Act Quickly to Remove Non-Paying Tenants
Quick action is necessary once a tenant stops paying rent on time. Most of the time, once a tenant is late paying rent, or stops paying rent altogether, it is a preview of underlying problems the tenant is having with its business. Charging a late fee, while allowed under the lease and encouraged, many times will just add further burden to the tenant’s inability to pay and prolong the time the landlord will be accepting less than full rent, and not have possession of its property to release to another tenant who will pay full rent.
Although most landlords cringe at the thought of having to find a new tenant and facing the prospect of having a vacancy into the foreseeable future, along with paying leasing commissions to find a new tenant and move out/clean up expenses, those thoughts must be balanced with the prospect of having a tenant who does not pay rent or contribute its share to the operating expenses of the property, while still adding to the property’s operating expenses the longer it remains in possession, not to mention liability from its business operations.
Once possession of the premises is restored in the landlord, damages, if any, can be assessed, needed repairs completed, and the vacant space put back on the market for lease. At that point, the landlord would consider its options to demand collection of future rent from the tenant if remaining time is left on the lease along with all expenses incurred to obtain a new tenant, which the lease terms should provide for, including leasing commissions and expenses to repair damages. This coincides with the landlord’s existing legal duty to mitigate any damages it may suffer due to the tenant’s actions. The key is for the landlord to get control over its property as soon as possible so it can keep costs to a minimum and maximize profits.
The longer action is delayed, the more time and expense will be incurred in removing the tenant and regaining possession of the leased space. Tenants should consider the rent as their number one operating obligation. If they can’t pay the rent, imagine who or what other creditors they’re not paying. If the tenant is giving you a story about business being slow, that should confirm your suspicions about the tenant’s business in general and is a good indication that the tenant will not be paying the rent in a timely fashion from there on out unless you put a stop to it. The relationship of tenants with their landlords is like that of children with their parents, if the rules are not enforced, everyone runs wild, after all, it’s to their economic benefit to do so. Why insist the tenant sign a lease at all unless the landlord is willing to enforce its terms and provisions?
Other than receiving timely payment of rent, it is important to strictly enforce the lease provisions for many reasons, one of which is to set an example of how the relationship with the landlord is expected to be conducted for the duration of the lease term, and also to show the tenant that the landlord is not sleeping on its rights and is not afraid to enforce them and pursue what it is rightly entitled to under the contract.
While there are tenants who have a good track record of paying their rent on time, and may just need a month to catch up, my experience is that most of the time granting concessions to tenants often backfire and the late payment or non-payment of rent is an indication of worse times for the tenant. In these situations, you may want to inquire further whether something more serious is the cause of the late or non-payment of rent or whether some type of arrangement can be worked out to both parties’ satisfaction. In either event, you must act swiftly to protect your rental income and your property.