With $1B in pandemic back-rent due, LA landlords scramble to survive

Los Angeles area landlords are owed more than $1 billion in back rent from the pandemic, according to data compiled by National Equity Atlas.

During the pandemic, many landlords in the National Equity Atlas’ research area of Los Angeles and Orange counties were forced to improvise to survive the pandemic’s eviction moratorium.

Universe Holdings, a company which owns and manages more than 1,000 units in Los Angeles, created a three-person task force at the beginning of the pandemic devoted to collecting rent from delinquent tenants, said Henry Manoucheri, CEO of the multifamily firm which has a Century City office.

The task force was staffed by management agents already employed by Universe. Its job was to comb through new renter regulations from different government agencies as well as understanding different situations of tenants who claimed COVID difficulties, Manoucheri said.

“There were hundreds of tenants who were delinquent on rent. Most had the money, but they wanted to take advantage of the moratorium. The (task force made) emails, text messages, door knockings, meetings and getting payment plans in writing. We did a number of cash buyouts. At the same time, we carried a lot of balance,” he said.

During the height of the pandemic, Manoucheri estimates a few of Universe’s Los Angeles buildings collected 65 percent of their rent. More recently, these buildings increased collection to 83 percent. Across Universe’s 4,000-unit multifamily portfolio, which includes other Southern California counties, as well as Florida and New Jersey, more than 96 percent of tenants paid rent on time.

Manoucheri said it was crucial to be proactive. “If we sat back, we wouldn’t be around today,” he noted.

Other landlords were able to evict tenants who did not pay during the pandemic. Ky Trang Ho said she evicted five tenants from a home in South Los Angeles last year. Ho runs private webinars for landlords to handle evictions. She said landlords are not the only ones who have to follow stringent city rules. Tenants “have to file documentation every month that they were affected by COVID when they failed to pay rent,” she said.

She was able to evict two tenants because they never applied for the state of California’s Housing is Key rent relief program. When she filed eviction papers against three other tenants in South Los Angeles, only one contested her, but dropped a civil court case and moved out in January. She sold the house in April for $1.2 million.

During the height of the pandemic, an estimated 18 percent of tenants did not pay rent in the 15,000 units managed by Moss & Co., said Chris Gray, the Sherman Oaks-based company’s president. Moss manages multifamily buildings for independent property owners.

Gray estimates his company was able to recover more than $13 million in rent for its clients through government funding. After programs such as the state’s Housing is Key relief program stopped accepting applications last year, Moss’ clients had another $15 million of past due rent uncollected.

To make up for the shortfall, many owners would cut services. “We have to be selective with expenses. We have to delay or cancel common area and unit upgrades. In some cases, mom-and-pop owners took out loans to keep properties operating. We were repairing large-ticket items instead of replacing them as a result of these COVID policies,” Gray said.

Joe Goldstein, chief operating officer with Concord Companies in Beverly Hills, owns and manages 4,000 units, of which 70 percent are in the city of Los Angeles. He said 400 tenants were unable to pay rent during the pandemic. Half of those tenants went to the eviction stage for a number of reasons including not getting government relief.

“We’re going to have to go to court 200 times,” he said. “I literally was looking to hire paralegals to handle the case volume.”

To spare his staff the hardship and cost of court, he sought to settle cases by getting his district managers and accounts receivable staff to place delinquent tenants on payment plans and sometimes forgiving debt so a paying tenant could move in. Goldstein said his company avoided small claims court. He also worried about upcoming municipal programs, such as the City of Los Angeles’ just cause eviction rules, which add increased protections for tenants.

“Just as tenants need to be protected from landlords with malicious intentions, there also has to be consideration for tenants with malicious intentions,” Goldstein said. “In order to be effective, we had no choice but to work with our residents because local governments’ blanketed policies were often too obtuse.”