What’s worse than a vacant property? A tenant who has stopped paying rent.

This is the absolute worst-case scenario for any owner or investor. Not only do you have no rental income, as with a vacant property, but you now also have the hassle of evicting your tenant.

Let’s talk straight about this very serious topic. If you stuff this up, not only will you be out of pocket, you might even put yourself at risk of legal action from the tenant. So be careful, and always seek legal advice.

In this article, we’ll walk through the process that you should follow if your tenant starts to fall behind on the rent, and what to do it they stop paying altogether.

Stage 1: The Tenant is Slow in Paying Their Rent.

Long before an eviction, the tenant usually starts to pay their rent a little late. Even a few days late is red flag.

You or your property manager should have a robust system of notifications about late rent payment in place. For example, our system here in the Nutshell Property Management team will send a friendly SMS reminder as soon as the tenant is 1 day late. From there, if they still don’t pay, they will receive firmer and firmer warnings via SMS, email, letter and phone call. The timing and contents of the reminders have been tested to maximise response rates and minimise late rent.

More tips and advice on resolving rental disagreements here.

Stage 2: The Tenant Breaches Their Lease

Most commercial leases will state that the tenant is in default if the rent remains unpaid for 14 days. Here’s an example from an Estate Agent’s Cooperative lease:

“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.”

Hold up! Before you go charging in and changing the locks, you need to be aware of the law. Specifically, the Conveyancing Act (1919).

Section 129 of the Conveyancing Act says that, in layman’s terms, you must notify the tenant that they have breached the lease and give them a chance to remedy the breach.

If you followed the steps above, you will already be in dialogue with your tenant. However, at this stage, you or your property manager should write to the tenant and include the following information in your letter:

  1. Correctly address the tenant as per the lease.
  2. Identify what clause of the lease they have breached.
  3. Identify how they can remedy the breach.
  4. Identify any compensation that they should pay (for example, penalty interest).

Your tenant then has a “reasonable time thereafter to remedy the breach”.

As well as being aware of the law, you also need to ensure that you haven’t breached the lease yourself. “An eye for an eye” does not apply here. Mr Nguyen from Unified Lawyers says,

“It is important that the landlord satisfies the requirements of the lease before evicting any commercial tenant. If the landlord fails to comply with the lease, it may render the eviction invalid and could potentially expose the landlord to loss and damage.”

Stage 3: Eviction

If all else has failed, you may have the unfortunate task of evicting your tenant. At this stage, we always recommend that you seek legal advice, if you haven’t already.

You should write to your lawyer (email is fine) and give them as much information as possible. Transparency is the key here. Give them a copy of all correspondence and a detailed timeline. Without the full picture, their advice might be invalid.

Each case is different, so ask your lawyer for the specific steps you should take to re-enter the property.

Having Tenant Trouble? Speak to a Property Manager.

If you are struggling with a tenant who is late in paying their rent, you need the advice of a property manager. Nutshell’s Property Management team can offer bespoke advice and get your rental income flowing again as soon as possible. Talk to us or view our fees now.

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