5 ms·

>Even if they think they can force the current tenant into bankruptcy and collect, there won't be much to collect after taking away the tenant's only income str

>Even if they think they can force the current tenant into bankruptcy and collect, there won't be much to collect after taking away the tenant's only income stream. A lot of landlords have no choice. They themselves are businesses, often leveraged to the hilt, with not a whole lot of room to offer grace. And yes, I realize there are massive REITs behind some of these properties, that have large earnings and reap huge windfalls for shareholders. That doesn't mean they're equipped to receive no income for months during a pandemic. It's sort of the way our economy works: right on the edge at all times.

paulgb 6y ago
I agree with all that, but surely if they don't have any wiggle room to offer grace they don't have wiggle room to let the property be vacant for 6+ months, by which time there will inevitably be a glut of supply on the market.
- bilbo0s 6y ago
  I'm almost sickened pointing this out, but legally speaking, a large part of the 6+ months would be the responsibility of the tenant they sued. It could get ugly for the small business owner.
  - hsitz 6y ago
    True generally regarding tenant responsibility if new tenant can't be found, but good luck recovering anything at all from a tenant who was evicted because they couldn't pay rent. It seems to me that any landlord who understood the economic situation would work with tenants to keep them on paying something, even if they couldn't afford full rent. I expect landlords will end up better economically in the end that way.
- lmm 6y ago
  It should shake out that way, but sometimes there are places where the gears don't quite mesh. For example they might have loans secured on the property as x * monthly rent, and so if they rent it out cheaper then they have to post additional collateral which would be more than a few month's rent.
chillacy 6y ago
Keeping a tenant at 80% rent is still better than having no tenant at 100% rent. If business are having a few quarters of negative profitability, why can't the same happen to commercial real estate?
- jedberg 6y ago
  Rent control. It makes more sense to keep the place vacant than to reduce the base rent, which could take decades to make up.
  - ShamelessC 6y ago
    I'm not familiar with how rent control works. If they lowered prices due to the pandemic would they really have to keep them that low indefinitely?
    - AdrianB1 6y ago
      Rent control in most places means you cannot increase the rent more than x% per year, where x is fairly low. If the rent is decreasing, you are not allowed to put it back to the original level if the difference is larger than x, so you need to do x% per year for several years just to revert to previous levels.
      - sullyj3 6y ago
        That seems like a seriously perverse incentive if kicking people out and leaving the building vacant becomes more economically prudent in the long run
    - tick_tock_tick 6y ago
      Depending on how they do it and the location for many areas temporary "discounts" do not effect the "base rent" but in many areas discounts are considered altering the "base rent" and would basically permanently ruin any chance of making money on a piece of property. Can't even sell it if you get stuck with a low base rent as normally rent control forces the rate to pass between owner with very few exceptions meaning no one would buy the land off you.
lordCarbonFiber 6y ago
Allow me to shed a single tear for the landlords who took an over leverage position and are expecting the taxpayer to bail them out on the threat of a mass eviction crisis. If only someone could have told those poor poor landlords the dangers of over leveraged investments. The TSLA short guys should get on this grift; bail outs for idiots or the public gets it.
nitwit005 6y ago
I suspect sometimes people just have trouble acknowledging the real value of a building. It certainly happens with a lot of home owners. In good times you sometimes see landlords dramatically raise the rent on tenants, have the space empty, and then continue to stay empty for months.

paulgb 6y ago

I agree with all that, but surely if they don't have any wiggle room to offer grace they don't have wiggle room to let the property be vacant for 6+ months, by which time there will inevitably be a glut of supply on the market.

bilbo0s 6y ago
I'm almost sickened pointing this out, but legally speaking, a large part of the 6+ months would be the responsibility of the tenant they sued. It could get ugly for the small business owner.
- hsitz 6y ago
  True generally regarding tenant responsibility if new tenant can't be found, but good luck recovering anything at all from a tenant who was evicted because they couldn't pay rent. It seems to me that any landlord who understood the economic situation would work with tenants to keep them on paying something, even if they couldn't afford full rent. I expect landlords will end up better economically in the end that way.
lmm 6y ago
It should shake out that way, but sometimes there are places where the gears don't quite mesh. For example they might have loans secured on the property as x * monthly rent, and so if they rent it out cheaper then they have to post additional collateral which would be more than a few month's rent.

chillacy 6y ago

Keeping a tenant at 80% rent is still better than having no tenant at 100% rent. If business are having a few quarters of negative profitability, why can't the same happen to commercial real estate?

jedberg 6y ago
Rent control. It makes more sense to keep the place vacant than to reduce the base rent, which could take decades to make up.
- ShamelessC 6y ago
  I'm not familiar with how rent control works. If they lowered prices due to the pandemic would they really have to keep them that low indefinitely?
  - AdrianB1 6y ago
    Rent control in most places means you cannot increase the rent more than x% per year, where x is fairly low. If the rent is decreasing, you are not allowed to put it back to the original level if the difference is larger than x, so you need to do x% per year for several years just to revert to previous levels.
    - sullyj3 6y ago
      That seems like a seriously perverse incentive if kicking people out and leaving the building vacant becomes more economically prudent in the long run
  - tick_tock_tick 6y ago
    Depending on how they do it and the location for many areas temporary "discounts" do not effect the "base rent" but in many areas discounts are considered altering the "base rent" and would basically permanently ruin any chance of making money on a piece of property. Can't even sell it if you get stuck with a low base rent as normally rent control forces the rate to pass between owner with very few exceptions meaning no one would buy the land off you.

lordCarbonFiber 6y ago

Allow me to shed a single tear for the landlords who took an over leverage position and are expecting the taxpayer to bail them out on the threat of a mass eviction crisis. If only someone could have told those poor poor landlords the dangers of over leveraged investments. The TSLA short guys should get on this grift; bail outs for idiots or the public gets it.

nitwit005 6y ago

I suspect sometimes people just have trouble acknowledging the real value of a building. It certainly happens with a lot of home owners. In good times you sometimes see landlords dramatically raise the rent on tenants, have the space empty, and then continue to stay empty for months.