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My Tenant: “I’ve Lost My Job and I Can’t Pay You…”

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Yesterday was a day for the record books for me. You'd think that getting news that your tenant can't pay you would be the most eventful thing of the day. Long term it was probably the worst news I had, but there was some definite competition. I'll leave the details of the rest as a tease for now. Let's leave as easily the biggest roller-coaster of good and bad things to happen to me in one day.

Back to the tenant... She called asking if I had a minute to talk. Since I was knee-deep in solving another crisis, I responded with "Literally a minute." Then she drops the bomb... "I just got laid off and I can't pay you..." She started going in to the specifics on how she can't pay April's rent (I was expecting that April's rent was just taking it's customary long route through the mail), May's rent, etc. I came very, very close to saying, "That's okay, just dip into your emergency fund." My brain often thinks in sarcasm. Fortunately, I often have a little voice to censor it at inappropriate times.

She continued saying that she called because she wanted to be open with it. I told her I appreciated it. Then my minute was up. I had to attend the other crisis. I left it as, "Let's let the dust settle for two days. Neither of us are in a position to make any great decisions at this minute. Things will look different, hopefully better, in 48 hours."

So that's where it stands now. One of my best friends is a real estate lawyer in Boston. My first step is to consult with him. Her lease ends in June and I have a month's rent in escrow - so it might not be worth beginning the eviction process. I really don't know what that is, but I'm thinking after two years of a great relationship with this tenant, I might not even want to think to go down that road. The other possibility is an intriguing one. The same real estate lawyer has occasionally mentioned how he could use a little help with his paperwork. My tenant did exactly that for a large law firm. If he still has the opening, he fills that position, she gets a job, I get my rent paid, all three of us do a little dance.

It's almost too perfect to work out that way, isn't it?

Posted on April 15, 2009.

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34 Responses to “My Tenant: “I’ve Lost My Job and I Can’t Pay You…””

  1. Matt SF says:

    If it does work out that well, you’re karma points must be in the stratosphere.

  2. mapgirl says:

    That would be a very neat and tidy package indeed. I hope she finds a new job soon.

    I think you are right to say that it might be best for you not to renew her lease and let her move out rather than evict her. After all you did get 11 mos of rent, right?

    How hard will it be to fill the rental?

  3. kosmo says:

    That would be pretty sweet if that worked out.

    How do you feel about your ability to replace the tenant with another one – will it take a few days, or will it take 5 months because of the economy? If the tenant will be hard to replace, it might make sense to be a bit more patient than if they’d be easy to replace.

    It would suck to lose a good tenant. Those can be hard to find.

    Good idea to let it wait 48 hours. Realistically, you already have April’s rent (the escrow) so you don’t start losing money until May 1.

  4. jdp says:

    Can I share some karma points if I’ve got them?

    fingersX’d

  5. MBirchmeier says:

    It sounds like you’re doing the right thing by taking a moment, and taking a deep breath on this. I hope it works out for the best.

    -MBirchmeier

  6. Lazy Man says:

    I should have mentioned that she called me a couple of weeks before and said that she wouldn’t be renewing. She was looking to move to another place.

    Getting a replacement shouldn’t be too bad… I think I just need to price it right… bring down the rent from $1350 to $1200.

    The lesson here is to have an emergency plan in place. I don’t need to tap mine in this case, but I’m super happy to know that it’s there.

  7. Jim says:

    Ideally she’ll get that legal job and everyone wins.

    So you’ve got last months rent which should at least cover April. Do you have a security deposit from her? You should be able to use that to cover unpaid rent too. Is she going to get unemployment? Maybe she can pay you partial amount for May out of that and cover the rest from the deposit.

    Starting the eviction process doesn’t have to be expensive. For starters you can just post an eviction notice on her door & mail her a copy. If they don’t pay rent that violates the lease and is grounds for eviction. That notice on the door will cause most people to move out with no lawyer fees required. Its only the more stubborn renters who squat forever regardless of eviction notices that really require spending money on a lawyer. But of course eviction process varies from place to place, so check into your local & state laws.

  8. Amphritrite says:

    Sounds like it’s wroth a phonecall, LM. This time in our lives sucks economically, but what it always comes back to is neighbors helping neighbors.

    This time, you could help your tenant, which might help yourself. You keep a tenant, she gets a job, neither of you spend money on attorneys. If it doesn’t work out, then you can consider alternatives for ending her lease.

  9. LMM, that sucks man. At least she only has a couple more months left.

  10. jim says:

    That’s rough but it was good that you decided to give it 48 hours to mull over, it’ll give both you a chance to reflect a little and make a better decision. Good luck buddy.

  11. ckstevenson says:

    I had to “evict” a tenant once, there was some very shady stuff going on, and the other tenant was fearful of her safety and stuff.

    I literally just spoke to the crazy tenant, said “It’s in your best interest to just leave now, I have grounds to evict you, I’ll win, just make it easy on yourself and leave now.” And they did.

    But avoid eviction at all costs. Even if you have a good relationship with the person, you have to decide if you are doing this as a business, or to be nice. Maybe the two can meet, but rarely do they.

    Hopefully the alternate job options work out. Is the tenant pursuing unemployment?

  12. Do you guys have some sort of unemployment insurance down there? Your tenant was pretty quick to say that she didnt’ have the money, what are her plans in case she doesn’t find a job soon?

  13. Cos says:

    interesting .. and good luck.

  14. Horlic says:

    Let’s pray hard that she got the job.

  15. I think you handled it very well and I’m glad you have that little voice censoring you…she might not have appreciated the sarcasm even if we readers might have. At any rate, if your lawyer friend genuinely needs the help and it’s a great fit, then that’s perfect for you. But, and I don’t mean to rain on the parade here, it’s a tricky situation because you’re mixing an awful lot of stuff together that are usually best left separate. She may not be right for the job, but the lawyer friend is doing you a favor, which then puts a strain on your relationship with him. Your lawyer friend may be a terrible boss which stresses your tenant and that puts a strain on your relationship with her. A lot of variables. Just think about things carefully before making any hasty decisions.

    Good luck!

  16. I had an experience not exactly the same, but somewhat similar.

    A client wrote me a check for her wedding (!) entertainment. The check bounced. The client is from West Palm Beach, Florida. A wealthy, certainly, wealthier than I am. Her new husband is a well connected, self-employed in finance.

    I wrote her a letter asking her for what was the matter, and if I can do anything to help her, so she can do good on her check.

    She called me back, saying, she was so moved, she cried when she read my letter.

    Turned out her husband lost lots of money in the stock market, etc. And she was looking for any job to help ends meet. I told her that I have connections in banking, finance among my Miami wealthy clients and I will make calls for her. I wanted her to be able to pay me!

    Long story short. I did help her. She paid me in 3 installments over period of time in cashier checks. With her last check she wrote me a letter, among other nice things saying *I will be a better person now because of this experience.*

    The moral of the story: I overheard someone once said “Are You Big Enough to Help Someone Become Greater Than Yourself?” And that is my motto: I feel blessed and big enough to help anyone at all, especially someone who owes me.

    It is really great feeling, feeling big. In most cases it cost no more than an hour to research for info, write a letter or make a few phone calls.

    If each of us makes an effort to do just that, we all can move on step in the right direction.

    LM, you know I earn money as balloon artist event entertainer in South Florida. Some people with the right personality can do what I do while looking for a job.

    Here are my instructions on how some can earn $100/h as an event entertainer: http://bit.ly/tKGkl Who knows, it might help one or two unemployed.

  17. jay says:

    A friend of mine just had a similar situation. The tenant said they had lost a job and was starting another soon and couldn’t pay the next two months. But they would start paying extra per month until those two months had been payed back. Two months later they had moved out without a word. Basically they wanted to buy themselves a few months without being hassled. Makes me glad I am not a landlord – I wouldn’t want to be used like that.

    Lazy Man – I am paying $1350 for a tiny one bedroom in South Boston. Unless your apartment is run down or something I would say it is priced right. Lowering the price might rent it faster but you might not get a quality tenant. I for one didn’t look at apartments in that price range because they were usually pretty bad and didn’t want to waste my time. I’d be interested in looking at the place if I wasn’t buying (most likely) a place this summer.

  18. I also have rental properties and I have a lot of experience with tenants. They all sound super nice, reasonable, full of promises when they’re asking you to let them use your $500,000 asset that they’re living in and you’re paying a mortgage on. 75% of the time I find that the tenant will leave the landlord – me – high and dry in the end. Disappear in the night without paying, damage the place if you don’t give them extra time because you can’t afford to pay the mortgage without their rent, even call city inspectors in revenge to claim that something about the place is illegal. I’ve seen it all.

    Many people are responsible and have good character, but it’s not usually those who ask for free rent.

    Help her find a job if you can for sure, give her food, rides to interviews, let her free3-ride on your wireless internet, but seperate the rent issue. She has to pay no matter what. As I said, 75% chance that whatever you give her she will take plus extra.

    To Mapgirl, who said “After all you did get 11 mos of rent, right?” If Lazy Man’s rental economics are anything like mine, that 12th month represents pretty much the entire profit on the unit for a year. That means Lazy Man let his house get used, handled repairs and other issues, signed himself in servitude to the bank, etc etc for 12 months for free.

  19. Sandy says:

    I don’t know about this one. It seems that she had no intention of paying April’s rent anyway since she lots her job now, what mid-month? So I think she might just be buying time until she moves out. Could she be “saving up” the rental deposit on her NEXT apartment by not paying you for the next few months? It almost sounds like what she is doing. The problem is, what happens in June when she is to leave? Will she leave? Will you have to evict her anyway and spend months longer in the process?

    I say you document your conversations with her and explore your options. Separate your money from anything else with her. It’s a hard line to take but if you didn’t hold up your end she would have had nowhere to stay.

  20. Irina – sliding off on the tangent of bounced checks …

    A friend of mine is a contractor and had done some very for a wealthy, VERY high profile couple in the community. He had done some work for them in the past and was shocked when a check bounced.

    He politely pointed out the problem to the wife. It turns out that they had lost their checkbook, and when they placed a “stop payment” order on the unused checks to avoid fraud, they accidentally stopped payment on some legitimate checks (i.e. they thought check # 995 was the last check they had written, but it was actually 991)

    Needless to say, they quickly fixed the problem.

  21. Nikki says:

    I was in the same position as this tenant just a few months ago, and my landlord decided to start eviction procedures WHILE I was paying the back rent AND the current rent. When we went to court, I had my bank records showing that I had been paying him and the amounts. The judge made us work out a deal. In the end, I have to pay him what I owe him in installments, and I was able to stay an extra month. And HE had to pay the court costs. In other words, he got what he would have gotten anyway, but over a longer stretch of time, and he had to cover the court costs. Plus, since it shows that it was a mutual agreement, it doesn’t count as much against me in the rental market. As long as I pay him something every month, I’m good.

    My point is, evicting her MAY cost you more in the end, depending on the judge. If you choose to not work with her, ask her to move out by a specific date (giving her the legally required notice of course), and get it in writing. If she’s been a good tenant, most likely she will do it. Only if she does not would I start eviction procedures – it may come back to bite you in the end, like it did my former landlord.

  22. Nikki says:

    I forgot to add, the last time a tenant moved out, it took him over a year to find someone, so he is losing a LOT more money now than the bit he thought he was losing by working with me.

  23. Lazy Man says:

    Nikki,

    This seems like a very different situation. For one this person had already announced her intention to leave after the current lease. If I don’t find someone for a year, it’s not because of any action I take against her, I wouldn’t have found someone for a year anyway.

    The other landlord seemed to gain something for his effort of taking you to court. I would feel much more comfortable having a judge’s ruling than I would without it. That insurance would likely be well the insurance. You knew you were going to pay, but the landlord didn’t. Look at Customer’s Revenge’s comment and the problems he had. It’s pretty hard to know if you are dealing with a tenant like he had or someone like you. Because of that, there’s some value to having gone through the legal process (again, something that I need to talk to my lawyer about – he may say that it’s not worthwhile).

    One more thing to add to this story…

    After I published this, I got a call from the condo Super. I have authorized him to do work on the condo as he sees fit (I trust him, he’s a great guy). I’ve also trusted her to pay him and deduct it from the rent. This might be a mistake, but it’s just the fastest/easiest way he can get his money – and I like that. On the call with the Super, he said that he didn’t have a record of payment from some $500 of work that he did last year and asked my tenant for some kind of proof (canceled check or something). It sounds like she hasn’t been able to provide this (he made it sound more like she was dodging him). Of course, I had deducted the amount from her rent.

    Again this conversation happened at an inopportune time, so I have to go back and flesh out the full details.

  24. About evictions: You can be nice about the eviction too. Sometimes tenants are late, and that’s not too much of a problem. If they’re 48 hours late and I can’t reach them, I send them a notice. If they’re going to be more than a week late and they tell me, I send them an eviction notice anyway.

    What I explain to them is that they have two weeks, or whatever we agree to on the phone, to pay but in the meantime they get a notice to vacate by the day after they were supposed to pay. The way to cancel the eviction is to pay as agreed. If they were going to pay anyway then nobody loses, but if they were just stalling to get some free rent from me then I lose the minimum possible because you always have to give more time when you evict.

    Honest people always understand that I have to do it that way because of other people who give me false promises. The ones who argue you can tell right away that their promise was false.

    Going to to court is terrible. Try to get them to pay :)

    Nikki’s case is different because she was paying the current rent. So it’s like there is a debt owed from the past that is being repaid slowly, not really a breach of the rental contract any longer. This is not a good reason to evict her. She should have been evicted when she missed the payments, not when she’s making them again.

  25. Jim says:

    Nikki,

    In my state and probably most others: if a landlord accepts any partial payment of rent from a tenant then you can not evict them on the grounds of non payment of rent. In other words your partial payment of rent meant that your landlord had no legal cause for eviction. Thats because an agreement is in effect. Assuming your laws are similar then your landlord shouldn’t have taken you to court since they had no cause (evidenced by the fact that they lost).

    But you are right, that actually going to court for legal eviction processes is the very last resort. It is costly for the landlord even if the landlord is 100% right.

    Working out a mutually agreeable arrangement between landlord and tenant is definitely the first, best option. But if asking nicely doesn’t work and she simply doesn’t come up with any rent or anything then you really do have to move forward with posting an eviction notice.

  26. James says:

    Lazy Man,

    Get her out of there ASAP. Give her like $400 to move out. Its your absolute best option for getting rid of a deadbeat tenant.

    -James

  27. What was the other crisis? Now I’m way too intrigued. Can’t wait for the full stories…

  28. That’s thinking on your feet. I hope everything works out for you and your tenant.

  29. Matt @ My Financial Recovery says:

    I think I am impressed by the reasonable request to wait 48 hours before discussing further.

    What I really want to know though: where do you get those censors that filter out sarcasm? I could use one of those for inappropriate times as well.

  30. I suppose this is one of the cons to this type of thing. There are so many pros to having renters, etc…

    And well done with your censorship. I’m impressed too.

  31. T. Green says:

    I’ve been a landlord for about a year and I realized that I am not “landlord material”. I am too easy. My tenant is a single mom with 2 kids. Although she has paid her rent on time, I shutter when I read about situations like yours. How do you evict a single mom with kids?

  32. kitty says:

    I also used to be a landlord – albeit a very lucky one – and I agree with Customers Revenge. You are not in charity business. You have your own expenses. Would your mortgage holder be understanding if you called them and said “my tenant cannot pay me this month, do you mind forgiving me this month’ payment?” How about your property tax collector? If new tenants are easy to come by you can ask her to move out sooner. Otherwise, if you want to be extra nice you can talk to her nicely, explain to her that you have expenses on this property, cannot afford to give that much money as gifts – because this is what she is asking for, a gift. If you want to, you can ask her to pay enough to cover your expenses or you could just evict. Keep in mind that if you go to court, the judge can ask her to pay rent anyway e.g. on payment schedule and also to cover court expenses. This is what happened with my friend when she had to evict.

    BTW – when I rented out I asked for last month rent in addition to security deposit upfront (a friend suggested this). This way I had a month buffer in addition to the security deposit. In your case it would’ve covered exactly last 2 months, although having tenants live last month on their deposit is worrisome: no problem if tenants took good care of the property (as mine did) and risky if something gets damaged.

  33. Randy says:

    Just found your blog thanks to freeby50. On the down side of this, what’s to prevent your tenant from staying around after the lease ends? How can she afford another place if she doesn’t have a job?

    In the up side, I heard a suggestion that instead of evicting, you should pay the person to leave. Call the tenant and offer her $500 (or some other some) if she moves out by the end of the month. It’s cheaper than eviction and much faster.

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