How to Avoid Costly Evictions with Rent Payment Plans

With the additional $600 in unemployment insurance payments provided by the CARES Act having expired on July 31, many renters across America are at a precipice. Millions of Americans are experiencing job loss, reduced hours, and reduced income due to the economic effects of COVID-19. Thus far, Senate Republicans have proposed a narrow pandemic relief bill that would issue extra unemployment benefits at half the original rate, but negotiations have stalled.

According to a the Census Bureau’s Household Pulse Survey (HPS), a weekly survey sent by text and email that asks about participants’ ability to make housing payments during the pandemic, an estimated 27 percent of adults in the U.S. missed their rent or mortgage payment for July. And among renters alone, just over one-third (34 percent) said that during the last days of July they had little to no confidence that they could make their August rent payment.

Nonpayment of rents can lead to evictions. However, at this time, the process of eviction can be complicated with the enactment of various federal, state, and local rental protections. Although the federal eviction moratorium designated by the CARES Act expired on July 24, state and local eviction moratoriums may remain in place along with restrictions on late fees and penalties related to the nonpayment of rent.

Under the circumstances, your site may be experiencing a decline in rents since lower-income households are having the most difficulty making monthly housing payments. With many residents possibly limited in their ability to pay rent, many owners are working with residents to create payment plans. In doing so, owners may be able to avoid high eviction costs, which include legal fees and unit turnover costs, and may be able to rely on more consistent and predictable rent revenue during this pandemic. We’ll discuss how to engage residents to avoid evictions and give you the important elements to include in a rent payment plan.

Engage At-Risk Residents

Sometimes a resident won’t wait until the rent is due to let you know that she’ll have trouble paying rent. Other times, however, a resident will fall into arrears and then either ask for more time or avoid communications altogether. Due to the economic fallout of the COVID-19 pandemic, you should be targeting engagement to at-risk residents. Being proactive to engage your residents will improve retention and rent repayment.

Identify how many and which households are behind on rent rather than making general announcements about assistance. A general announcement may entice residents who are able to pay rent in full to seek a deferral or reduction of future rent payments.

When you communicate with this targeted group of households, make sure they understand that rent payments are expected during any moratorium. Some households mistakenly believe that they don’t need to pay rent during a federal, state, or locally imposed eviction moratorium.

Communications with the target group households should also convey information about available safety net benefits with rent reminder notices. During one-on-one communications with households, you can discuss benefit options that may be available to them such as unemployment benefits, future or pending stimulus payments, and any local rent assistance resources.

Gather Information and Be Realistic

A rent repayment plan should be used to help a household catch up with their arrears or help manage their new financial circumstance. As you communicate with households, you need to assess the situation carefully. Payment plans don’t always work, especially if they’re unrealistic. By gathering enough information, you can determine whether a repayment plan is achievable or suitable.

Before offering a payment plan, you should discuss details concerning when and where the resident plans on getting their money from. Ask: How long do you think your income will stay at the level it is now? Have you applied for unemployment or any other assistance? How many months do you think the repayment plan needs to be in order to help you catch up? These are all valid questions you should ask at-risk residents.

In addition to information obtained through one-on-communications, you might want to ask residents to document their need for assistance. Some examples of documentation might include:

• Healthcare professional’s note that tenant was unable to work due to illness (or dependent required care);
• Termination or furlough notice;
• Pay stubs reflecting reduced hours;
• Bank statement reflecting reduced income; and
• Signed letters from employer or bank.

Based on the information gathered, you can make a decision on the scope of a payment plan and whether the resident will be able to honor it.

Document the Repayment Plan

Once you come up with realistic terms for a repayment plan, be sure to have the agreement recorded in a clear manner. You can adapt our Model Agreement: COVID-19 Payment Plan Agreement, below, for use at your site. Here are the key elements of a repayment plan:

• The delinquent rent payments (if any) and future rent payments (if any) included in the repayment amount;
• The total amount subject to repayment;
• A payment schedule, with the due date and amount of each payment, agreed to by the resident;
• An indication of whether these payments include or exclude future rent;
• Acknowledgement that all other provisions of the original lease remain in force;
• An agreement by the owner not to commence eviction based on nonpayment or submit any negative information to credit reporting agencies if payments are made as scheduled;
• The tenant’s acknowledgement of the consequences of one or more late payments, such as all unpaid rent becomes due immediately, the owner may initiate eviction and reclaim possession of the premises, and the owner may pursue other remedies to obtain unpaid funds;
• The tenant’s acknowledgement of other conditions voiding the repayment plan (such as other lease violations, moving out, or subleasing the unit);
• A description of conditions that terminate the repayment agreement (such as full payment, a set end date, or another event, such as the end of an emergency order or the tenant returning to work); and
• Space for the signatures of the owner or site manager and all tenants listed on the lease.