Diving into the rental realm during COVID-19
I've never been one for subtlety.
I’m going to address the sleeping and snoring unfriendly giant we have all been tiptoeing around in hopes that it will quietly vanish out of our living rooms, so we don’t continue feeling that impending doom. I know, I’m sounding a little morbid but stick with me here let me explain.
How do we breach the conversation on rental rates with our current landlords and tenants?
I’m sure at this point as we are hitting close to 3 months of COVID lockdown in Barbados that we are all financially feeling constricted in one way or the other.
We had plans on how we were going to spend our paychecks on:
- What we were going to do this summer
- Where we were going to travel
- What upgrades we were going to do to our homes
- That birthday present that your child or partner has been eyeballing all year
- Treating ourselves to a spa day
- And the list goes on…
The reality is ALL of that has come to a startling halt.
What we haven’t particularly adapted to would be how do we financially plan out the next 6-12 months of our lives. And if you are a tenant or a landlord this article is specifically for you.
I’ve taken the past few months to genuinely get to know all of my clients and listen to their concerns with the economic climate. There’s no magic wand or true north to guide you during these times but there is always a middle ground that can keep all parties comfortable.
I will never forget the first thing that Hayden (my boss) told me when we started to discuss a rental project. Vacancy can NEVER be recovered. Our banks have graced us with a 3-6-month moratorium which many of us have taken as we are uncertain on how the next few months would pan out especially if we have tenants occupying our properties. As landlords, by now we have more than likely had conversations with our tenants who have been laid off, made redundant or even taken a pay cut whilst working from home. Your tenants haven’t taken this lightly and some of them have been dreading what the future holds for them and how they will be able to take care of their fixed expenses and rent is certainly one of them. There are going to be some tenants who simply won’t be able to afford the original agreed rental rate. So what can we do here?
Before I go on, let me touch base on tenants.
There’s no sugar coating here. As I said, I’ve never been one for subtlety. These past few months have been tough. Rethinking and reorganizing your finances especially when you have dependents during this time is overwhelming. Along with making sure all your bills are paid and keeping a roof over your head. Many of us have had to put on a brave face and go to our landlord to explain our current situation and ask for some relief when it comes to paying our full month’s rent. AND THIS IS OK! There is nothing wrong with being honest and letting your landlord know your financial situation. You’d be so surprised to know that landlords are willing to work with you during these times. If it’s one thing I can put my hand on my heart and say about Barbadians is that they care and they are compassionate above all else.
Whilst this isn’t the go-to guide, these are a few solutions I have found have helped my clients whether from the landlord’s or tenant’s perspective.
- Agree to a reduced rate for a certain duration and at the end of said duration increase the rate to cover the rent that would not have been paid. Similar to a moratorium.
- Agree to a reduced rate which can be renegotiated at the end of the contract based on the tenant’s financial situation.
- Agree to a reduced rate but extend the rental contract. This works for tenancies that are coming to an end. Rather than losing a tenant and having a property sit vacant, this ensures a steady flow of income for landlords for the foreseeable future.
- Agree to rent abatement which would be no rental payments for X amount of months based on the severity of your tenant’s situation. At the end of X months, payments will resume as normal or at a reduced rate.
The reason I have reiterated the word agree above is to make sure both parties are on the same page and the best way to ensure this would be to get it in writing in an email or a formal written agreement.
What this really boils down to is having an honest and genuine conversation with your landlord or your tenant. In your mind, it feels exponentially more uncomfortable than it will actually be in person and as I said, there is always a way or a middle ground to make everyone comfortable.
Whilst this may not be the most pressing matter during COVID, it is a harsh reality for everyone involved in the rental world, and whilst not all solutions are ideal, I trust that everyone can find a way to make it work.
If you ever want a fresh perspective on how to approach this topic, feel free to shoot me a message, I myself still rent (until I find my dream property) and I can first hand say I’m happy to give any advice I may have on this topic.