Published on March 25, 2020
Rent Strike 2020, an online project claiming 1.5 million signatories, asking that “every governor, in every state, must do what is necessary to ensure a 2-month freeze on the payment of rent, residential mortgages, and utility bills.” The initiative was launched by a long-shot Democratic congressional challenger in Washington State who is a supporter of Bernie Sanders and backed by a local chapter of the Democratic Socialists of America.
Coverage Tuesday afternoon (March 24) in Bloomberg highlighted that some major retail corporations—chief among them Mattress Firm and Subway—are beginning to communicate to their landlords that they will be delaying or withholding rent due to the economic situation.
Well, yes and no. There are several differences between you deciding you don’t want to pay rent, and a multinational corporation deciding that. Differences including eviction laws, contract terms, bargaining power, and credit impact.
Cities and states are starting to take action halting the most immediate potential consequence of nonpayment of rent. (Evictions provisions generally fall under state and local laws.) Nolo.com has a good listing of the actions being taken in various states and cities.
So far, there does not seem to have been coordinated action on delays of commercial rents. Does that mean we’ll see Subway thrown out on the street, though? It seems unlikely — kind of like foreclosing on the bank. While residential tenants tend to have special legal protections against evictions, the bargaining power and legal firepower of big business still seems like a better bet.
According to a 2018 report, the top 1,000 corporations in the U.S. take an average of 57 days between receiving a bill and paying it. As anyone who has been on the vendor side of a relationship with a large corporation knows, respectable and prudent cash management practices generally include delaying payment of bills as long as is allowed, and sometimes longer. But don’t try this at home!
Even with evictions frozen, a major fear of any individual considering delaying their bill payments is the potential impact on their credit report. There’s no simple answer here.
Only 1% of rent payments are automatically reported to major credit bureaus. But that just means that historically paying your rent is rarely useful in building your credit. (New tools are trying to change that). Big apartment management companies may be more likely to report your rent payments automatically.
Well, not exactly. Credit bureau Experian explains two ways in which rent non-payment can follow you. First, non-payment of rent can show up on a Tenant Screening Report. Experian helpfully adds that “A tenant screening report is not the same thing as a credit report, but it may prevent you from finding housing.”
And second, your landlord can sell your debts to a collection agency, who may report you to the credit bureaus
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