In Canada, several individuals and businesses are reeling from the economic impact of the coronavirus pandemic. In a recent poll, a jaw-dropping 44% of Canadian residents report that either themselves or someone living in their households has lost a job. Alarmingly, an additional 18% of people expect to lose their employment or have their hours cut in the near future as well.
The impact of these immense layoffs or reduced work hours on rent payment is likely to be felt from April 2020 and expected to linger much longer, due to the expected economic slowdown in the next 12 months. With recurring bills such as mortgage payments, utility bills and other financial obligations, how can landlords and their tenants weather this storm without rancour?
Tenants who are having difficulty making their rent payment can utilize the Canadian Government’s Emergency Response Benefits (CREB) to supplement their income. As well, landlords can also consider utilizing the Mortgage Deferral Program to defer rental payments. Certain provinces are also providing additional support to counteract the economic impact of the pandemic on their residents.
Government Funding Available to Renters who have been impacted
The COVID-19 Economic Response Plan, introduced to provide Canadian residents with temporary income to handle obligatory expenses.
Some of the relief measures which renters can take advantage of include:
- The Canada Emergency Response Benefit (CERB) which makes provision of $500 weekly for up to 16 weeks for Canadian residents who qualify
- The Canada Child Care Benefit Boost of up to $300 per child for the 2019-2020 year
- Delay of debt payment without interest or penalties, to the Canada Revenue Agency until August 31st
- Six-month interest-free reprieve on student loan payments
- Provision of relief measures by Canadian big banks, including postponing line of credit payments
- Reducing required minimum withdrawals from Registered Retirement Income Funds (RRIFs) by 25% for 2020, in recognition of volatile market conditions and their impact on many seniors’ retirement savings. This will provide flexibility to seniors that are concerned that they may be required to liquidate their RRIF assets to meet minimum withdrawal requirements.
Additional Provincial Support
British Columbia: The B.C. emergency benefit for workers will provide a one-time, tax-free, $1,000 payment for B.C. residents whose ability to work has been affected due to COVID-19. Additionally, a $500/month rent relief is being provided as part of a Temporary Rental Support Program. This rent relief will be paid directly to landlords to ensure they continue receiving rent.
Ontario: Parents of children who have been affected by closure of schools and daycare are being offered a one-time payment of $200 per child.
New Brunswick: One time payments of $900 is to be made to eligible workers who have lost their jobs as a result of COVID-19.
Alberta: Emergency isolation support has been provided for Albertans who have to self-isolate. Other supportive measures for Albertans include a 90-day payment deferral for utility bills and a 6-month interest-free student loan repayment deferral.
I am Worried about Mortgage Payment; What Can I Do?
As a landlord who relies on the rent for mortgage payment, you might be worried about how non-payment of rent by your tenant(s) could affect your ability to make mortgage payments. In this case, the new Mortgage Deferral Program offered by Canadian banks and mortgage lenders can help increase your flexibility to accommodate tenants having difficulty making their rent payments.
How Does the Mortgage Deferral Program Work?
Through the Mortgage Deferral Program, the Canadian Government aims to help homeowners whose monthly source of income (e.g. rent, a job) has been affected by the pandemic and as a result, are unable to make monthly mortgage payments.
This program ensures that mortgage payments can be suspended for up to 6 months once an agreement has been reached between the lender and the homeowner. Once the agreement period has elapsed, all missed payments are repaid- inclusive of any accumulated interest and mortgage payments resume as previously scheduled.
Any homeowner who wants to use the Mortgage Deferral Program should realize however, that it does not result in the cancellation of any amount owed on mortgages, and any interest accrued will be repaid. Hence, if you can make your mortgage payments without getting mortgage deferral, it is advisable to do so.
As a landlord, if your mortgage is insured by the CMHC, you can simply contact your mortgage lender to take advantage of this benefit, as CMHC-insured homes have been cleared to get mortgage deferral on request. However, if your home isn’t insured by CMHC, you would have to contact your lender to find out what options are available to you.
“Can I Charge Interest or Late Fees on Late Rent?”
The answer is that in some provinces, Yes, you can charge late rent fees, but you probably should waive these fees for tenants during this difficult time.
Residential tenancy agreements are province specific. In British Columbia for instance, landlords can charge certain fees for late rent payment, this is also dependent on the lease agreement that the tenant signs with their landlords. As an adjustment to the pandemic in Alberta, late fees or interest cannot be applied to late rent payment until June 30th. In Ontario on the other hand, landlords cannot charge penalties on late rent, instead they’d have to issue an eviction notice if payment is late. However, due to the COVID-19 pandemic, no new eviction orders can be issued, and scheduled enforcement of current orders has been postponed.
More importantly, despite your ability to charge penalties for late rent, we do recommend that landlords be sympathetic to the circumstances that many tenants are facing and waiving these fees is a great way to build goodwill with your tenants and to not add to their financial strain.
I Need to Find a New Tenant; What Extra Precautions Should I Take?
Since this is a difficult period for many tenants, the Landlord and Tenant Board has been closed and evictions halted. What this means is that until the quarantine period is over and the courts re-open, you would be unable to evict a tenant for non-payment of rent. When the courts reopen, we expect that there will be a backlog of eviction hearings which will likely result in hearing delays of 6 to 8 months or more. All of these factors increase the risk that landlords take on, so if you must get a new tenant, be sure to run a very thorough background check.
For tenant verification, you can conduct a thorough Credit and Background Check with SingleKey, so that you have all the information you need to make a decision. This report also includes a scan of the applicant’s social media public accounts; and a public document scan that searches for criminal records, negative press, court decisions, public biographies and past employment records of the applicant to help you determine if you’d be comfortable proceeding with their tenancy application. We also strongly suggest getting proof of income from tenants and ensuring that the rent does not exceed 45% of the gross household income as this is the best indicator of the tenant’s ability to pay rent.
Going through this process can be quite tasking if you are a busy person. This is why we recommend to hire an experienced realtor to help you find and sign a quality tenant.
Is there a way to protect my rental income from tenant non-payment of rent?
As a landlord, if you are relying on rental income as your primary income source, or relying on rent to cover mortgage costs, you can use insurance to mitigate the risk of non-payment of rent by your tenant. With The SingleKey Rent Guarantee program, you can secure your rental income and also protect your property from vandalism or willful damage.
Since many tenants unfortunately live paycheck to paycheck, we are seeing a spike in tenant rent payment default due to the impact of COVID-19 on the economy and the resulting job loss and reduced work hours. Therefore this is a great time to consider enrolling in a Rent Guarantee Program.
Note that tenants are required to have employment in order to be approved for this program; so make sure to enroll in the Rent Guarantee Program as soon as possible, before your tenant(s) are impacted by the slowing economy.
With many tenants having to delay their rent payments and laws enacted against eviction in most provinces, it is very important to make some adjustments as a landlord during this pandemic. Take advantage of government benefit programs and if you have to, utilize the Mortgage Deferral Program to delay your mortgage payments over the next few months. If you need to fill a vacancy, make sure to conduct a thorough background check, preferably with the help of an experienced realtor. Finally, most people are going through a difficult period now, and showing empathy towards tenants is very admirable in these uncertain times.