Shut up and keep your money! (Rent forgiveness in these COVID-19 times)

March 20, 2020 10:09 PM

I have a tenant who is wonderful. I want to provide her with free rent for a month along with a legal-ish document that states this. How?

I'm a very small-time landlord, with just a single studio apartment that I rent out. The person living there is a perfect tenant and I hope to keep her for as long as she'll stay (she's been renting from me for about 15 months now). She always pays the rent on time, if not early, but she's a social worker and I know that she doesn't make a lot of money. Her hours have been cut as a result of COVID-19 and I worry that she'll struggle to make rent next month. Rather than stress her out, I'd like to offer her free rent next month. Is there a legal way to put this in writing that would state that she wouldn't owe anything for the month of April and also wouldn't be charged any kind of penalties or fees? Our relationship is friendly but professional and I want her to have something in writing so that she's clear on the terms. I'd rather not alter the original rental agreement if I don't have to, and it also seems less professional and pretty weird to just accept the rent as normal and then refund it. I tried to find rent forgiveness templates online but they were all for tenants to request forgiveness from the landlord.

posted by mezzanayne to Law & Government (17 answers total)

Can't you just drop them a note and "pay" it yourself? I assume there's nothing which states the money has to come directly from the tenant's account?
posted by fullerine at 10:17 PM on March 20, 2020

Best answer: "Here's a receipt for this months rent. Thanks for being my tenant. "

You're a good landlord. Thank you.
posted by Uncle at 10:23 PM on March 20, 2020 [24 favorites]

Response by poster: Gah, I didn't think about just printing up a receipt for next month's rent. So simple. Thanks for pointing that out.
posted by mezzanayne at 10:37 PM on March 20, 2020 [3 favorites]

Best answer: Does a receipt imply you've received income and affect your taxes? I'd send a letter saying rent has been waived for the month of _; your current balance is _.
posted by quercus23 at 12:42 AM on March 21, 2020 [21 favorites]

Maybe print up a coupon for one free month worth of rent, for flexibility when they use it?

They might be fine now but struggling in a month or two. (So long as you account for this on your side).

Or waiting for them to ask about rent help. Preemptively offering free rent might lead to them asking for the same next month, and the month after, etc.
posted by TheAdamist at 4:59 AM on March 21, 2020 [3 favorites]

Don't overthink this. Send her a note: "Dear Tenant, In light of all that is going on right now and the potential impact to your finances, I am choosing to waive your rent payment this month. This is a one-time event and does not otherwise change the terms of your rental agreement. -Me"
posted by NotMyselfRightNow at 5:34 AM on March 21, 2020 [23 favorites]

If her hours have been reduced that might be a longer term thing. If your goal is to keep her in the apartment maybe a discount every month for the next 3 or 6 months might better achieve your goal. Legally, a simple one-page amendment to the lease that you both sign is probably all you need.
posted by COD at 6:33 AM on March 21, 2020 [2 favorites]

That's a good thing you're doing. But don't forget to let your tenant know that your rent forgiveness will be considered a "gift" or a "forgiveness of debt" by the IRS and she may be liable for taxes on it if it's more than the annual exclusion (for gifts, I believe that's $15,000).

As in all cases, check with your accountant.
posted by Arthur Dent at 6:57 AM on March 21, 2020

Best answer: This is generally called rent abatement, in legal agreements. Basically it means a reduced rate for a specific period of time for a specific reason, that doesn't change the underlying rent rate.

So, I think NotMyselfRightNow's answer is fine, but you could also say "Dear Tenant, In light of all that is going on right now, I am providing you with a rent abatement of 50% for the next two months, resulting in a monthly payment due of $XXX. This is a one-time event and does not otherwise change the terms of your rental agreement. -Me"
posted by mercredi at 7:00 AM on March 21, 2020 [6 favorites]

Re:gift, generally rent abatement isn't considered a gift. As much as it may feel that way, this should be viewed as a commercial calculation to keep a good tenant. (IANYL, you should talk to an accountant, but I would recommend not thinking of this as a interpersonal favor, but rather as a investment in a successful, ongoing business relationship.)
posted by mercredi at 7:03 AM on March 21, 2020 [5 favorites]

But don't forget to let your tenant know that your rent forgiveness will be considered a "gift" or a "forgiveness of debt" by the IRS and she may be liable for taxes on it if it's more than the annual exclusion (for gifts, I believe that's $15,000).

This is completely false.
posted by NotMyselfRightNow at 7:03 AM on March 21, 2020 [10 favorites]

Sorry for the serial commenting, but regularly large apartment building offer these sort of rent abatements to get people into apartments when demand is low, and in other promotional situations, or for other reasons, such as ongoing construction. So there's an existing legal framework to understand them, and you should generally operate within that framework.
posted by mercredi at 7:05 AM on March 21, 2020 [3 favorites]

I work for a property mgmt co and we would write an amendment for things like this. Nothing fancy just a letter w/both your names, the address of the prop and saying that for April 2020 rent is 0 dollars and that no other terns in current lease change. Both parties sign and keep a copy. You are awesome to do this!
posted by RichardHenryYarbo at 7:17 AM on March 21, 2020 [2 favorites]

"Dear Tenant, In light of all that is going on right now and the potential impact to your finances, I am choosing to waive your rent payment this month. This is a one-time event and does not otherwise change the terms of your rental agreement. -Me"

The crisis is likely to continue indefinitely. Please be prepared to continue to allow the tenant to have a home.
posted by Rust Moranis at 8:09 AM on March 21, 2020

I've been a landlord. This may go on for some time. If you can afford No Rent for a while, great. Another option is half-price rent for a longer period. Thank for being a good person.
posted by theora55 at 9:30 AM on March 21, 2020 [2 favorites]

My landlord did this for our building - we all are getting 20% off rent next month. We all got a letter under the door which said almost exactly what NotMyselfRightNow is suggesting. The one additional sentence in our letter was “We will re-assess the situation next month”, implying that they are open to continued abatements. Which is clearly very, very welcome.

As an aside, my landlords are great, and last year they came to my wedding. Good landlords are such a gem.
posted by chuntered inelegantly from a sedentary position at 10:04 AM on March 21, 2020 [5 favorites]

don't forget to let your tenant know that your rent forgiveness will be considered a "gift" or a "forgiveness of debt" by the IRS and she may be liable for taxes on it if it's more than the annual exclusion (for gifts, I believe that's $15,000).

Gift taxes, to the extent they're even incurred (actually pretty uncommon amongst normal people), are paid by the giver.

(Forgiveness of debt is not generally covered by the gift tax exclusion. If it's taxable, it's ordinary income. This would not generally be considered forgiveness of debt--among other things, the debt hasn't even been incurred yet.)
posted by praemunire at 12:48 PM on March 21, 2020 [2 favorites]