Tenants not paying rent

bbehan202 · 17-04-2020 7:27pm #1

I rent out a property at 1,700e to two tenants (via an agency). Pretty good tenants - no major hassle from them.
I am not too sure of their relationship with their employer (I think it's a contract basis with an airline) but their hours have been cut back due to COVID-19 crisis.
They have offered to pay 1,400e rent (they asked for there to be no arrears as they have been good tenants and plan on staying there once this is over) and assess situation as it progresses.
My costs for the property are pretty high and I don't make much money off of it - just break even. I have savings but it's not much. I can't avail of any mortgage holiday from the bank. (That's a whole other story.)

[line]300[/line]
I am wondering what the best thing to do in this situation is:

Reject their offer outright.

Pros: I can clear my debts if they pay
Cons: They might leave the property and I have an empty property and no income. I don't want the headache of legal hassle. Note - they are from a different country so chance of recuperating anything if they head home after this over would be low and I can't evict them.
Use their deposit to pay for arrears.

Pros: Keep me able to pay my bills but would only last a few months
Cons: If they wreck the gaff - I'd have to pay out of my own pocket once they leave.
Accept the 1,400e and chase them for arrears

I don't know the specifics of their situation. I don't know if they are getting COVID-19 payment & rent/supplement. I don't know if it's okay for me to ask them to provide bank statements, wage slips, and evidence that they've tried to get rent supplement. If both of them were getting payment of 350e a month each that's 2,800e a month income. This well covers the cost of rent and them being able to live comfortably while being kept restricted to a 2km radius.

Pros: I might get the money back eventually
Cons: I'd have to pry into their personal affairs which I don't want to do. This could be a step too far.
Accept the 1,400e and write off the rest for one month, maybe more?

Pros: I get to keep my asset in an uncertain property/rental market
Cons: My savings would deplete. I suffer a loss from that aspect. I know I took this on as a risk.

Any advice greatly appreciated.

JPCN1 · 17-04-2020 7:29pm

handlemaster · 17-04-2020 7:33pm

Did you get a letter from there employer to see this or some other proof. You are been asked to effectively hand then money that is owed to you.

Deco99 · 17-04-2020 7:33pm

300 euros would deplete your savings? What happens if the washing machine or oven went in the apartment? Let's say this went on for 3 months, €900 would deplete your savings? Nonsense

Batgurl · 17-04-2020 7:35pm

893bet · 17-04-2020 7:36pm

E) they stop paying rent altogether and you can’t evict

Box careful. They are good tenants so play ball.

JPCN1 · 17-04-2020 7:38pm

By you're own admission they've been pretty good tenants which are hard enough to find.

They have offered you a good portion of the rent.

It'll be a different renters market on the other side of this.

No brainer for me. Work with them and take a small enough hit.

James 007 · 17-04-2020 7:38pm

Yes, accept reduced rent for now, hold onto good tenants during this time. Your title is misleading. Better change it to Tenants looking for reduced rent during Covid-19 crisis. Try & not word it as reduced rent, someone else put it better, as you can only increase your rent by 4% again for the year. Put it in as a temporary deduction until they return to work.

ooter · 17-04-2020 7:42pm

if they were to leave tomorrow would you be confident of getting someone else to move in straight away, given the way things are?
losing 300 euro a month isn't ideal but it's much better than losing 1700 euro a month.

enricoh · 17-04-2020 7:50pm

Better the devil you know imo. Tell em you can afford to do it for 3 months max.

Pkiernan · 17-04-2020 7:54pm

If you can't take a 300 euro hit, how are you going to pay your preliminary tax to Revenue?

You've got to be looking at 6 grand at least on the rental income you're getting.

Keep those tenants. Take the 1400.

punisher5112 · 17-04-2020 7:56pm

They will be getting the social welfare payment most likely and may even qualify for assistance for rent.

Be very careful accepting a reduction as it may cause issues down the line, if you do I'd be making sure it's all in writing and written out correctly.

I'd also look that they contribute to this reduction when back to normal and make this clear.

Fred Cryton · 17-04-2020 7:59pm

Ah sure isn't this the new SF republic we keep hearing about? no rent to be paid to those "greedy" landlords, and no power of eviction either.

Virus is no excuse, are they really claiming to have zero savings to use to pay the rent? Tell them to show you balance in their bank account, and also show evidence of looking for loan from bank to pay the rent. You should be the very last person they come to after exhausting all other options.

there are lots of people who will take a mile if you give an inch, and will use any excuse to shirk responsibilities.

JeffKenna · 17-04-2020 8:00pm

Graham · 17-04-2020 8:35pm

Allow them to defer a proportion of the rent for now unless you're happy to permanently reduce the rent.

robinbird · 17-04-2020 8:37pm

D.

Rents are falling and doubt that FG/FF will have the same level of funds to subsidise landlords to keep rents at the same high level when this is over.

TheChizler · 17-04-2020 9:09pm

Why not C without the prying into their affairs? Just let them know they're in arrears and expect it to be paid when they can. This is what you'd do in normal times (with the added threat of termination) so why not now?

bbehan202 · 17-04-2020 9:49pm

handlemaster wrote: »

Did you get a letter from there employer to see this or some other proof. You are been asked to effectively hand then money that is owed to you.

No. Good feedback though. I haven't received anything written. I don't know if it's "legal" for me to do that. See below about my chat with PRTB today.

Deco99 wrote: »

300 euros would deplete your savings? What happens if the washing machine or oven went in the apartment? Let's say this went on for 3 months, €900 would deplete your savings? Nonsense

All repairs etc. are taken from the rent collected by the agency at the end of the month.

James 007 wrote: »

Your title is misleading. Better change it to Tenants looking for reduced rent during Covid-19 crisis. Try & not word it as reduced rent, someone else put it better, as you can only increase your rent by 4% again for the year. Put it in as a temporary deduction until they return to work.

Agree re:title. It won't let me edit it though.

punisher5112 wrote: »

Be very careful accepting a reduction as it may cause issues down the line, if you do I'd be making sure it's all in writing and written out correctly.

Agree. I'll definitely do that.

Fred Cryton wrote: »

Ah sure isn't this the new SF republic we keep hearing about? no rent to be paid to those "greedy" landlords, and no power of eviction either.

Virus is no excuse, are they really claiming to have zero savings to use to pay the rent? Tell them to show you balance in their bank account, and also show evidence of looking for loan from bank to pay the rent. You should be the very last person they come to after exhausting all other options.

there are lots of people who will take a mile if you give an inch, and will use any excuse to shirk responsibilities.

This is the post which resonates with me the most. The relationship I have with them is a business one ya know? It's not like I am here sitting on stacks of cash. If I am taking a hit on my savings - how am I to know that they are not on theirs ya know? I don't have 100% of the information to make a judgement call. I asked the PRTB chat thingy today about the landlord's rights and about requesting documents from them and she said that I'd need to consult with a solicitor.

TheChizler wrote: »

Why not C without the prying into their affairs? Just let them know they're in arrears and expect it to be paid when they can. This is what you'd do in normal times (with the added threat of termination) so why not now?

I agree - they said they'd like to stay in the property moving forward so maybe a payment plan can be arranged until the tenancy ends.

This whole thing is a dilly of a pickle.

Gumbo · 17-04-2020 10:15pm

As a LL I’d accept the €1400 once they can prove or I’d you are certain they are on reduced income.

But I’d keep it official and let them
Know the €300 may be added to the rent going forward once back to full time employment. The arrears, even if it’s 6 months of €300 which is 1800 can be paid back over 12 months or so.

I wouldn’t risk loosing good professional tenants over €300 here
Which don’t forget, if you make a loss, can be carried over to next year.

HamSarris · 17-04-2020 11:04pm

If you are taking a substantial financial hit by losing €300, it suggests you need better financial planning skills. Consider developing a rainy-day fund and avoid using excessive debt that you can’t service in an economic downturn.

Also consider getting a promotion in your job or educating yourself in a higher paying degree such as software development.

Tasfasdf · 17-04-2020 11:15pm

HamSarris wrote: »

If you are taking a substantial financial hit by losing €300, it suggests you need better financial planning skills. Consider developing a rainy-day fund and avoid using excessive debt that you can’t service in an economic downturn.

Also consider getting a promotion in your job or educating yourself in a higher paying degree such as software development.

Yeah and he should start doing the lotto aswel:rolleyes:

mrslancaster · 17-04-2020 11:22pm

punisher5112 wrote: »

...
Be very careful accepting a reduction as it may cause issues down the line, if you do I'd be making sure it's all in writing and written out correctly.....

Info recently from rtb is that any change to rent is a rent review which can only be every 12 months with 90 days notice in a rpz.

Arrears notice now is 28 days not 14.

suggestion from TheChizler seems a good option, tenant pays lower rent & arrears can be sorted out later.

Pawwed Rig · 17-04-2020 11:25pm

You would be down €140 after tax!
No brainer

Gumbo · 18-04-2020 8:36am

HamSarris wrote: »

If you are taking a substantial financial hit by losing €300, it suggests you need better financial planning skills. Consider developing a rainy-day fund and avoid using excessive debt that you can’t service in an economic downturn.

Also consider getting a promotion in your job or educating yourself in a higher paying degree such as software development.

Same could be said about the tenants. They should have a rainy day fund for times like this.

overkill602 · 18-04-2020 9:32am

Bit off topic talking to some friends and staying in Ireland at atm with f/a social scene going on and no pubs restaurants entertainment less travel clothes buying and lots of staying in, home cooking, we are spending less i know i am sure.
So I guess it makes it look like a stroke, likely hood when this end we will have more in the bank as well as the LL who should be allowed or not?

I would not like to looking for a tenant or a tenant looking for a place to live in the current climate reduce for 3 months

If they leave would you give them a reference?

I assume they will be working after the lock down ends

rosmoke · 18-04-2020 9:41am

How are you barely breaking even?
The tenants literally pay the mortgage/house!?
You are in a fantastic postlition if someone else pays for your house in an economic shutdown.

zinfandel · 18-04-2020 9:46am

B use the deposit to pay the arrears and hope that having been good tenants they will leave the place in good order.

silver2020 · 18-04-2020 9:52am

punisher5112 wrote: »

They will be getting the social welfare payment most likely and may even qualify for assistance for rent.

No they won't - generally your information of your posts is very wrong and should always come with a health warning

The covid payment does not entitle you to rent assistance - you need to reach a totally different bar and apply separately for that. It is highly unlikely that these tenants would qualify.

They will get the covid payment. At €1500/month (€3,000 combined), the rent they have offered is almost 50% of their net income.

I think they are being fair. They have not suggests 50%. I think the decent thing is to accept it for a 3 month period, but also inform them that it will also place hardship on you due to the high costs your have of the mortgage and that you would not be able to extend it past 3 months.

A way of doing this is to do get them to pay the €1700 and for you to do a "special refund" of €300 the next day.

Deco99 · 18-04-2020 9:57am

Why are they not dealing with the agency? Just because an agency takes repairs out the impact to you is the same still a loss. So again how can €300 or €900 over 3 months deplete your savings. Have you got €1000 savings? What if 3 of your friends were getting married over the next 3 months (pre-lockdown) would you not be able to go cause your skint? The issue isn't savings, you don't want to give the inch which is understandable and long term it maybe unsustainable if it were to stay at €1400 but claiming you can't afford €900 is not going to win much sympathy.

overkill602 · 18-04-2020 10:08am

You cant win here even though you say they are good tenants but all LLs are bad here except the professional ones.

Deco99 · 18-04-2020 10:38am

overkill602 wrote: »

You cant win here even though you say they are good tenants but all LLs are bad here except the professional ones.

Disagree, I don't have an issue with trying to make sure they get full rent due. Just don't claim that €300 will break them

Manion · 18-04-2020 10:52am

deplete
/dɪˈpliːt/
diminish in number or quantity.

I don't know if people responding are deliberately missing the point? 300 (140 after tax) euro out of the OPs saving is depleting their savings. I'm not sure why people keep challenging this. Read a dictionary.

Regarding hardship, I don't know anybody that wouldn't miss that money. Obviously it's a burden on the tenants, why is it so inconceivable that it's a burden on this landlord? Did someone really just suggest the OP goes back to school to get educated for a higher paying job so they could cross subsidy their tenants?

Anyway, bbehan202 you seem to be coming at this from the point of view of principles of it rather than from the view of what makes financial sense. As you said, you have a business relationship with these people and also with an agency. Look at the market situation and do a full costings of the different alternatives and make a smart move.

Factors to consider:

If you reduce rents what does that mean for what you pay the agency (if if they deduct from source, you are paying them either monthly or a year in advance).
If you don't reduce rent will you have to pay a months rent again to the agency to find new tenants?
You say you're breaking even, maybe you should reevaluate how much this agency is costing you.
If you reduce rents and enter into a formal agreement with them are you sure you're able to increase the rents again when the crisis is over? How will this impact your long term profitability.
Have you considered disposing of the property when the lockdown is lifted, if you're main objective is not to be paying more into the property each month than you get our then maybe it's best to call it quiets now and cash out?

Detach yourself from the rightness or wrongness of the situation. This is not the time for social and morality studies. You need to make a decision that is financially the right move now and in the longer term.

18-04-2020 11:00am

Just make sure it’s not a reduction. Let the arrears build and work something out then afterwards but if you easily go to 1400 now then the rent going forward will be 1400 and you’ll never see 1700 again.

It also doesn’t matter how much savings the OP has (though not surprising people focus immediately on it). They shouldn’t be out of pocket for someone else.

18-04-2020 12:09pm

They were extremely cheeky to ask for no arrears, based on that alone I’d almost be inclined to say rent must be paid in full. They should have approached with their tail between their legs and asked for a temp reduction and offer to fully repay arrears when they can.

Allowing to drop very temporarily with arrears being built and repayment fully expected would be as far as I’d risk going as otherwise you could end up stuck on low rent. I would not be saying it’s a reduction I would say something like you will not be chasing their arrears for a short period of time but you will be expecting all arrears to be repaid before they move out.

It is interesting though how people expect the LL to use savings and question him on why he hasn’t a fund yet not question why the tenants don’t have a fund set aside. Times are hard and I feel sorry for anyone struggling to pay rent and would fully support a temp reduction (once arrears are repaid) if the LL is having a mortgage break but with the LL is not getting a break from his mortgage then it’s much tougher. Also not everyone is down money at the moment, if anything some are saving money due to spending less and there are chancers out there looking for reductions when they can well afford to pay rent.

Op is there really no option of a mortgage freeze, this would be ideal as you could then easily allow a temporarily lower rent.

Claw Hammer · 18-04-2020 5:14pm

Even if a landlord does not have a mortgage he could be keeping his mother in a nursing home with the rent.
It is none of the tenants business what the landlords circumstances are.
Any tenant who tries that on will be gone like snow off a rope in a few months when the market generally drops and they can negotiate a better deal. the op might as well hag tough, those tenants will be gone soon anyway.

overkill602 · 18-04-2020 5:34pm

Deco99 wrote: »

Disagree, I don't have an issue with trying to make sure they get full rent due. Just don't claim that €300 will break them

delayed pisstake, should you be a LL if you come here looking for advice
nothing to learn here in the left leaning view

Abel Ruiz · 18-04-2020 5:41pm

What's the issue with the bank in all of this????
How come you can't come to an arrangement with them?
What about the new legislation

Samuel T. Cogley · 18-04-2020 6:37pm

Abel Ruiz wrote: »

What's the issue with the bank in all of this????
How come you can't come to an arrangement with them?
What about the new legislation

My guess would be he, like loads of accidental LL's, is not on a BTL mortgage and therefore the much vaunted 'holiday' is not available without massive financial repercussions.

3DataModem · 18-04-2020 9:56pm

When you say you are "not making profit" do you mean your rent is not higher than your costs, or do you mean the rent is not higher than your interest and costs? If you are net spending 300 per month and your mortgage is reducing by 1000 a month you are becoming 700 wealthier every month... I'd call that profit.

18-04-2020 11:04pm

3DataModem wrote: »

When you say you are "not making profit" do you mean your rent is not higher than your costs, or do you mean the rent is not higher than your interest and costs? If you are net spending 300 per month and your mortgage is reducing by 1000 a month you are becoming 700 wealthier every month... I'd call that profit.

No it isn’t. Tax has to be paid on the income and if the asset does not appreciate in value during ownership, there is no profit if the rental income is going to pay back the loan.

Grumpypants · 18-04-2020 11:05pm

bbehan202 wrote: »

Any advice greatly appreciated.

Offer them this: pay €1470 a month, and you will assign €700 of the deposit to topping it up by €230 a month. (If the rent is €1700, I'll assume the deposit is 1 month's rent).

That gives them 3 months at a reduced rate, removes the loss to you. And keeps 1k to cover any damage.

Sheep Shagger · 18-04-2020 11:08pm

3DataModem wrote: »

When you say you are "not making profit" do you mean your rent is not higher than your costs, or do you mean the rent is not higher than your interest and costs? If you are net spending 300 per month and your mortgage is reducing by 1000 a month you are becoming 700 wealthier every month... I'd call that profit.

Ah the myth about being a landlord.

robinbird · 18-04-2020 11:20pm

Sheep Shagger wrote: »

Ah the myth about being a landlord.

Indeed. Let's hope that FG can increase the €1,000,000,000 year in payments that they are giving them once they are properly back in power.
If they do not have the funds to significantly increase the subsidy rents might well fall.

18-04-2020 11:32pm

Pkiernan wrote: »

If you can't take a 300 euro hit, how are you going to pay your preliminary tax to Revenue?

You've got to be looking at 6 grand at least on the rental income you're getting.

Keep those tenants. Take the 1400.

Couldn't be

1700 x 12 = 20400.
Mortgage interest reduction, wear and tear, insurance, agency fees, repairs, etc. Should be able to reduce by half depending on the interest.

10200 net isn't costing 6000 in income tax

18-04-2020 11:35pm

rosmoke wrote: »

How are you barely breaking even?
The tenants literally pay the mortgage/house!?
You are in a fantastic postlition if someone else pays for your house in an economic shutdown.

Do you not what breaking even means? If the rent is only covering his mortgage and costs, that's breaking even.

His asset value increases but that's different

Mrs W · 18-04-2020 11:47pm

I’d ask for proof, I do some work for a landlord and he’s had a load of tenants claiming they can’t pay. Quoting the 3 month holiday that the banks are giving him as if its free and not just delayed.

Obviously if they are genuine you could accept it and they can pay an extra 100 a month after it to repay

Browney7 · 19-04-2020 12:07am

Dav010 wrote: »

No it isn’t. Tax has to be paid on the income and if the asset does not appreciate in value during ownership, there is no profit if the rental income is going to pay back the loan.

Does the property spontaneously combust or burn to the ground when the loan is repaid or do they just never sell?

19-04-2020 12:20am

Browney7 wrote: »

Does the property spontaneously combust or burn to the ground when the loan is repaid or do they just never sell?

No Browney, properties don’t tend to combust when the loan is repaid, why would you ask a question like that?

I suppose someone with a property in negative equity might give you a more illuminating answer to that question. But suffice to say, if the property does not appreciate in the time it is owned, or the appreciation is less than the owner has had to pay in addition to rent received. then there is no profit.

Given the cost of buying a property, few small LLs make a profit after tax on rental income, the profit tends to come from appreciation of the asset. But if repayments can’t be met, then the asset can be lost. That is the risk you take when you invest in property.

TheChizler · 19-04-2020 12:27am

Niner leprauchan wrote: »

Do you not what breaking even means? If the rent is only covering his mortgage and costs, that's breaking even.

His asset value increases but that's different

It's zero cash flow not breaking even. Most investments are negative cash flow until the time comes that they sell or vest, pensions, shares, portfolios. All come with risk.

Browney7 · 19-04-2020 12:39am

Dav010 wrote: »

No Browney, properties don’t tend to combust when the loan is repaid, why would you ask a question like that?

I suppose someone with a property in negative equity might give you a more illuminating answer to that question. But suffice to say, if the property does not appreciate in the time it is owned, or the appreciation is less than the owner has had to pay in addition to rent received. then there is no profit.

Given the cost of buying a property, few small LLs make a profit after tax on rental income, the profit tends to come from appreciation of the asset. But if repayments can’t be met, then the asset can be lost. That is the risk you take when you invest in property.

Simple figures to illustrate the point on this profit versus cashflow that constantly comes up on this forum.

Loan 200k at month one
Mortgage repayment 1000 per month (500 interest 500 capital repayment)
20% expense ratio
Tenant pays 1000 rent ("breaking even") so the landlord gets 800 after expenses.
Tota Tax deductible expenses are 700 total.
At the end of the month the landlord has a 150 tax payment from own resources (assume 50% marginal).
So they've paid 1150 out in cash, they receive a net 800 from tenant after their expenses but the mortgage balance is 199500.

If the house price is still worth 200k, their financial position has improved by €150 after the month without capital appreciation.

The fact the loan outstanding balance gets reduced is always ignored by people on this forum and it's nonsense. If someone is only breaking even on an interest only basis then they are indeed losing money after paying tax and would be wise to consider their ongoing investment in the loss making venture they continue to pursue.

Dr_Kolossus · 19-04-2020 2:33am

And browny, you are ignoring the very real possibility that the value of the property will likely drop in the current circumstances. In which case the landlord makes an actual loss.

Tenants not paying rent

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