Dealing with rental disputes is one of the most stressful aspects of being a commercial landlord. Emotionally charged conversations are fueled by unseen financial pressures on both sides of the negotiation table.

If you find yourself in a disagreement with your tenant about rent it can be hard to know what to do. Don’t worry, your commercial lease will give you a lot of protection when it comes to late payers. In this post we’ll look into just some of the ways you can avoid and resolve rental disagreements.

Prevention is Better Than Cure

When is comes to rental disagreements, it’s better to avoid them altogether. Stack the cards in your favour from the outset and avoid the headaches in the long run by following this advice:

1. Use a Property Manager

You’ll want to have a good relationship with your tenant from the start. This is where having a good property management company is priceless. Your property manager will take the time to build a relationship with your tenant. With a good understanding of the tenant’s business, late payments and disagreements can be addressed before they get out of hand.

2. Send Timely Rent Invoices

Don’t just reply on your tenant to pay the rent each month. Sending invoices 1 month before they are due means that your tenant has no excuse for not paying their rent. If your tenant is late with their rent, reminders should be sent on a consistent basis as well. Nutshell’s systematic approach sends daily reminders as soon as a tenant falls behind on the rent. These reminders become stronger in their wording as the days pass by. They have been proven to minimise rental arrears.

3. Meet For Coffee

This is a slightly less conventional piece of advice but we have found that it works very well. If the tenant is behind on rent and you need to resolve the dispute, arrange a coffee meeting. Literally sit on the same side of the table as the tenant with the lease and rental ledger in front of you. Try to determine why they are behind. Is it a miscommunication? Is business slow? Do they prioritise other creditors above their rent? Understanding the root-cause of the lateness can help you come to a solution. Again, this is where a property manager can save you time and money by handling this meeting for you.

4. Remind the Tenant of the Lease Terms

If you still can’t resolve the dispute, try reminding the tenant of their obligations under the lease, and the consequences of not fulfilling their obligations. Be careful with this one. Reminding the tenant that the property may be repossessed will come off as a threat, no matter how you word it, and it is likely to damage any good rapport you have built. However, this firm approach may be what’s needed to get them to pay up.

IMPORTANT: Do not tell the tenant that you intend to re-enter the property without first getting legal advice!

5. Use a Payment Plan

So you’ve had a chat with the tenant and determined that it’s a cashflow issue. In this case, you could suggest a payment plan. Say the tenant is $5000 behind in their rent. Split the $5000 over the next 12 months and add it to each rental invoice. Smoothing out the payments for your tenant might be all they need to get back on top of things. A word of caution on this tactic: If the lateness of their rent is related to profitability, not just cash flow, then this tactic will just make things worst.

6. Know Your Lease

Ok, so you’ve got the best property manager in sydney, you have tried everything in this article, and you still can’t resolve the issue. It’s time to start planning for the worst-case scenario: re-possession. Step one is to know your lease. Understand your rights, and understand the tenant’s rights. Understanding, and observing, your tenant’s rights is a super important part of this process. If you end up in court, you don’t want to give your tenant’s lawyers any leverage against you.

In particular, look for the “default” clause in your lease. It might look something like this:

“If any rent or other money payable under this lease remains unpaid for 14 days after becoming due for payment, or if the Lessee fails to observe or perform any covenant or provision on the part of the Lessee in this lease, then the Lessor may re-enter the premises whereupon this lease will terminate.”

7. Get Legal Advice

I can’t stress enough the importance of getting legal advice before you discuss repossession with the tenant. To cover all the legal nuance around commercial property law would be outside the scope of this article, indeed, outside the scope of Nutshell’s services. If you don’t handle re-entry correctly you might damage your rights to your claim, or worse, be charged with trespassing. So, please, speak to a lawyer.

8. The Last Straw – Evicting Your Tenant

With the formal advice from a lawyer, and support of a property manager, you may find yourself reentering your commercial property under the cover of darkness (perhaps literally). Once you do, you’ll want to change the locks. Also, have your property manager prepare an inventory; it’s likely that you will now own everything that was left by the tenant, including their fittings and stock.

Looking for Specific Advice?

If you have a rental disagreement with a tenant and need specific advice, we would love to chat. Please get in touch below.

Leave a Reply

Your email address will not be published. Required fields are marked *