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My Tenant Can’t Pay Rent: What Should I Do?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act that Congress passed in March contained several different initiatives designed to help Americans cope with the economic consequences of the COVID-19 pandemic. This includes several programs which may provide financial help for landlords whose tenants can’t pay rent as a result of job loss. 

We’ve provided answers to some of the most common legal questions landlords may have about the economic impacts caused by the global health crisis. 


Rent Payment Plan

Outline the terms of deferred rent payments.


Can I evict a tenant during shelter-in-place?

Traditionally, if a tenant fails to pay the rent on time, landlords are entitled to serve an Eviction Notice and move forward legally with the eviction process. However, some states and local municipalities are issuing moratoriums on evictions. Thus, many landlords are looking for alternative ways to collect rent payments in order to meet their own financial obligations.

It is worth noting, however, that the eviction moratoriums typically do not forgive the tenants’ financial responsibilities, but rather push back the due date for the amount owed. Landlords should keep this in mind when entering into any alternative agreements with their tenants. 

What is a Rent Payment Plan?

If your tenant has recently become unemployed or furloughed due to COVID-19, they may find themselves unable to pay rent on the first of the month. In order to avoid losing rental income altogether, you can opt to offer a deferral on rent payments. A Rent Payment Plan outlines the terms of deferred rent payments and allows you to define if the tenant will receive a discount in exchange for performing yard work or repairs.

What is a Late Rent Payment Agreement?

Another alternative for collecting overdue rent is a Late Rent Payment Agreement, which allows you to set a deadline for payment by the tenant. The Late Rent Payment Agreement sets guidelines for repayment and defines the grounds for eviction, such as if the tenant fails to pay the owed rent as outlined in the agreement. 

What is a Barter Agreement?

If a tenant is unable to make monetary payments due to unemployment or a loss of income, a Barter Agreement might be an option. A Barter Agreement serves as a contract spelling out what each party is providing in an exchange of goods or services. In the case of a landlord, housing is being provided. In the case of the tenant, it specifies what they will provide in lieu of rent payments. For example, a tenant who is an accountant may offer their professional services to the landlord in exchange for a few months’ rent.

The Barter Agreement should specify: 

  • The length of time for which it will last
  • Whether it will be impacted by any change of circumstances (e.g. tenant secures employment)
  • When rent payment will be due again 

What are other landlords doing?

Some landlords are taking another approach and lowering rents by 10 percent, for example, in order to ease the potential financial burden on their tenants. Freezing potential rent increases is also being implemented by some.

What is the Paycheck Protection Program, and how can it help me?

The Paycheck Protection Program (PPP) is a subsection of the CARES Act designed to help small businesses cope with decreased proceeds as a result of the economic shutdown. PPP loans are calculated based on average historical payroll costs and the program allows for favorable loan terms, with the potential for partial forgiveness of repayment.

In addition to loan proceeds being used to meet payroll obligations, the PPP explicitly allows expenditures on rent or mortgage interest obligations. 

How can the PPP help my tenants? 

If you are unable to qualify for a PPP loan, your tenants may qualify. Landlords may consider working with professional third-party firms in order to facilitate the application process for tenants wishing to apply for PPP aid. The terms of the PPP program explicitly state that the funds can be applied to rent payments, therefore resulting in a mutually beneficial outcome for the tenant and landlord. 

Is the Economic Injury Disaster Loan Program an option for landlords?

Yes. The CARES Act also expanded the SBA’s Economic Injury Disaster Loan (EIDL) program, available to any business with fewer than 500 employees. The expanded terms allow for: 

  • A $10,000 loan advance
  • Bridge loans of up to $25,000
  • Total loan amount of up to $2,000,000

What mortgage protections are available for landlords?

In addition to seeking emergency funding, a landlord with a federally-backed mortgage loan who is experiencing financial hardship (such as receiving decreased rent) due to the COVID-19 pandemic can request a forbearance. The CARES Act provides multifamily property borrowers with certain forbearance rights under federally-backed residential mortgages covering residential multifamily properties. 

This applies to properties designed to house five or more families and requires satisfaction of certain other criteria (federal lender, HUD program, or federal insurer). Contact your lender directly to submit a request and provide the necessary paperwork.

In exchange for the protections, a landlord receiving a forbearance under the program must not

  • Evict any tenants for nonpayment of rent
  • Charge any fees relating to late payment of rent
  • Serve a notice to vacate 

If granted, the mortgage servicer must allow an initial forbearance of 180 days, with the option for an additional 180-day period that must be separately requested. This does not forgive the mortgage obligation, it merely provides a temporary delay of the monthly payments due to the current shelter-in-place restrictions. 

Ask a lawyer

If you are a landlord, and you are unsure about how to access the various programs under the CARES Act or need other legal advice relating to the coronavirus pandemic, we’re here to help. You can access free legal advice and key documents for protecting your business in our Coronavirus Legal Center. You can also reach the Rocket Lawyer CARES support team toll-free at (877) 885-0088, Monday through Friday, from 6 am – 6 pm PST.

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