A reflection of a
turning, turned renter’s market during the current COVID-19 climate.
Our agents Kate Ryley and Jen Powell who assist a lot of landlords and tenants alike share their perspectives on the shifts and migration happening in the current Cayman rental market. They also offer advice on the hard hitting and most frequently asked questions from landlords and tenants.
Please note that the market is changing on a weekly and sometimes daily basis. These are our findings and advice as of the 8th April 2020. We will update you as and when changes occur. If you have any specific questions not answered here, please reach out to us.
In the absence of tourists, a heavy and sudden loss of jobs and the inevitable decline in population, the rental market is loosening up.
As holiday-units sit vacant, most condo investors are converting to long term tenancy. Owners are looking for tenants as some lose jobs (and can’t afford to stay) and tenants are requesting rate reductions from landlords who cannot afford to pay their mortgages.
There is no “one-size fits all” approach. The effects of this shift are being felt heavily by both landlords and tenants.
With this in mind, we urge both landlords and tenants to take extra care during this unique time; using empathy and compassion in all decisions being made and know that this will pass.
We are firm believers that while in the short term, this pandemic is going to allow for a significant correction in the rental market, easing affordability for residents, it is likely to be a temporary shift lasting 12-months.
The climate is rapidly changing and no two situations are the same. We encourage you to reach out to us to discuss your situation – we’ve got nothing but time and it’s 100% free. In the mean time, here are 4 quick steps plus some FAQs that will help:
First things first. Reread your rental agreement. This is important, everyone’s lease is slightly different, and you must familiarize yourself with the agreement before making any decisions, this goes for both landlords and tenants!
How is your tenancy situation shaping up? Have they asked for a reduction in rent or maybe they even missed rent this month?
We are seeing a surge of empty apartments and condos come to market as owners look to replace tenants that have had to leave island or even visitors who have cancelled their vacations entirely. There is also an increase in interest from renters to see upgrade opportunities maybe at a nicer location for the same amount of rent.
If you are a landlord of a long-term rental, stay calm and explore all your options before making any decisions. Read your rental agreements, talk to your loan officer, and have open discussions with your tenants. It’s important to note that there is going to be significantly more inventory out there for your tenants to consider. Reduced rent from a grateful tenant is much more attractive than no rent at all if they choose to vacate.
You may run the risk of no income if you do not allow for circumstantial understanding. Be sure to think about your short, medium and long term property plan and know that we are available any time to guide you through these new norms.
Should I be offering / accepting a reduction in rent or postponing the collection of rent?
- Landlords are not required to stop charging rent during this period, and many tenants will be able to pay rent as normal and should continue to do so, however, it is important to understand than many tenants will be without income or a reduced income in this difficult time. Discuss options with your tenants as soon as possible.
- Consider an interim, temporary agreement for a reduced rental rate, for example 6 months reduced in exchange for a ‘no leave clause’ for the same period. Or ideally aim for 12 months. At this stage it’s about buying time, covering your costs AND securing tenant loyalty.
How can I protect my investment during this uncertain time?
- Mortgage lenders have agreed to offer payment holidays for 3 months, and most banks will consider a longer period, speak to your representative to determine the best option for you.
- Discuss with your Strata on how they can trim fees for 6 to 12 months.
- Dip into savings to cover strata and mortgage. Short term pain for long term gain.
- Seek a co-investor who can buy in and share the ownership, and the costs!
- If none of the above works for you, perhaps it’s time to consider selling. That’s a whole other market!
Can I evict my tenant for failure to pay rent?
- Most rental agreements should have a clause with respect to non-payment. If your tenant does not honour their rental agreement you can ask them to vacate.
- We advise landlords not to evict during this challenging time without a very good reason. It is essential that we work together in these unprecedented circumstances to keep each other safe and soften the adverse effects on the community in any way that we can.
- As inventory increases and demand decreases it may be hard to find a replacement tenant, so if you evict you may be jeopardizing longer term income.
So what happens when there is an influx of new inventory for long term rentals in the market? Prices will follow suit giving you more options and opportunities to:
- Upsize: Make a lateral move, paying the same price and upgrade to something better or bigger. This includes upsizing your lifestyle too. Fancy some oceanfront property or a condo with fancier amenities?
- Move locations: Where the price factor once determined your location, you now have the power of choice; canal or beach, shorter commute or quieter lifestyle? We are already seeing a small rental migration in motion, for example:
- Savannah moving to Prospect
- Prospect to Grand Harbour to South Sound
- West Bay to Snug Harbour
- South Sound and Snug Harbour to 7MB
- Downsize: Move to a more affordable residence and save.
Be conscious that if you choose to relocate for a better location or rental rate, you run the risk of losing your security deposit and also not having your new rental agreement renewed in a years’ time if the market returns. Be sure to think through your living situation on the longer term and give us a call to chat through your thoughts and strategy.
Can I stop paying rent?
- Tenants should continue to pay rent and abide by all terms in their rental agreement, at least to the best of their financial ability.
- If you have no significant disruption to your income, you should continue to honour your rental agreement.
- If there is a clause allowing you to give notice (i.e. 60 days to vacate) and you determine there is a more suitable or affordable place to relocate to, you should stick to the terms and allowances of the agreement and speak to your landlord as soon as possible.
- If you choose to leave in breach of your agreement, your security deposit is in jeopardy. Read your agreement and understand both your rights, as well as your landlord.
- If you are worried about being evicted and not having anywhere else to go, you should contact the Ministry of Community Affairs : http://www.gov.ky/portal/page/portal/mchhome/announcements/non-caymanian-covid-19-support-application-form
Can I ask for a reduction in rent?
- If you feel that you are paying too much in rent and are considering other options, explain this openly with your landlord to determine a fair outcome for both parties under the circumstances.
- If your income has been affected, but is likely to only be short term, you should seek a new and temporary agreement which can be applied for extension, month to month, as there is more clarity on what happens next. This temporary agreement could include a reduced rental rate or agreement to pay in arrears at a later date.
- If you are a work permit holder and are considering leaving island, or are not guaranteed to return to work prior to the airport reopening and will likely have to leave island temporarily, speak to your landlord as soon as possible to discuss your options.
It’s a dynamic, fluid and complex situation that’s unfolding rapidly. We do feel strongly that the rental market will return to some form of stability in time so it’s important that BOTH landlords and tenants respect each other and use communication to come to a common ground in this unique time.
Every property journey is different; if you are uncertain as to what to do, or how to do it, we are here every step of the way. All you have to do is ask.