What if the tenant can’t pay their rent arrears?

Rent arrears – they are a serious issue. In the past couple of days, we are seeing many businesses starting to let go of staff. It’s a terrible time if you’re in tourism or hospitality. This will result in a number of your tenants being out of a job and perhaps unable to pay rent.

What action to take?

BE COMPASSIONATE

Regardless of the rent arrears, this is a terrible time for everyone. Be understanding and helpful. In the end, supporting one another is the most important thing we do at this time.

ASSESS THE SITUATION

We recommend that you go through your tenant list in your property management software and tag them by the risk of rent arrears: HIGH, MED, LOW. This is not to stigmatise your tenants but so you can help those in greatest need. The categories might look like this:

High – works in tourism, hospitality, importing or exporting business, in an airline or airport-related job
Medium – works in all other sectors
Low – works in the health, food, courier, beneficiary

Read our blog about risk assessment.

COMMUNICATE

In this situation, the best thing we can do is keep regular contact with our tenants and landlords. Increase your frequency of communication to at least weekly but in some cases almost daily. Based on the risk assessment of the tenant I would adjust my communication style. For example, for the high-risk situations, I recommend ringing, texting, and emailing both tenants and landlords. The landlord needs to be aware of the situation and the measures you are putting in place. The tenant needs your support. For the low to the medium risk, they might only require emails.

BE CARING AND SUPPORTIVE

If the tenant has lost their job, they will be very distraught. Love and understanding is the greatest thing we can show right now.

BE FLEXIBLE

If the tenant has rent arrears then come up with something that can help them. Be flexible. A rent reduction or a rent holiday could be two options. It may mean that the rent has to drop for 6 months or more.

KIA KAHA – BE STRONG

There may be situations where the tenant has to be evicted. If you feel that the tenant is taking advantage of your good nature. Whether it’s a 14-day notice or an application to the tenancy tribunal, then be strong (but kind) and take the actions you need.

BE CREATIVE

This situation is unprecedented and as such, there is no playbook. We need to be creating and ‘making up’ solutions on the fly. At the time of writing this blog, Countdown is employing people nationwide. They are supporting this country and community by creating jobs for people. Think about how you and your business can be creative to help your owners and tenants at this.

BE POSITIVE

For every cloud, there is a silver lining. At the moment there are 80,000 ex-pats returning to New Zealand. They will all need homes. This information could lift the spirits of your owners and allow them to understand that this ‘blip’ is only temporary.

RING YOUR MUM AND DAD

Property management is all-consuming. It’s easy to work from sun-up to sun-down and beyond. It’s 6 am on a Saturday while I write this. In these tumultuous times don’t forget to call and tell those closest to you how you feel about them.

What you need to know about COVID-19 (Coronavirus) as of 12 March 2020

The symptoms for COVID-19 include coughing, shortness of breath, and/or fever, but could also just be tiredness, feeling achy, sore throat. It looks like many people with COVID-19 experience a relatively mild infection, ranging from cold and flu-like symptoms to feeling like the actual flu. Mild to moderate infections are taking about two weeks to recover from. About 20% of people have been experiencing a much more serious infection requiring hospitalisation for several weeks. From the data so far the case fatality rate rises as you get older, and is higher in those with underlying health conditions.

On the 11th of March, COVID-19 was upgraded to a Pandemic by the World Health Organisation. At that time there were over 100,000 cases world-wide and over 4000 deaths.  Schools have closed down in the worst hit countries. New Zealand has five confirmed cases but the worst-case scenario forecast by the ministry of health for NZ is that 40% of the population catch it over an 8 week period. This could mean 30% of staff being unwell and unable to work. It could mean hundreds of elderly at risk with health services unable to meet the demand.

Responsibilities

Workplace risks

Any infectious disease such as COVID-19 is classified as a workplace hazard and the Health and Safety at Work Act 2015 requires that employers take all practicable steps to mitigate risk and protect workers at all times from workplace hazards.

Business risks

A large proportion of workforce could be unwell at the same time which would result in a number of service failures. Your property management company may not have the personnel to provide all of your services. Suppliers and contractors may not be able to deliver their normal products and services.

What actions can you take to mitigate the risks?

• Download our Contingency Plan template and use it.
• Communicate the potential risk to your team
• Allow staff to work from home where possible
• Organise times for staff to get immunised
• Establish your minimum essential services and devise a list of what and how staff redirect their time if required
• Inform owners & tenants of a potentially longer than normal wait for addressing issues such as maintenance and repairs.
• Adjust BDM strategy to be more digitally or telesales focused instead of networking or meetings.
• Increase space between workstations
• Implement alternative social practices e.g. no shaking hands or kissing
• Avoid attending international conferences and unnecessary international travel at this time.
• Where possible, buy increased levels of workplace supplies e.g. paper, toilet paper, hand cleaner

 

Final words

Kia tūpato! Be careful about how you talk about COVID-19. Please read this very important resource on how to avoid stigmatising people with the disease. Get your news from a trustworthy source. The Ministry of Health’s website has a lot of good information.

Credit must go to Dr Siouxsie Wiles (@SiouxsieW) and Dr Reremoana Theodore (@MoanaTheodore) for pointing me in the right direction and providing valuable information.

 

Why shouldn’t we just stop doing inspections?

It has been suggested by some other commentators in the sector that rental property inspections should be suspected for 90 days. Although we applaud the efforts to keep staff safe, the question we ask is, what happens after 90 days is up?

Nowhere has the Ministry of Health ever set a time frame of 90 days. The only timeframe we can be certain about is that nothing can go back to how it was until we have a vaccine for Coronavirus. Best estimates are saying this will be 18-24 months away.

Currently in New Zealand, in order for certain insurance claims to be eligible, we must inspect the rental property every three months. The current inspections process, however, may not be safe for property managers.

Creating a COVID-19 safe inspection process

There are possibly many solutions to this challenge including technology for inspecting the home or tenant self-inspection systems. The most practical approach, that would be easy to implement, would be adding a pre-inspection risk analysis to every inspection and then improving the safety of the inspection itself.

For example, this might mean conducting a pre-inspection phone survey with the tenant to assess the current risk within the rental property. If the risk is low then the inspection will go ahead as scheduled. If not, then it will be rescheduled for 14 days from now.

For the inspection itself, the tenants would be required to be out of the house at the time of inspection, the property manager would wear appropriate protective clothing (e.g. gloves & mask), and would take extra precautions such as avoiding touching surfaces. Upon completing the inspection the property manager would discard their protective clothing and clean their hands with hand sanitiser.