July 22, 2020 Landlord Advice

What to Do if Tenants Delay or Skip Rent During Coronavirus Pandemic

 In the wake of the unexpected job losses and furloughs caused by Coronavirus (COVID-19), Chicago renters are turning to landlords for rent reprieves. Their pleas are echoed by Mayor Lightfoot, who asked property owners on March 19, 2020  to “give tenants some grace, whenever possible during these trying times.” If your renter’s income is derived from the restaurant, entertainment, retail, hotel, transportation, or childcare sectors, he or she might be approaching you soon for support during this challenging time.  If your cash flow allows, you might discount, defer, or forgive the July or August rent -- but be sure to document any agreement with your tenant -- and you might be able to recoup the lost funds from new government subsidies. 

Landlords, Consider Your Options to Support Tenants During Coronavirus Pandemic

What is a landlord to do if renters suddenly cannot pay the rent? Most landlords would probably perfer to find a way to keep a good tenant rather than evict her because she can’t pay the rent due to consequences of a worldwide pandemic. But even for those landlords interested in pursuing eviction, it’s not a viable option in the short term because Governor J.B. Pritzker’s extended stay-at-home order also included the Illinois eviction moratorium. Governor Pritzker’s executive order 2020-30 suspended new eviction filings and enforcement of previously filed evictions through the end of May 2020; this order was extended to run through August 22, 2020 by Executive Order no. 44.

Here are a few ideas for landlords who face the challenging situation of renters who ask to delay or skip rent payments due to the Coronavirus pandemic.

Can Renters Apply for Coronavirus Relief from the Government or Nonprofit Agencies?

An abbreviated session of Illinois’ general assembly held over the Memorial Day weekend in 2020 resulted in added financial assistance for Illinois homeowners and renters. Nearly $400 million in financing will come from the Illinois State CURE Fund. Finances will be administered by the Illinois Housing Development Authority. Landlords can encourage renters to apply for rent relief from nonprofit and government agencies. The Chicago Community Trust and United Way’s Chicago Community COVID-10 Response Fund is offering rent support.  Renters could also apply to the Rental Assistance Program through the City of Chicago, which provides Coronavirus relief to renters facing immediate risk of homelessness due to a temporary economic crisis beyond the renter’s control and who are likely to be able to meet the lease obligations based on anticipated income. Catholic Charities and other nonprofits have established rent relief programs, too. 

Should Landlords Accept Pre-payment or Partial Payments During Coronavirus?

Landlords can provide temporary rent relief to tenants if cash flow allows. Landlords can take some solace in Cook County’s decision to waive late fees on property tax bills. The Cook County Board of Commissioner’s effectively extended the deadline for payment on the second installment 2019 property tax bill to October 1 from the original due date of August 3. 

Landlords might simply forgo collection of next month’s rent. Landlords who lose rental income can contest the Cook County Assessor’s next property tax bill on the basis of the depreciated rental income, but keep in mind that Cook County Assessor Fritz Kaegi announced that his office will be reassessing properties across the county as markets and property values have been substantially impacted by the Coronavirus pandemic.

Or perhaps you can't afford to lose the upcoming rent payment, but would like to defer collecting it until the tenant's employment resumes or unemployment benefits kick in. In that case, ask the tenant to sign a lease amendment that agrees to defer collection of the next month's rent and obligates the tenant to pay it in equal parts in August, September, and October. (For example, if the monthly rent is $1500, the tenant would pay zero rent in July, but would agree to pay $2000 in each of August, September, and October).  Lastly, if you collected a security deposit, you might consider refunding it in its entirety to the tenant with the understanding that she would use those funds to pay the rent. Similarly, if the lease required a prepayment of the last month’s rent, consider offering the tenant a lease amendment that applies that pre-payment of rent to the July rent. Landlords have many options to support tenants during this unexpected period of economic duress.  But be sure to consult an attorney and document any rent relief effort with a lease amendment signed by both landlord and tenant.

Can Landlords Recoup Any Lost Rent Payments from Coronavirus?

Landlords, if you support your tenants by discounting, delaying, or forgiving rent, you are likely eligible for cash flow relief from public-private partnerships like the new Chicago Small Business Resiliency Loan Fund, a new fund created to help small businesses and neighborhood entrepreneurs survive the dire coronavirus economic fallout. Landlords who offer rent abatements or other financial benefits to their tenants can apply for low-interest loans to ease the burden. Landlords may also find it worthwhile to apply for disaster relief funds from the federal Small Business Administration.

Landlords who forgo rent could also try to collect from their commercial general liability carriers instead, as policies typically include some coverage for business interruption. Perhaps a cluster of tenants in your building transmitted the virus to one another through the building’s gym, shared cooking facility, or other common space, and then lost their income due to extended sick leave. Or perhaps a few tenants are concurrently unable to pay the rent because of job losses caused by the epidemic. The insurance policy’s epidemic coverage might be too limited to respond to the current crisis, but it is probably worth an email to your broker or carrier to discuss the costs and benefits of filing a claim. 

Chicago tenants and landlords will find their way through this difficult time. As all Chicagoans practice social distancing and do their part to stop the spread of Coronavirus in Illinois, Domu wishes for robust health for all of us. 

Domu reminds you that it is not a lawyer or a substitute for one and is not purporting to provide legal advice here or anywhere.