Since the world hasn’t fully recovered from the challenges of 2020, tenants continue to seek rent relief from landlords. Having lost many commercials, tenants, when businesses closed down, many landlords are confused about how to handle tenants’ rent relief requests. After all, they’ve also been affected by the crisis and need to find ways to preserve a stable cash flow to maintain long-term financial stability.
Among the various strategies to handle rent relief requests is to ask for the right documents from concerned tenants. This guide will list down the documents required for rent relief requests.
Yearly Revenue and Sales Comparisons
Before anything else, it’s important to determine whether the tenant genuinely qualifies for a rent relief or not. Many businesses that continued to perform well through the pandemic months may try to exploit the situation and use it as an excuse to request rent relief.
To determine whether they deserve a rent relief or not, ask the tenant to show the comparison of the year’s revenue and sales with those of the previous years. Moreover, probe them to know what they’re doing to improve their earnings.
When you request the financial statements, make sure they provide you the audited versions. The company should be able to demonstrate how a rent relief can help improve financial stability in the future.
Rent is not the only operating expense businesses incur. As a landlord, you should be concerned that your tenant is not just considering rent for rent reduction but all of their options. To ensure this, require your tenant to present documents giving details about the steps you’ve taken to reduce the operating expenses.
These documents can include the rent relief requests for other outlets of the business, any discontinued business divisions due to the pandemic, any reduced working hours, and any redundancies carried out to save on salaries.
Besides, you should be interested in knowing whether your tenant obtained support under the CARES Act. Part of that loan can be used to pay for the loan. Based on the requirements of the loan, businesses can use 25% of it on expenses outside of payroll, such as for rent.
The Budget for Current Year
The fiscal year budgets for this year should also give you a clear idea of whether the tenant really needs rent relief or not. Make sure the document includes the forecasted and actual expenditures and revenue to date. When scrutinizing the document, pay particular attention to their income and expenses for the requested rent relief period.
Determining whether your tenant has experienced a tough time or not is not sufficient to establish their eligibility for rent relief. To qualify for it, they must also be able to demonstrate the steps they’re taking now should restore their profitability and improve their cash flow situation in the near future.
Ask them for a business plan that clarifies what measures they have in mind for the rest of 2021.
As a landlord, you should now find yourself in a much better position to assess rent relief requests and make rational decisions. Your tenants should be completely aware of the documents required for rent relief.
If you’ve lost some of your tenants and are looking for new, more responsible ones, connect with Sensible Home Management today!