In the world of corporate relocation, renters traditionally received less attention and much more limited benefits than homeowners. There were two reasons for this. First, renters tended to be recent college grads, new hires or lower-level employees—at the lower rung of a typical tiered relocation program. Second, from a practical standpoint, this group of employees was easy to move: often single, with relatively few possessions and of course, no home to sell. They needed little assistance to complete their moves.
Today, post-crash real estate problems, changing demographics and evolving lifestyle preferences have dramatically expanded the group of transferees who choose to rent. In addition to the traditional group, there are current homeowners with little or no equity to invest in a new home; homeowners moving from a low-cost to a high-cost area; empty-nesters who are trading suburban homeownership for city life; and a growing group of people who simply would rather not shoulder the burdens and risks of home ownership.
Not surprisingly, many companies are re-evaluating their rental assistance benefits. Some are even creating several tiers of renter benefits to accommodate the different groups. But the core rental assistance benefits turn on breaking the lease at the departure location (if applicable) and finding a new rental property at the destination.
Breaking a Lease
It is common for landlords to charge fees for breaking a lease, even with proper notice given thirty to sixty days in advance. This usually means that they keep the renter’s initial deposit and charge one or two months of extra rent to cover the unexpected vacancy of the property. Some leases allow the landlord to continue to charge rent as long as the property remains vacant, up to the full lease term.
Most rental assistance benefits include payment of up to two months of rent to cover the expense of breaking the lease early. Some companies use a tiered system, offering one or two months of rent for employees below the executive level, and up to three months of coverage for executive level employees.
It is important to note that the rental assistance for breaking a lease only applies to the loss of a deposit and the additional rent that is being charged by the landlord. Rental assistance will not cover damages or cleaning services. Pet deposits are also not covered by most rental assistance programs.
Finding a New Rental
The employer’s relocation management company (RMC) typically assesses the employee’s needs and determines the criteria for a rental property, sharing this information with a destination rental agent. The relocation company then schedules an orientation tour of the new area, to help the employee identify potential communities and properties. The rental agent uses the information gleaned from the RMC to pre-select properties that meet the employee’s needs. Alternatively, companies that manage their relocation program in-house sometimes partner with local property managers to help employees find a rental property near their new job.
Once a property is found, it is advisable to include a “diplomatic clause” in the lease agreement, stating that if the employee is transferred again during the lease term, he or she will not be charged additional fees for breaking the lease early. This gives employees the confidence to move without worrying that they will be repeatedly subject to costly lease termination penalties. Not all landlords will agree to this, but it is worth asking.
Other Services and Approaches
While this is the essence of the core rental assistance benefit, companies can offer additional benefits to meet the needs of executive or higher-tier renters. These can include miscellaneous allowances, longer rental finding trips, more in-depth area tours to include luxury properties, and homesale assistance for a departure home.
Conversely, many companies are now offering a lump sum in lieu of specific rental assistance benefits, especially for new-hires and college-grads. Some companies rely on their RMC to guide the employees through the rental process and keep them on track; others simply tell the employees when and where they are expected to report.
While this greatly simplifies administration for the company, there is a risk that the employee will not manage the process efficiently and will be distracted by the move long after it should have been completed. More formal rental assistance programs are relatively inexpensive for companies and result in more efficient moves, a faster return to productivity and ultimately, happier employees.