Mortgages and Leases During a Pandemic

There has been some legislation and much discussion about prohibiting evictions and/or foreclosures during this time of crisis. The press had reported how many people have been unable to make their payments as they can’t work outside the home. Preventing legal enforcement of lease or mortgage default does not, however, solve the problem. In the end, there needs to be a termination or a restructuring of the lease or mortgage.

Whether you are an owner/lender or a tenant/borrower, it is always best to communicate with the other party if normal payments cannot be made. It might be too early to have a final plan as your return to work might still be up in the air but avoiding communication just adds fuel to the fire. Even if your story is that you can’t make the payment, reach out to the other party and explain your situation and ask for some time.

Once there is more clarity, and let’s hope that’s soon, you either need to agree with your lender and landlord that keeping the property just doesn’t make sense or agree to amend your lease or mortgage. With a lease or mortgage, the landlord or lender may prefer to restructure rather than take the property back. As a tenant or borrower, you need something in writing that confirms whether the missing payments are still due and how that period of default will be handled in the future.

My experience is that lenders and landlords are more receptive to restructuring if the tenant or borrower is open and honest about the reasons for any default. Often, the concern is not about the missed payment but instead about the increased chance of future missed payments. If you can reassure the other party that the default won’t happen again a restructuring makes sense and all parties should understand the unique circumstances to justify a second chance.

Please send any request for topic suggestions to rene@breenandperson.com. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.