since 2021 · 7 posts · 7 votes
    5y

    I had a nurse move into my duplex upstairs from where I live in Milwaukee. She paid two months and then started making excuses for not paying the rent. This was very difficult. There was an eviction moratorium then. There was no smoking in the lease. She started smoking in the building. She was a terror. She left the house with the bathtub running. I got a lawyer. I threatened eviction based on the smoking. She left within 6 weeks without being evicted but after receiving a letter of intent from my lawyer and notice of eviction. It was frustrating but I learned some valuable lessons. Never skip the credit report ever. It is cheaper to have no tenant than to have a bad one. Very expensive.

    4Reply
  • Jill F.
    Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
    5y

    In my county, in December the aid administrators ran out of funding and only half of our tenants that applied for aid were were funded. Then before the next batch of aid, they added criteria that said having an eviction filed here made you a priority for funding-- This really irritated me because they always complain about landlords filing evictions and not working with tenants-- so what do they do? they reward those landlords and pay them first (grrr). I told all my tenants that were waiting on aid that they could pay me their stimulus check as an extra security deposit to avoid an eviction filing bump to the front of the line and then if they did get their application funded we'd credit the stimulus deposit to their future rent and if they didn't get funded, at least they'd be way more likely to be able to catch up. It provided us some insurance against loss and our tenants were able to avoid a damaging eviction filing and to also have some cushion if they weren't funded. I don't believe this plan  violated either the letter or the spirit of the law and it worked out pretty well. (In Ohio, there is no limit on security deposit funds that a landlord can require, you just have to pay 5% interest on deposits greater than one month's rent held longer than 6 months)

    We also had tenants that applied send us a copy of their application receipt with their application ID so we could ask for status on the applications on their behalf.

    2Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y
    Originally posted by @Jane Schoensee:

    I had a nurse move into my duplex upstairs from where I live in Milwaukee. She paid two months and then started making excuses for not paying the rent. This was very difficult. There was an eviction moratorium then. There was no smoking in the lease. She started smoking in the building. She was a terror. She left the house with the bathtub running. I got a lawyer. I threatened eviction based on the smoking. She left within 6 weeks without being evicted but after receiving a letter of intent from my lawyer and notice of eviction. It was frustrating but I learned some valuable lessons. Never skip the credit report ever. It is cheaper to have no tenant than to have a bad one. Very expensive.

     Currently in San Diego you cannot evict for lease violations unless it is a health or safety issue.  Lease indicates it is a Non-smoking unit, tenant can smoke and not be evicted.  Lease states no pets, tenant can have a virtual zoo and not be evicted.  Lease indicates no sublease or additional tenants, tenant can invite whoever they want and cannot be evicted. They can cause damage to the unit and you cannot evict them. 

    I suspect San Diego currently has the most ones onerous eviction regulations in the entire country.

    When these policies expire, the additional risk associated with these regulations will be reflected in my rents.  I am thinking $150 to $450 rent increases (on the multi family units, Ca constrains rent increase to 10% (5% + CPI), but virtually all our rents are above $1500, so $150 will be legal increase).   Rents reflects both risks and return.  The risks have never been higher in San Diego so it makes sense that the rents should increase similar to the increased risk.  We just sent 3 rent increases (for Sept 1, two months notice is required) for $300/month or more.  It may result in some complaint, but the increased rent reflects increased risk to the LL.

    MANY/Most politicians do not understand the economic consequences of their actions.  

    Ironically I am on record indicating we would not evict any tenant that could not pay due to Covid.  What I am offended by is the extent of protections the board or supervisors gave the tenants at the expense of LL and property rights.  

    Tenants will end up paying for these policies.  It is unfortunate for both the tenants and the LL (it was a stupid regulation, it mostly benefitted people who were breaking the lease).

    0Reply
  • Jane Schoensee
    Member since 2021 · 7 posts · 7 votes
    5y

    @Dan Heuschele. Like my smoking non paying tenant, reality, and your response are unbelievable to me. My lawyer said if we made it to court the judge would very likely rule in her favor. Landlords beware and be wary. Keep talking, keep looking for input. I was too angry to admit defeat. Now I have a tenant that is serious and hardworking. All you need is one good tenant for one unit. I am hoping that business people take over the government in most places especially CA. @realmeetkevin is running for governor in CA with policies that would make any state thrive.

    2Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y
    Originally posted by @Jane Schoensee:

    @Dan Heuschele. Like my smoking non paying tenant, reality, and your response are unbelievable to me. My lawyer said if we made it to court the judge would very likely rule in her favor. Landlords beware and be wary. Keep talking, keep looking for input. I was too angry to admit defeat. Now I have a tenant that is serious and hardworking. All you need is one good tenant for one unit. I am hoping that business people take over the government in most places especially CA. @realmeetkevin is running for governor in CA with policies that would make any state thrive.

    Why do you think Kevin is a business person?   He is a career politician.  Started in politics at SDSU while in college.  Has virtually zero business experience.

    I am so against this recall election of a candidate that won by 25 points (biggest victory margin for non incumbent Ca governor since 1930) and approval rating over 50%.   

    The recall election is a waste of $215m.  

    In addition, Newsom is moderate compared to the 3 board of Supervisors that voted for the eviction ban.  His rent control increase is CPI + 5%.  Prior to the increased risk resulting from the eviction ban, we never raised the rents 10% in a year for a tenant that we were not trying to get rid of.

    The supervisor from my district voted against the ban.  I wish I could vote against the supervisors that voted for the county eviction ban, but I am glad our representative voted against the ban.  

    0Reply
  • Kenneth Donaghy
    Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes
    5y

    I do know evictions are happening in San Diego, although the system is extremely backed up. Once an eviction is granted, the said Sheriff they will do it, just don't know when because they have some many to get to.  

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y
    Originally posted by @Kenneth Donaghy:

    I do know evictions are happening in San Diego, although the system is extremely backed up. Once an eviction is granted, the said Sheriff they will do it, just don't know when because they have some many to get to.  

    in San Diego county, Board of Supervisors reg No. 101724 should be in effect for another 58 days.  The only evictions currently allowed are for health and safety.  You cannot evict to move in to the unit, to rehab the unit, for non-payment, or for lease violations that are not health and safety related.

    I suspect there are no evictions occurring in San Diego since the start of 101724 in early June (passed in early May).

    Hopefully in less than 60 days the LL get their rights restored.  The LLs should recognize the new identified risks associated with COVID and set rents appropriately.  I know many of our tenants will be getting rent increases larger than what we historically have done.
     

     

    0Reply
  • Kenneth Donaghy
    Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes
    5y

    @Dan H. Have you try to actually evict? I have a client awarded an eviction based on no-payment, and waiting for the Sheriff to execute. Second I wrote an offer on a listing where the tenants were just evicted. 

    1Reply
  • Lynnette E.
    Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    Make sure that you do not sign anything that states you are forgiving or not collecting the 20% from the tenants.  There may be a requirement that you do not collect it. IF so, collecting it may be considered fraud.  Also make sure you do not sign anything saying you will not evict them...for any reason!

    Also consider how long you are willing to give them free rent in the hope that they and you will get some of the rent relief money.  SD may be out of that money very fast!  What happens if you wait 3-4 months to find out you will not get the 80%, and they will never catch up with the rent.  If they can not afford the unit or will not afford the unit, do you want to keep playing this game with them?

    Also, think long and hard, are these tenants you want to keep?   What is desirable about them?  Maybe it is better to be at the front of the court line than the end.  The longer you wait, the more rent you lose.

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    5y
    Originally posted by @Kenneth Donaghy:

    @Dan H. Have you try to actually evict? I have a client awarded an eviction based on no-payment, and waiting for the Sheriff to execute. Second I wrote an offer on a listing where the tenants were just evicted. 

    >waiting for the Sheriff to execute.

    I do not believe the sheriff will execute.  I believe any eviction for anything other than health and safety in San Diego county would be in clear violation of the regulation. 


    >I wrote an offer on a listing where the tenants were just evicted.

    "Just" meaning since the Board of supervisors regulation went into affect early this month (I think it was June 6, but I may be off by a little)?  I suspect they got the eviction completed before the regulation went into effect.  Evictions are currently illegal except for health and safety reasons county wide.  Read reg No. 101724 and see if you can find any other legal criteria for an eviction other than health and safety (I have only read it once in part because it caused my blood to boil).  Recognize the board of supervisors regulation takes precedence over local city regulations (i.e. if Poway allows evictions, but the county does not, then evictions are not allowed in Poway).

    My view is that the regulation is fairly clear that all evictions except for relating to health and safety are banned county wide.  If you read the regulation and have a different interpretation, let me know.  Also let me know if the sheriff actually evicts the tenant.  My belief is the tenant will get an additional ~58 days before they can be legally evicted.

    Good luck



      

    1Reply
  • Ahmed Megahed
    Member since 2021 · 66 posts · 8 votes
    5y

    Did you figure it out

    0Reply
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