“It’s a real mess,” Tobener said. “It’s like the perfect shitstorm with the courts being closed.”
Jeff Woo, a San Francisco-based property attorney who represents landlords with Cooper White & Cooper LLP, also sees a backlog of cases in the courts’ future, and said that means time is now on the tenants’ side. The Judicial Council’s decision was just one more in a bevy of tenant protections cities and counties had already approved, he said.
“What this order has done is, it has shifted the whole timing to at least 120 days longer,” Woo said, “and that is to the advantage of the tenant.”
Evictions were one way to get tenants to negotiate a payment plan if they were not making rent, Woo said. But rent will be due eventually, and Woo is advising clients to work out a deal with their tenants to pay some rent now.
Some property management companies, however, have tried more aggressive tactics to get their tenants to pay. Greg August, of San Francisco, was laid off in March from his job as a hotel convention waiter and bartender. He’s applied for unemployment but still hasn’t received a payment yet.
The property managers for Normandy Apartments in San Francisco, where August lives, slipped a letter under the door asking for a phone number for tenants’ employers to verify they are unemployed. They also requested a statement, under penalty of perjury, declaring the tenant does not have sufficient savings to cover rent. Attorneys for tenants say that it’s illegal to request those items.
August said the letter made him really nervous.
“I don’t feel like getting up in the morning,” he said. “I’m afraid there will be a knock on my door demanding I pay, and I’m worried about someone approaching me in the laundry room.”
David Kimmel, one of the property managers for Normandy Apartments, said they’ve since agreed to only ask tenants for a letter from their employers stating their hours were reduced or that they were laid off. Then, like many other property managers, he’ll try to work out a payment plan when the tenants can go back to work.
“We’re all in the same boat here,” Kimmel said.
Striking a Deal
A recent survey by Apartment List of nearly 1,000 California residents found nearly 11 percent of tenants were unable to pay any rent in April. Another 14 percent of renters could only make a partial payment.
That’s pretty consistent with what Bill Rosetti, the CEO of J & R Associates, an Oakland-based property management firm, said he’s seeing, with about 10 percent of the tenants in the 700 or 800 units his company owns unable to pay rent this month.
Rosetti is offering his tenants a 60-day deferral on rent and is using that time to figure out a payment plan. A five-decade veteran of the industry, Rosetti has seen recessions come and go. But he’s never experienced anything like this.
“This is way worse,” he said, “because in other cycles, it’s just a small percentage of people — 5 or 10 percent of tenants who can’t pay — but in this circumstance, every one of our tenants is impacted.”
He expects 30 percent of his tenants won’t be able to pay come June if the shelter in place continues, which will make it difficult to keep up with maintenance on the buildings and seismic retrofit work he had planned to do this year.
The burden falls especially hard on small landlords who have just a few properties they rent out.
Andy Kim and his wife purchased a four-unit apartment building in Oakland’s Eastmont neighborhood last year. Most of the tenants use Section 8 vouchers to subsidize their rents, Kim said. And two of them couldn’t make payments this month.
Kim said he has no plans to evict his tenants. But he doesn’t know how long he can cover his mortgage without their rent.
“We can do maybe six months, and then we’ll be forced to sell the building,” he said, adding that the time frame includes getting his bank to agree to a forbearance on the mortgage and taking out loans.
“If I don’t pay for April, May and June, my bank won’t charge interest, but come July, I have to pay in full,” he said. “And if I don’t pay anything until then, I will have a really big bill.”
Ripple Effects
If property owners can’t pay their mortgages or maintain their properties, a housing disaster could be looming.
“It’s not just renters that get hurt by this,” said Carol Galante, faculty director for the Terner Center for Housing Innovation at UC Berkeley and the former federal housing commissioner during the Obama administration. “I think people really don’t understand how much of the rent goes to covering the basics of owning and running a building.”
In a worst case scenario, Galante said that if landlords start missing their payments, we could see an extended drop in rents and home values. On top of that, a spike in unemployment and an uncertain economic forecast could spell bad news for the housing market.
“You don’t want to see a dramatic distressed market,” Galante said. “That’s not good for anybody.”
But just as landlords are feeling uncertain about being able to pay their mortgages, electricity bills and maintenance, tenants are uncertain when they will go back to work — or even if they will go back.
Jamie Bagley always thought hairdressing was a recession-proof profession. Even during the Great Depression, some people were getting their hair done, she said. Now, she’s not sure when she’ll be allowed to go back to work or what the economy will look like when she does.
In the meantime, she doesn’t want to use the little savings she has on rent.
