The unemployment report was just released for October, and the news isn’t good.  Approximately 240,000 jobs were lost in the month and the unemployment rate has hit 6.5%.

Traditionally, an unemployment rate of 5% is considered “full employment”, so the news might not be as bad as we’re being led to believe.  Regardless, this is an issue that real estate investors - and particularly landlords - want to be aware of, since it could be your tenants who lose their jobs.

When your tenants lose the ability to pay you, the key is quick and decisive action.  But you must know when such a change happens before you can act on it.

I was thinking about this issue this morning and came to the conclusion that it would be ideal if there was a way to know as quickly as possible when a tenant has lost his/her job.  That way, you can be prepared to act quickly in the way that’s most appropriate.

Please note: What I’m about to describe to you are ideas in the embryonic stage.  I’ve not tested them, and I’ve not confirmed them with legal counsel.  I’m posting them here because I think it’s well worth considering, and it’s also possible that someone among the thousands of readers of this blog may have already implemented a similar idea and could tell us about it.  So here goes:

Here are a few ideas to be able to know quickly if your tenants have lost their job:

• Send a notice to all of your tenants that you have some sort of “Assistance Program” in the event of the Tenant’s being laid off, but that they must notify you within 3 (or whatever #) of days of their termination.  (It’s up to you what your “Assistance Program” entails - maybe you reduce rent slightly, or maybe you connect the tenant with an employment agency… that part is your choice.)
• Require your Tenants to disclose their employer to you at the time they sign their lease with you, and require them to notify you within a short period of time any time their employment situation changes.
• If your lease enables you to change its terms, consider doing so for active leases, and require the tenant to notify you of employment changes

These are the 3 ideas that I’ve come up with so far.  I’m very interested to hear your ideas on how to deal with the issue of a suddenly unemployed tenant.  If you would be so kind as to share your experience, we’ll all be grateful.  Also, feel free to share with us exactly how you use the information that your tenant has lost their job.

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