No landlord or property owner ever wants to be in a position where a tenant eviction is inevitable. Besides the emotional toll an eviction may take on both parties, the process can be time-consuming, costly, and not always conclude with the anticipated result.
Still, evictions are often viewed as a necessary evil. Just ask Rick Hoegler, CEO of Pan American Properties. He estimates nearly 15% of his clients’ tenants—or approximately 100 renters—owe back rent and are in various stages of eviction, while an additional 50 tenants have already been through the process. Rick estimates that the outstanding back rent amounts to several million dollars. It’s a significant problem for property owners.
All of this begs the question: Why are so many tenants failing to pay their rent?
The Pandemic’s Effect
Rick explained that much of the increase in evictions is due to the pandemic, and the resulting struggles many people endured with Covid-related problems like job loss and illness. Renters had safety nets, including government-issued rent-relief payments. To get access to such programs, renters needed to know about them and follow the right application process. However, not every tenant who qualified for and received government-issued payments used the funds to resolve unpaid rent. You can read more about how Pan American has dealt with this issue HERE.
Additionally, not every tenant received the payments they were due, given red tape snafus, Rick says, “In L.A., we haven’t seen any rent relief payments in two-and-a-half years.”
The True Cost of Eviction Moratoriums
The eviction moratoriums enacted in 2020, still in place today, were another issue. In Southern California, Orange County stopped the moratoriums, yet they are still in effect in LA City and are very likely to continue until December 2022—with certain exceptions—despite recent efforts to suspend them by the Los Angeles City Council’s Housing Committee. A rent increase freeze is also in effect there until the end of 2023.
As a result, landlords’ hands have been tied when it comes to collecting rent, either due to moratoriums, negligent renters, or stalled payments. And they’ve had to continue to maintain their renters’ units throughout this period.
“Everyone thinks landlords are the bad guys,” Rick says. “But it’s been two and a half years since the pandemic began, and despite not getting paid or being able to evict tenants, we’ve had to maintain their properties—in L.A. specifically—and of course, we want to do that. But for years we haven’t been able to recoup and recover our losses. And with the current economic situation, everything costs more.”
Steps to Eviction
Despite many lifted moratoriums, the process to evict a tenant isn’t an easy one. All evictions must go through small claims court, a long and costly (between $1500 to $2500) multi-tiered process:
- First, the owner must check with their municipality to verify any restrictions.
- Then, an attorney with expertise in the subject is hired.
- Next, the necessary paperwork must be filed with the tenant and attorney. After three days, the attorney files the lawsuit and serves the tenant’s notice.
- It may take up to three months to receive a court date. Once in court, and if the judge is inundated with claims, the parties may be urged to try and settle outside of the courtroom by negotiating a repayment plan and some sort of surrender of the premises.
- If the owner makes it to court and receives a judgment, they still need to collect, which entails going to collections so the renter’s paycheck can be garnished.
But there is a solution to all this: communication.
“We’re not in the business of kicking people out,” Rick says. “If tenants would just approach us, talk to us and try to work out a payment plan, we’d be more than happy to work with them.”
And with the pandemic seemingly coming to a close, an end is imminent. Rick says. “Hopefully by this time next year everything will be fine, and with rents going up we can ultimately recover our losses.”
Let Pan American Help You Recoup Your Losses
Are you struggling to receive back rent from your tenants? Pan American can help advise you on what steps you can take, both in and out of the courtroom. Call today at (888) 754-9700 or email [email protected] to learn more.