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What Can Landlords Do If Tenants Can’t Pay Rent?

Life can be unpredictable. One day, you can unexpectedly be faced with a tenant who cannot pay rent because they lost their job. There are, however, ways you can recover rent while being understanding of your tenant’s circumstances. If your tenant owes you rent, here are some options for getting back on track.

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How much do Americans owe in back rent?

Roughly 28% of renters entered 2021 with unpaid rent bills carrying over from 2020. Estimates for the total back rent owed by all renters by the end of 2020 are as high as $7.2 billion. Roughly 60% of landlords have had tenants struggling to pay their rent.

Of course, your experience may vary. You may have a single rental unit with long-term tenants who remain employed and capable of paying their rent on time. You might also be unlucky enough to have multiple units occupied by tenants from a large local employer who is facing financial problems.

The number of Americans who owe back rent tells you two things. First, you are not alone. Second, if you do need to pursue back rent, there might be delays in the legal process because courts need time to work through all of the cases that have been filed. 

What is a Rent Repayment Agreement?

Many landlords are willing to work with their tenants, especially when tenants are unable to pay because of circumstances beyond their control. Your tenant might have a new job lined up or be in line for government assistance. Getting a good tenant caught up on rent can also be more profitable long-term than going through the eviction process and trying to find a new good tenant.

A Rent Repayment Agreement is an agreement for the tenant to catch up on rent. It serves four purposes.

  • It gives the tenant a formal pause on the eviction process so they don’t have to worry about being evicted.
  • It makes it clear that the landlord isn’t waiving their right to evict or pursue other lease remedies in other circumstances not covered by the Rent Repayment Agreement.
  • It creates a clear timeline for the tenant to catch up on their rent payments.
  • It can define consequences for the tenant not following through on the payment plan, such as agreeing to move out or losing any waiver the landlord gave on late fees or other penalties.

For example, let’s say your tenant is two months behind on rent but will be back to work soon. You sign a Rent Repayment Agreement allowing them to pay 25% of the balance in each of the next four months in addition to their usual rent. You agree to waive late fees if they make all payments on time. If the tenant misses a payment, they agree to end the lease and move out.

Are there other ways landlords can get a break when tenants can’t pay rent?

One key way to get back on track with your mortgage if you have fallen behind on payments due to a loss in tenant revenue is forbearance. Your lender may have multiple options for you to consider if you qualify for forbearance. You may be able to work with your mortgage lender to defer payments or make smaller payments for a specified period of time. Be sure to find out whether the payments will be added to the end of your mortgage or become immediately due at the end of the deferment period.

Insurance is another major expense landlords face. Insurance companies may be willing to offer a payment plan or switch you from annual to monthly billing. If your rental property is unoccupied, ask about a potential premium reduction until you find a new tenant.

You might have to consider eviction if you have exhausted all of your other options. The eviction process can be difficult to navigate if you have never evicted a tenant before. If you need additional help navigating the eviction process, exploring your legal options, or how to work with your tenants on catching up on rent, reach out to a Rocket Lawyer On Call® attorney for affordable advice. If you are considering incorporating as an LLC, contact our Rocket Lawyer incorporation experts.

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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