How to Deal with a Tenant Who Is Delinquent

There could be legitimate circumstances that explain the delayed payment by a tenant.

As a commercial landlord, you depend on tenants making timely rental payments. After all, you need the money to pay the bills that you have. When a tenant fails to pay on time, it affects the landlord’s ability to cover their financial obligations for that specific property.

With the financial downturn affecting businesses across North America, commercial landlords have to be aware of what their options are to remedy non-payment of rent. There are a number of steps that commercial landlords would be wise to follow. Commercial landlords would be well advised to contact the tenant to see why they are late on the rent.

There could be a legitimate circumstance that explains the delayed payment. A death in the tenant’s family could also be having an impact on the ability of the business to operate. The possibility of a workplace accident cannot be ignored. A workplace accident could result in a shutdown and loss of business-related income for the tenant.

By contacting the tenant, the landlord has an opportunity to make arrangements with the tenant to correct the payment problem. Following this method avoids costly legal entanglements and allows both parties to reach an equitable solution to the problem. The other benefit is that the landlord also avoids the cost involved with advertising, interviewing and approving a new tenant.

Distrain is a term that means seizing the tenant’s property to recover rental arrears. Seizing a tenant’s chattels is a complex process for a landlord to undertake. This process needs to be carefully undertaken in order to make sure that the tenant’s right to use and enjoy the premises is not breached by the process.

The landlord is required to provide the tenant with notice, informing the tenant of the intention to dispose of chattels to cover the rental arrears that are owed. The process usually requires two independent appraisals of the chattels after a pre-specified period of time. The sale of chattels may, or may not, cover all expenses and rental arrears.

If the sale does not cover the arrears, the landlord must sue the tenant to recover the remaining rental arrears. If the tenant informs a commercial landlord that he or she can no longer afford to lease the space, the landlord must decide whether to accept the fundamental breach or refuse it. Either way, the landlord will potentially have to go through the process of suing the tenant to recover any of the lost rental income.

Commercial landlords need to carefully weigh their options when attempting to recover lost rental income. The best solution is often to find a way to work with the existing tenant to resolve any arrears before legal action is taken. In the event a landlord’s best option is to pursue legal recovery of rental arrears, then they will have to weigh their legal options.

Randy Bett www.BetterGroupRealEstate.ca