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Few Tenants Fail to Pay April Rent, Landlords Fear Numbers Will Rapidly Grow
By Jorge Casuso
April 7, 2020 -- Santa Monica landlords fear the trickle of tenants who who failed to pay their April rent due to the economic fallout of the coronavirus crackdown could swell in coming months, straining their finances.
Landlords and property managers interviewed by The Lookout reported that few tenants so far have invoked a City moratorium on evictions for nonpayment of rent during the health emergency.
The City's emergency order bars landlords from evicting tenants who show they are unable to pay rent "due to financial impacts related to COVID-19" ("Santa Monica Expands Eviction Protections to Business Tenants, Suspends Bus Fares, Late Fees," March 18, 2020).
Sullivan-Dituri Real Estate, which manages more than 3,000 units, reported that about 40 tenants have informed the property management company they can't pay their April rent.
"We're being very sympathetic," said Joseph Fitzsimons, a vice president of the real estate company. "We're not going to be agreesive and hassle people."
But as the economic squeeze tightens, Fitzsimons, like other property managers and landlords, fears that more tenants could quickly fall behind on their rents.
"We're looking at not maybe this month, but next month, and June and going forward," Fitzsimons said. "We don't know how long that's going to last."
Wes Wellman, a Realtor and leader of ACTION Apartment Association, which represents several hundred small Santa Monica landlords, also said few tenants have failed to pay their April rent but that those numbers will likely grow.
"The fact that people aren't calling me suggests it's not a widespread problem," he said. "Now this is April, there may be more people affected in May."
Wellman also thinks Santa Monicans for Renters' Rights (SMRR), the tenant activist group that held a live online forum on the City moratorium Tuesday, "could keep beating the drums."
Working Payments Out
Some landlords have worked out ways for tenants to pay their April rents -- from negotiating discounts to dipping into a portion of the security deposits.
Former Rent Control Board Commissioner Jay Johnson, who with his wife, Rachel Sene, owns about 100 units, said five of his tenants said they wouldn't be paying their April rent.
In four of the cases, Johnson worked out a payment method. One tenant paid half the rent and offered to pay the other half later. Another negotiated a $500 reduction on a $3,000-a-month rental unit.
"Everything is case by case," Johnson said.
Pat Cramer, who owns 125 units in the city, worked with the two tenants who said they couldn't pay rent, crediting them a portion of their security deposits.
But he worries what will happen when more tenants fail to pay the May rent -- and subsequent rents after the City moratorium, which is set to expire May 31, is likely extended.
"I'm concerned they won't be able to pay next month, when they're really under pressure," said Cramer, who has owned most of his units for a quarter century or more.
Cramer worries that a tenant who fails to pay rent for two months could go another two months without paying and then decide to move out and not pay at all.
"If they owe six or seven months, you'll never see it," Cramer said. "The concern is what the break point is for everyone."
Johnson said one of his tenants refused to pay her April rent, telling him "the Governor said I can't be evicted." (California Governor Gavin Newsom issued an eviction moratorium on March 27.)
The tenant, Johnson said, has been saving to buy a condominium and refuses to show proof she can't pay. "We feel she is abusing it because we feel she has the money," he said.
Johnson doesn't expect the tenant to pay during the six months she has to catch up on her back rent under the moratorium, but he feels his hands are tied.
"All the eviction courts are closed and will be closed for 90 days after the emergency declared by the Governor ends," Johnson said.
It could be December before the courts reopen, he added, and then there will be "thousands of cases filed.
"It could be months," Johnson said.
City Won't Pitch In
The number of tenants who don't make their April payments could still rise. Tenants have until April 30 to notify landlords that they were unable to pay their rent for the month, said Deputy City Attorney Gary Rhoades.
"Even if you miss the (rent) deadline, you still have 30 days to get notification and information to the landlord," Rhoades said during the SMRR online forum.
Santa Monica's mom ad pop landlords would be especially hard hit if tenants continue to miss their rent payments, property owners warn.
Cramer notes that while the City placed a moratorium on evictions, it failed to impose similar orders halting steep water rate increases or pushing back deadlines for costly earthquake retrofits.
Mathew Millen, whose tenants all paid April rent on the 15 units he owns, believes the City should pitch in to help Santa Monica tenants make their rent payments.
Last month, he helped spearhead a petition asking the City to use money from its housing fund to help landlords share the burden ("Small Apartment Owners Ask City to 'Share Financial Burden' When Tenants Can't Pay Rent," March 19, 2020).
"This really affects small landlords because many are senior citizens and this is their retirement income," Millen said.
Said Cramer, who signed the petition, "The City should try to help as many (tenants and landlords) as they possibly can."
City officials have rebuffed the call to share the burden.
"We have to be realistic about the City’s capacity to absorb economic distress among our residents and businesses," City Manager Rick Cole told the Lookout.
"Unlike the Federal government, we are required by law to have balanced budgets and our revenues will take a huge hit as a result of this crisis -- like communities across the globe," he said.
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