'Dogfight' looms as landlords start suing restaurants over unpaid rent • Hacker News Board

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#41

Post by Blackthorn » Sun, Apr 05, 2020, 8:04 PM UTC

papeda wrote: post #5

I find this question hard to think about. Who exactly should be pricing in the risk of something like this happening? On both sides there are agents who have taken on risk. Some of the agents paying rent overextended themselves even before the crisis. Some of the agents renting space did the same. So who should take the hit? Nobody (i.e., the government)? Even that solution seems wrong -- do we really want to incenti…

I generally don't feel bad about the rich person in this equation taking the hit. 99% of the time that's the landlord.

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#42

Post by dahdum » Sun, Apr 05, 2020, 8:04 PM UTC

Justsignedup wrote: post #16

dahdum wrote: post #14

Government should take a hit, in my opinion. It's inefficient for every individual and entity to prepare themselves against things like this, especially since government action (stay at home orders) is exacerbating it. The business "bailouts", at least the in US, are mostly just loans anyway. Taking a "too bad" stance and letting businesses cascade fail prolongs the pain and leaves the country worse off when the cris…

In that argument case, what about average citizens? Businesses seem to get bailouts when they fail because of unforeseen circumstances, but citizens are left to pay the bill. so in the end it is either fair, or someone takes a bigger hit.

Average citizens in need should (and are in many places) getting grants instead of loans. If the government lets businesses fail because they won't issue loans, more people lose their jobs and require grants. Much more cost effective to keep businesses alive.

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#43

Post by maxsilver » Sun, Apr 05, 2020, 8:05 PM UTC

papeda wrote: post #5

I find this question hard to think about. Who exactly should be pricing in the risk of something like this happening? On both sides there are agents who have taken on risk. Some of the agents paying rent overextended themselves even before the crisis. Some of the agents renting space did the same. So who should take the hit? Nobody (i.e., the government)? Even that solution seems wrong -- do we really want to incenti…

I don't see how this is even in question. The landlord should always be taking on the risk, that's literally their only job -- they provide nothing of value, besides that one thing. (They often don't even maintain the property or upkeep, in the US that's usually entirely on the tenants, through a third-party management service priced into the rent).

If landlords aren't willing to take the risk of tenant defaults on, then landlording should just be universally-illegal, and let the government directly cut rent-like mortgages and property-management-like upkeep for those properties. If the general public is going to keep bailing out wealthy deadbeat landlords every decade, we better at least get to keep the property.

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#44

Post by AmVess » Sun, Apr 05, 2020, 8:05 PM UTC

matz1 wrote: post #15

papeda wrote: post #5

I find this question hard to think about. Who exactly should be pricing in the risk of something like this happening? On both sides there are agents who have taken on risk. Some of the agents paying rent overextended themselves even before the crisis. Some of the agents renting space did the same. So who should take the hit? Nobody (i.e., the government)? Even that solution seems wrong -- do we really want to incenti…

The mistake is the landlord didn't take payment upfront, 6 month / 1 year.

Do you make your mortgage or rent payments 6 months to a year in advance? If not, why do you expect landlords to do the same?

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#45

Post by JonoW » Sun, Apr 05, 2020, 8:06 PM UTC

Whilst I'm sure landlords are in a tight spot too, what good actually comes from evicting any business right now? It's not like there are any new ones to take their place. Having an existing business with known revenue, waiting to restart once lock down ends seems better than hoping a new one will fare any better.

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#46

Post by williamdclt » Sun, Apr 05, 2020, 8:06 PM UTC

kfrzcode wrote: post #19

echelon wrote: post #8

Earlier quoted context omitted.

Businesses were told to close by the government to prevent spread of the virus, thus effectively shutting off their income. The government should shut off rent income, too. And mortgage payments. We're in survival mode. Nobody gets to make any money right now. We have to wait for the recovery to begin.

> Nobody gets to make any money right now. This is a fantasy, and will never, ever happen... At least in the United States.

Strong assumption. "Never ever" is a long time for one of the youngest countries in the world.

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#47

Post by ummonk » Sun, Apr 05, 2020, 8:06 PM UTC

papeda wrote: post #5

I find this question hard to think about. Who exactly should be pricing in the risk of something like this happening? On both sides there are agents who have taken on risk. Some of the agents paying rent overextended themselves even before the crisis. Some of the agents renting space did the same. So who should take the hit? Nobody (i.e., the government)? Even that solution seems wrong -- do we really want to incenti…

The way to be economically successful in modern America is to leverage yourself to the hilt to get massive returns during good times (while cautious savers miss out on getting such massive gains), and then turn around and ask for a bailout if things go south and the heavy leverage and lack of rainy day savings pushes you underwater.

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#48

Post by papeda » Sun, Apr 05, 2020, 8:07 PM UTC

toomuchtodo wrote: post #22

kfrzcode wrote: post #11

Earlier quoted context omitted.

Honest question, how does one factor in risk for a catastrophic decline in cash flow? I'd suggest having a war chest which could cover six months expenses. I'm not a business owner though... I imagine it's probably harder to do than it is for an individual.

6-12 months of cash reserves, whether you’re an individual or business. The yield drag is offset by avoiding insolvency.

Is this reasonable to expect from a business where 6 months of cash reserves are not legally required? Can't the restaurant that saves 1 month of reserves instead of 6 months charge lower prices and still turn a profit, thus outcompeting the prudent save-for-6-months restaurant?

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#49

Post by SpicyLemonZest » Sun, Apr 05, 2020, 8:08 PM UTC

echelon wrote: post #21

SpicyLemonZest wrote: post #10

Earlier quoted context omitted.

How are people going to obtain goods and services if they're not making any money? I suppose we could bootstrap a temporary command economy, but that seems very challenging and such economies don't have a great track record.

A few key businesses can be carved out as exceptions. It's not a hard and fast rule - we have to be pragmatic. People can't starve. You shouldn't require businesses to pay mortgages or rent. This is where the government needs to step in and provide guidance, leadership, and subsidies. It's pretty clear we're headed for a recession at this point. Forgiving debts could help reprime the system.

Right, that's what I would refer to as a "command economy": an economy where the government cancels broad categories of monetary flows and substitutes itself as an arbiter of who should do what work. I don't think the government would be good enough at central planning for that strategy to help.

Re: 'Dogfight' looms as landlords start suing restaurants over unpaid rent

#50

Post by xxpor » Sun, Apr 05, 2020, 8:08 PM UTC

matwood wrote: post #24

echelon wrote: post #8

Earlier quoted context omitted.

Businesses were told to close by the government to prevent spread of the virus, thus effectively shutting off their income. The government should shut off rent income, too. And mortgage payments. We're in survival mode. Nobody gets to make any money right now. We have to wait for the recovery to begin.

What happens to the people living on fixed income from the dividends of those bonds backed by those mortgages? This is why I think some of the European countries have the right idea. Don't stop people from paying rent or mortgages, instead give all those who lost their jobs some percentage of their income until this is over. This lets people continue paying their bills so all of the second, third, and forth order eff…

What happens to the bondholders when the landlords evict the restaurants for not paying rent, thereby guaranteeing there won't be rental income for a year+?

Someone's going to have to suck it up. In this case, it is the bondholders. It's not a risk free investment.