Rent to Rent and Coronavirus – What if I can’t pay my landlord?

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Today we’re getting controversial.

That really gets people’s undergarments in a twist!

What to do if you can’t pay your landlord.

This is for those situations where you as a rent to renter are in the position where you can’t pay your landlords.

Before I go on here today, I want to refer you back to episode 13 where I talked about what to do if your tenants can’t pay. 

Coronavirus is causing havoc…

Huge companies are not paying their rent due to coronavirus.

Rent to rent companies will usually be small businesses and I’ve seen vicious exchanges on social media between people who say:

• Guaranteed rent should mean guaranteed rent

• And others who say well the government’s stopped me running my business this is not money I can get back.

Legally you have an obligation under your contract to pay guaranteed rent.

The same as tenants do, like we talked about in episode 13.

However, you can come to an agreement with your landlord.

People in Kickstarter have negotiated different arrangements such as a reduction in rent during lockdown.

If you saw the episode of Rent to Rent Real Talk featuring Maria.

Maria explained that her landlord agreed to a reduction in rent.

He was delighted that Maria had contacted him and that she continued to pay the reduced amount in lockdown.

So much so he sent her a thank you note afterwards.

Maria reflected that he is perhaps working with other companies which aren’t paying at all.

Now I want to talk about what impact coronavirus had on our business and what we did.

The 2 biggest risks were non-payment of rent and empty rooms.

Non-payment of rent

Thanks to government financial support including universal credit and furlough in particular, most tenants could pay their rent straight away. And a small number needed a rent payment plan to pay a lower amount initially and then make it up once universal credit payments came through.

In short, non-payment of rent hasn’t been an issue.

And even though it’s likely some people currently on furlough will lose their jobs, the changes to Universal Credit mean they’ll be able to claim and that will be able to cover rent payment.

Empty rooms

This is an issue for us.

Before lockdown we were about to move a tenant into our only empty room.

That move didn’t go ahead as the person was due to start a job which they never started!

And then lots of people handed in their notice to move home after being laid off, furloughed or told to work from home.

Over a few weeks our percentage of empty rooms, went from 0% to 20%.

This was very uncomfortable as we guarantee the rent because we know that we do the work. Then suddenly people aren’t able to move. 

We talked in episode 13 about lots of options to fill properties with key workers and people who need emergency housing but these options weren’t available to us with partially-tenanted houses mainly of young professionals.

So what did we do?

We made sure all our rooms were ready and that some were on Spareroom so we were ready when the lockdown eased and enquiries re-started.

We made sure our POETRY game was on point.

I explain that in episode 13

We looked at our figures and we forecast ahead.

We worked out that we could weather the storm for at least 6 months paying full rent with up to 30% voids. 

It’s also worth saying here that you should look at the government financial help and see whether it’s relevant to you.

You’ll see an overview of that in the show notes for episode 13.

It’s really important for us to come out of this knowing that we did the best for our landlords and our tenants and our business. 

It’s so easy to get drawn in to all the challenges.

But when we look ahead we can see each deal is 5 years so a few months blip is not a big deal.

And 20% voids we could work with for a short time.

However, not everyone has those cash reserves or is in that position.

Some rent to renters might have no rent coming in at all and have lost their job.

So it’s not a one size fits all.

Our advice is to create a win-win.

And talk your landlord.

Let’s move on to that now.

What to say when you can’t pay.

Communication with your landlords is very important. 

You’ve got to get the message right.

And I want to share with you the letter we sent to our landlords at the beginning of coronavirus.

This may come in useful if you have another issue which affects your ability to pay even if it’s not coronavirus.

We sent this because even though we could cope for a while, we didn’t know if something would be announced causing more people to hand in notice, or if lockdown would be extended.

What was in our email?

• Acknowledged that landlords would be concerned

• Reminded them that we have never missed or been late for a rent payment and it's our aim to be able to maintain that

• Signposted that there are threats to our business operation that are outside of our control and that we won't be able to operate our business in the normal way

• We pledged to stay in touch and let them know in advance of any issues and changes

The email was received well.

Over the years you have built up equity with your landlords:

• You’ve provided good service

• You've never missed a rent payment and 

• You’ve diligently managed their properties

And that means that when challenging times arise it's much easier to communicate with your landlords and they understand that these are unprecedented times and all sorts of unusual things are happening that nobody would have predicted. 

And they know that we are working hard to minimise any impact on our landlords. 

My aim is for all our landlords to think, I’m so glad I was with HMO Heaven.

So to summarise

• Assess your situation with a calm head

• Ensure you’ve applied for any government assistance applicable to you 

• Communicate with your landlords for a win-win

• Don’t lose sight of the big picture, you have 5 years

With everything you do, ensure you do things that if you look back in a year, you’ll be proud of.

And that might mean agreeing a rent reduction or agreeing to return a property.

But what’s important is that you communicate well and from an intention of win-win.

And…

we’ve also revised our contracts to provide us with more protection should a “new unprecedented crisis” occur. 

Our solicitor has added some new “corona clauses” so if anything like this happens again in the future and our ability to operate is impacted we can renegotiate the rent accordingly. 

You’ll find a link to more information about our contracts in the show notes for episode 12

Find out more about how these things work in practice by joining us live for Rent to Rent Real Talk.

These are our conversations with real people about the reality of running a rent to rent business.

We do these every Wednesday at 8pm in our Rent 2 Rent Success Secrets facebook group.  

Have you found this useful?

We’d be super appreciative if you could leave a review on apple podcasts. 

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And remember,

Believe Bigger, Be Bolder and Be a Gamechanger!

See you next week.

Stephanie & Nicky

xx

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