Renters Alliance Position on Mandatory Rent Repayment Plans: A Bad Idea!

City council will discuss modifying the urgency ordinance to possibly implement something like a mandatory rent-repayment plan for tenants who seek forbearance of rent due to COVID-19 emergency measures. No other major California city imposes the requirement as a condition for assistance because it means committing the tenant to an additional monthly financial obligation (on top of the regular rent) at a time when economic uncertainty is at its highest. Here are the points I made to city council.

  • Having a tenant to commit to a fixed monthly rent repayment as a condition of rent forbearance will discourage some tenants from seeking the assistance.
  • Under a proposed modification option (Q6 in the staff report) a tenant could held in default for not meeting the repayment obligation alone (aside from paid regular rent) and then be obligated to pay all back rent plus late fees.
  • The tenant held in default for missing a rent repayment installment under a rent repayment plan will face the prospect of eviction and still be liable for rent owed plus late fees.

The key question is, Does a problem even exist? We have seen no data from the rent stabilization office that suggests that tenants in any significant proportion are delaying rent payments. We don’t know how many are making partial rent payments or how many tenants already entered into a formal repayment agreement.

Moreover there has been no effective, proactive guidance from the rent stabilization office to tenants (like Renters Alliance explainers) to help tenants navigate a complex policy with potentially unforeseen circumstances given the uncertainty at the present time.

The National Multifamily Housing Council does have data though because it tracks monthly rent payments nationally. In April 91.5% of apartment households made a full or partial rent payment — a modest decline from the 96% a year earlier. The landlord organization sounded no alarm about lagging rent repayments during this COVID-19 crisis.

What do landlord industry associations say? They like rent repayment agreements because it obligates tenants to repay on a schedule where any payment missed could trigger a default on the obligation. From the fine print of the template agreement provided to landlords by the California Apartment Association:

In the event that Resident(s) fail(s) to conform to any of the payment requirements above, even if late by a single day, all outstanding amounts shall be immediately due and payable…If the sum demanded is not paid within the required time period, Landlord has the right to begin Unlawful Detainer proceedings to recover possession. — California Apartment Association payment plan agreement template section 6

I suggested to city council that it is impossible to envision a one-size-fits-all approach that would not do harm to some tenants. That’s because a vulnerable tenant may feel pressured to agree to rent repayments under penalty of default and either: 1) won’t agree to the repayment plan and thus forfeit forbearance; or 2) agree to a plan at an uncertain time and find out later whether circumstances allow for meeting the additional monthly obligation.

In a recent post, Renters Alliance called making mandatory a rent repayment agreement no good option for tenants.

The best approach for tenants as I recommended to city council:

  • Keep the rent repayments schedule option voluntary;
  • Make any rent repayment agreement amendable by the month as tenant need requires;
  • Direct the rent stabilization office to provide effective guidance to tenants who are approached by the landlord about a mandatory repayment agreement or a buyout offer.

To my knowledge, no California city requires a formal rent repayment agreement. Cities that mention it point out that it is only voluntary:
“Landlords cannot compel tenants to enter a payment agreement, although they can do so voluntarily if they choose.” — Santa Monica
“A tenant is not required to sign a payment plan or other form of rent payment agreement.” — West Hollywood
“A landlord and tenant may (but are not required to) agree to a plan for repayment of unpaid rent.” — City of Los Angeles
“Tenants and landlords are encouraged to work out a payment plan during and after the moratorium.” — County of Los Angeles
“Landlords and tenants can create written agreements for waived or reduced rent during the crisis…[the] agreement is voluntarily entered into between the parties.” — Berkeley

That’s a good practice to follow for Beverly Hills tenants too!