Let’s talk about rent: what respite can landlords offer?

As the economy continues to take a beating from the Covid-19 pandemic, tenants continue to hope for some sort of respite from their landlords.

Different entities, including the Landlords, Tenants Association, the Trade Union and even President Uhuru Kenyatta have asked landlords to reduce or even waive rent.

Tenants at Kiambu Road apartment recently took it upon themselves to initiate the conversation on rent reduction.

Each tenant signed a document requesting a reasonable reduction. The document was then sealed in an envelope and a delivery person assigned the task of taking it to the property manager.

To his shock, the manager, after reading the document threw it in the messenger’s face. Needless to say, the tenants’ request for a reduction had been rejected, and in a rather dramatic manner.

Is rent reduction or waiver conversation such a bitter pill for landlords and property managers?

April has come to a close, and many tenants are still hopeful that some form of relief will be communicated.

The Distress for Rent Act gives guidance to landlords in a situation where tenants are unable to pay their dues, but the law does not take into account a pandemic or total disruption of the economy.

The final decision to reduce rent rests solely with landlords. Some have waived rent for up to three months, while others have reduced the same by a significant percentage.

Still, others have stood their ground, demanding full remittance. Regardless, the big question remains: just how reasonable are the tenants’ expectations? Are all landlords capable of slashing or waiving rent? Who else has a say in this conversation?

COMPLEX TASK

A property manager with Vantage Management, Gift Musyoka, has been steeped in talks with tenants and property owners.

From March, he started receiving letters, phone calls and messages from tenants seeking or inquiring about a reduction in their rent.

Most of those seeking relief cited grounded businesses or low returns as reasons for not managing to remit the full amount.

Interestingly, Musyoka had started experiencing challenges with rent collection as early as February.

“Some tenants, especially those in the low-priced apartments, started defaulting on rent way back in February, even before the virus hit Kenya,” he says, even though the defaulters cited the coronavirus pandemic for their inability to pay.

Rent collection, he says, has never been an easy task for property managers, but the pandemic has made it more difficult and complex.

He mentions two categories of tenants: those that always pay on time, and those who have to be pushed to cough up the rent, even when they’re capable of paying.

“The pandemic gave the second category a good excuse to default, even when they could pay up. It has become increasingly difficult to separate genuine defaulters from those taking advantage of the situation,” he says.

RELIEFS

By the end of March, Musyoka was dealing with more defaulters: though those residing in upmarket apartments were still paying comfortably, those in lower and middle-priced apartments struggled to remit.

With increasing pleas to lower the rents, he began to engage property owners.

Two agreed to slash rent by 50 per cent — a better option compared to losing tenants who threatened to move out or host tenants who were unable to pay.

While some landlords may not have reduced rent, they offered relief in how they handled defaulters.

“Ordinarily, when a tenant defaults, we disconnect their electricity, and if they haven’t paid their water bills, we also disconnect the water. At the moment, we’re refraining from taking such measures,” he says.

The month of April has come to a close and it’s rent collection time again. Some of Musyoka’s tenants have paid rent in full, others have remitted half of it, while the rest haven’t paid a cent.

While he sympathises with tenants struggling to pay, he notes that a total waiver for all the tenants under his management agency would mean no salary for him and other service providers, such as security guards, caretakers, cleaners and garbage collectors.

LOAN REPAYMENT

Besides, water bills must be paid in full to Nairobi City Water and Sewerage Company, or else the entire building will be denied the precious commodity, regardless of whether or not some tenants have paid their bills.

Such concerns make it difficult to waive rent, although he agrees that rent reduction would be a better solution depending on the property owner’s financial situation.

For Thomas Muoki, a landlord in Nairobi, reducing rent is definitely a conversation necessary to have during this period, pointing out that he slashed a percentage of the rent he charges his tenants.

“I understand that they are going through a difficult financial period. Therefore, I can’t turn a blind eye to their distress,” he says.

Thus, he had a long-standing relationship with his tenants and would wish to reciprocate the loyalty they’ve shown him over the years.

However, Muoki says tenants need to understand that humanity is two-way. “Some tenants have the capacity to pay rent, but they hold onto it, taking advantage of the situation we’re in. For instance, there are tenants who’ve defaulted, yet they’re hosting parties in the apartments,” he says.

It’s wrong to assume all landlords are well off and well-cushioned. “Some are still paying the loans they took to put up the property, and rely on rent to make the monthly repayments to the bank.”

For property owners servicing loans, Muoki explains that their ability to reduce rent depends on how the bank treats them.

NEGOTIATION TIPS

Some banks have been lenient enough to give property owners a three-month relief, while others have negotiated less strict payment terms. Other banks still require landlords to remit their monthly payments on time.

“Owning a rental property is a business investment. Not all landlords have day jobs or other sources of income. Some depend solely on rent to look after their families and pay the bills that everyone else incurs.”

For Muoki, slashing rent for all his tenants was the best way to deal with the situation most property owners find themselves in.

It was the better option compared to waiving or giving relief to just a few.

Musyoka, the property manager, adds that some landlords are dealing with the situation on a case-by-case basis.

“Tenants who write letters with attached documents or emails showing proof of pay cuts, dismissal or other disruptions are better placed when negotiating with landlords,” he says.

These documents come in handy for landlords who have to write proposals to banks to receive similar relief on loan repayment.

Besides, rent payment is a legal issue; therefore, tenants who get total waivers may have to repay later when they resume working.

Besides, at a time when some tenants are taking advantage of landlords, approaching them formally and professionally may yield better results compared to informal phone calls and texts.

CUSTOMER SERVICE

He also cautions tenants against teaming up to request or even demand rent reduction.

“Property owners will end up feeling as if you ganged up against them, while still residing in their hard-earned property, when approached in such a manner,” he says.

He advises each tenant to present their case individually and privately. Drawing from his experience, Muoki says all this can be avoided if landlords slash a standard amount of rent for all tenants.

“Reducing or waiving rent for some while leaving others out can lead to conflict among the tenants,” he observes.

Those who pay in full while others pay nothing or half the amount will feel left out and unvalued, which in return might prompt them to look for accommodation elsewhere.

It’s important, he points out, to bear in mind that the way landlords treat tenants during the pandemic will determine how both transition after the pandemic.

“I advise fellow landlords to put themselves in their tenants’ shoes and slash or waive rent. It’s not only humane but also a good business move. If that’s not possible, then handling them gently when they’re unable to pay would go a long way in retaining most of them in the long run. Dismantling roofs, doors or locking people out may be counter-intuitive in the long run.”

CUT COST

Musyoka advises tenants to assess their situation honestly. “If you’re unable to pay completely and are not sure whether your source of income will be restored after the pandemic, the best move would be to cut cost by moving to a cheaper apartment,” he says.

The same applies to those unable to pay rent, but are dealing with landlords who do not seem touched by the reduction/waiver request.

Think of it this way: you’re currently earning nothing and surviving on savings. You’re expected to pay Sh40,000 in rent. Failure to pay for three months leaves you with a Sh120,000 debt.

If you have a family, you will still need to feed them, and once the pandemic comes to an end, children will need to go back to school with school fees.

Ultimately, you’ll end up frustrated. You also face the risk of losing your property to your landlord as per the Distress for Rent Act, which allows landlords to seize and auction defaulters’ property.

The best move, therefore, would be to cut cost now and live within your means. On the bright side, there’s always a cheaper option to your apartment in another neighbourhood, even though the amenities and environment may be different.