Rentals in Lockdown #5 (Mar/Apr 2020) | Rentals Month-End – Lockdown Style

Step #1: Reminder

I think that , given the mostly unusual circumstances we find ourselves in, a gentle reminder to tenants would be only fair – including (even if it’s a repeat) an explanation of why you are obliged to still follow your usual arrear management procedure and carry out the required actions.

It’s important that tenants understand that it’s not your decision on whether or not to follow due process and that you are contractually bound to do so, or you are probably in breach of your contractual obligation to your Landlord/s.

Here are two draft letters to Tenants that I prepared and distributed earlier this week that may help – you may want to take parts out of both, but I’ll leave that with you.

Step #2: Issue Letters of Demand (LOD/s)

It’s incredibly important that you continue to send out your usual LOD’s, despite the difficult time.

There are a number of reasons I feel strongly about this:

  • to enable the landlord to take any further steps – whether on the date of the expiry stated in the LOD, or later (i.e. the landlord deciding to grant the tenant an ‘indulgence’) – the very first step or action needs to have been taken, i.e. an LOD need to have been issued notifying the tenant they are in breach, setting out the breach and giving them a deadline in which to remedy the breach
  • when the expiry date in the LOD is reached, the Landlord does not have to take action – they can decide that that point in time to extend the deadline date to a later date, as far as I am aware, without prejudice to any of their legal rights
  • issuing an LOD as per usual puts the Landlord in a position of having choices, i.e. gives them options that they can decide how to exercise at a point in the future. It could be that the Landlord is currently in a position that they are able to show the tenant leniency and give them a rent deferment or ‘rent holiday’, but their situation could change dramatically with time., given the uncertainty of almost everything at the moment. Their circumstances could look totally different in a month’s time (i.e. 20 business days as per the CPA in the case of a fixed term lease). If they decide not to issue an LOD not, and they change their mind later and then decide to issue an LOD at that point, there is no way to shorten the required LOD period – it’s set under legislation. This is why I believe so strongly that it’s your responsibility to ensure that your Landlords understand this and are fully informed of the consequences of their decisions.
  • Also, make sure that you know what you have undertaken to do in terms of your mandate. Most mandates include the agents’ responsibility specify to collect rent and implement arrears management actions when rent is not received in full and on time.. If this is the case, then you are contractually bound to implement your usual procedures – nothing in the current disaster management regulations would prohibit or prevent you from doing so, so you are not ‘excused from these contractually agreed responsibilities. To cover yourself in the event that the landlord should instruct you otherwise, it’s my advice to ensure to get the Landlord/s confirmation in writing (to be safe, i.e. CYA) that they are ‘relieving’ or ‘excusing’ you of your obligation to fulfil your contractual agreement (as it pertains to rent collection and arrears management actions) for now. I’d also suggest that you get them to indemnify you for any losses, or additional losses, they may incur as a result of not issuing an LOD at all, issuing it now, or issuing it later than usual.

You can download an editable draft landlord communication template I prepared a few days ago that includes some of these important points:

Remember, as long as you have completed step #1, which is the most urgent as it starts the ‘legal clock’ ticking, you have time to complete the next steps without rushing or putting yourself under undue pressure. No further action can be taken until expiry of the LOD period – explain this to your Landlords and Tenants too so they understand this.

It’s never a good idea to try and get things done under pressure – this is when mistakes happen and, more often that now, mistakes have negative consequences for agents. So, rather don’t get pressurised and think through your planned actions thoroughly before moving forward.

Step #3: Tenant Income Declaration Information

If a tenant has a genuine problem, I suggest approaching the matter calmly and in a business like manner.

Appraise yourself thoroughly of their situation BEFORE speaking to the Landlord/s. The Landlord/s will want to know the details. e.g what is the problem, is it genuine, will it be resolved, if so, when do they expect things to be back to normal, etc. As a rental professional you should to be able to answer these questions and furnish the Landlord/s with as many facts as possible, as is to be expected of a professional – to empower the Landlord/s to make an informed decision.

I suggest using the TPN Income Declaration Document for this purpose. It’s part of the TPN Rental Recovery Pack that can be downloaded for free here.

If you follow due diligence, gather the information and then make a proper case to the Landlord you will stand out as a true Rental Professional.

It’s in times like this that your professionalism can shine and allow you to stand out from the crowd

Another advantage of using this strategy is to ‘filter out’ those people that want to use or abuse the current situation. More than one agent has already told me that they have been approached by tenants for rental deferment arrangements and/or payment holidays, and have sent them the Income Declaration Form to complete, only to then receive the rent payments in full.

Another important point to highlight to the tenants is the harsh and start reality that . . .

rent will still be payable, the timing of payments is simply altered – the debt remains

Step #4: Speak to Landlords

Once, and only once, you have all the information, and you are comfortable that the situation is in fact genuine warrants some form of ‘indulgence’ should you contact the Landlord/s.

When do you know you’re in this position? I say, ask yourself the question. “If I was the Landlords, would the information that I have gathered and put together, if presented to me, empower me to make an informed decision?”. Don’t approach the Landlord’s until the answer to this question is “yes!”.

A Landlord that is provided full information, together with supporting documentation, is a lot more likely to take the tenant/s request seriously and be understanding because they know that you have gone to the trouble of gathering and verifying the the information required and that the tenant has a genuine case.

At this point you will, of course, need to discuss the options that are available with the Landlord.

I know that utilisation of the deposit has been mentioned many time – including by some of our learned and respected partners – I have thought this matter through thoroughly. In fact, it played on my mind all of last night to the extent that I had to pen an article about this first thing this morning.

I do not believe that this should even be considered at all.

I know times are tough and we’re still with the most unusual of circumstances, but – purely on a practical level (let’s leave the legalities for our learned colleagues to debate for now) – I do not believe that this month end is the crisis – I firmly believe the end of April is then the %*^# will hit the proverbial fan.

Step #5: Negotiate & Document Payment Arrangement Agreements

Once you have agreed on a strategy of how the agreed rent arrears will be repaid, make sure to document it.

My concern at the moment is that it’s difficult to commit to dates, as this process is still ‘unfolding’ – the possibility of an extension of our lockdown period has even been mentioned – so we’re dealing with a very fast moving target here.

My advice would be to maybe come to an ‘agreement in principle’, on the understanding that any changes in the dates of the lockdown, etc would necessitate a review of the agreement later – but before (maybe agree and diarise a review/finalise date) the deadline date in the LOD.

Remember, there is still a fallback position – the Landlord’s recourse to cancel after the expiry date of the LOD – until that date is reached no further action can be taken. I hope that makes sense.

It’s important to get an agreement documented asap, but is it really fair, or even practical to expect either party to put pen to paper when there is so much uncertainty?

My thoughts at the moment would be to maybe wait until closer to the end of lockdown, or even after lockdown, given that most of the LOD’s would be for 20 business days, which is way beyond the current date for the end of the lockdown period. Even LOD’s that are for shorter periods can always be extended if need be.

If you have thoughts on the above, please feel free to share them in the comments below.

Step #6: Update Software Systems

Once agreement has been reached, your payment arrangements need to be updated in your rental software. This is important to ensure that the information that is sent through to TPN or any other bureau does not negatively affect a tenant’s record unnecessarily or unfairly.

If you haven’t already done to, take a look at the chat I had with Michelle Dickens yesterday about this:

Step #7: Update Information Exported to TPN

This relates to Step #6 to ensure that tenant/s payment records are not unnecessarily negatively affected if they have done the right thing by proving their position to you and entering into a payment arrangement.

If this isn’t finalised by the time that your data is fed to TPN, or the situation and arrangement changes subsequent to the data being sent, please remember that you can re-send the updated data so that the tenant’s payment profile can be update to accurately reflect their position. Michelle Dickens explains this clearly in the above video.

2 thoughts on “Rentals in Lockdown #5 (Mar/Apr 2020) | Rentals Month-End – Lockdown Style”

  1. Hi Shaun, I want to say thank you to YOU for the amount of effort and time you are putting into keeping us informed, up to date and the various options we have as rental agents.
    I have a question tho…if a derferment agreement is reached…then i presume that and LOD or LOD issued before agreement would now fall away…for example…if I LOD a tenant today and on Monday they submitted their income declaration and we sign an agreement after discussions with Landlord then the LOD issued on the 3rd would no longer be valid?
    Have a great weekend and again thank you. Stay safe and stay home.

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