Tenant Payment Performance Update through July 2022
We’re not aware of any other local management company sending their clients these type of update! Please let us know if you hear of another company doing so.
Please be sure to share this with anyone you know interested in real estate investing or looking for a better property manager, so they can see what they are missing!
We’re now more than halfway through 2022 and at this point, 10 months after the Eviction Moratorium was lifted back in October, we are disappointed in how long evictions are still taking.
We are getting evictions done and seeing some acceleration in cases, but not what we’d hoped for at this point. Detroit and Pontiac courts, cities with the highest percentage of tenants, are still several months behind. Fortunately, most other cities in the tri-county area are only weeks behind.
One of the reasons Detroit and Pontiac cases are behind is due to the CERA program. Judges have been adjourning most cases in an attempt to give tenants every opportunity possible to apply – at the expense of landlords. We’ve been VERY aggressive about pursuing tenants to get them to apply – even sending someone to their homes to have them sign the application docs! Yet, many tenants are “playing the system” and won’t apply.
It’s our opinion that the government has failed landlords and trampled on their rights in their eagerness to pander to the masses.
On our update, the next challenge for evictions in the City of Detroit will be judges refusing to issue Eviction Judgments if a landlord doesn’t have a Certificate of Compliance for a property. It doesn’t make a lot of sense for a landlord to make repairs to comply – only to have the tenant trash the property when they’re evicted. If this becomes a problem we’ll have to stop filing Evictions for Nonpayment and instead file Evictions for Possession, which unfortunately, will not help owners try to recover some of the money owed by tenants.
GOVERNMENT AID FOR PAST DUE TENANTS
Michigan shut down the CERA application website June 30. Tenant applications will be processed until the program runs out of money.
The biggest concern is weaning tenants off the program and getting them to pay rent again. Some tenants became so accustomed to having the government pay their high balances to where they know what to say to play the system.
As you can tell from this monthly article, we pay close attention to tenant performance. So, we’ll pursue nonpaying tenants aggressively to replace them with better ones.
For Detroit properties without a Certificate of Compliance, many CERA caseworkers are only disbursing 80% of approved amounts, some only 50%. While we’ve had many clients finally approve our Maintenance Department to pursue getting their properties into compliance, the nationwide labor shortage doesn’t allow us to make this happen quickly.
Another challenge will be monitoring the CERA program performance as their funds get low. How long do we wait for funds, that may never come, before moving forward with evicting a tenant? Unfortunately, there won’t be any simple answers to this problem, so we’ll be discussing with our property owner clients, who in the end, will have to make that tough decision.
TENANT APPLICANT SCREENING CHALLENGES
We continue to see application fraud for income, but our number one challenge is residency fraud.
To hide problematic payment histories with their current landlords, many applicants are misrepresenting where they currently live or misrepresenting who their landlords are. It takes a lot of research to properly validate their residency history to make sure they aren’t trying to hide a past due balance or if they are currently in the process of being evicted.
Due to concerns about being accused of Fair Housing discrimination, and getting sued, we have to proceed carefully on every application we receive. As a result, it’s taking us longer to process each application.
RENT PAYMENT TRENDS 30-60-90+ Days Behind Update
In our update there is not much change from last month, but a slight decrease in the number of paying tenants. We expect this to be a one-time trend and the number of paying tenants increase through the end of the year as tenants start to figure out they have no government protection and must pay their own rent again.
We saw an increase of the number of tenants either paying full or partial rent which is great news. We hope this trend continues. Part of this is as tenants see that government assistance runs out; we have been working more closely with payment plans to help avoid eviction.
The portfolio of Pontiac properties we took on in March continues to negatively affect our metrics. Several have applied for CERA or are being evicted.
This month’s update shows our processes work! The “Paid Full Rent” performance stayed the same as we haven’t let any additional tenants fall behind. The sharp decrease in the “Pero Zero Rent” number reflects the increase in the tenants either paying full or partial rent. So; everything shows that we’re either getting rid of the tenants that have no intention of paying rent or pursuing the last CERA payment they’ll be eligible for or we are working with tenants to get them on payment plans. Tenants see that an eviction is now a reality and they are trying to do anything to stay in their homes.
We’re concerned about what will happen to all the tenants that chose NOT to pay their rent when they had jobs and really could afford to do so.
In our opinion, the failure of the government, both politicians & courts, to hold these tenants accountable, has only empowered these tenants to look for every possible reason not to pay rent in the future. Also, who is going to rent to them? Why would any landlord rent to them with a history of nonpayment?
Again, please refer us to others you know interested in real estate investing or that are looking for a better property manager!