Tenant 2 month arrears on rent...options?

[willister]

Hi,

Our tenant has advised us via our agent frankly that he has "no money" to pay rent. He is in the 2nd of a 3 year lease with a 3 year option to renew.

Honestly, it looks like his business is about to go belly up and likelihood to recover this is rent is near zero. Any advice on how to assess this situation?

The last thing I'd like to do is lose rent, but if it means getting a new and hopefully better tenant, then I'm willing to bite the bullet so to speak.

What I fear is that he will refuse to move out and I can't recover my money.....last thing I want is another headache with a non paying tenant.

Thanks.

 

[Scott No Mates]

Get the agents to cut them loose asap.Sure the building may sit vacant but it won't be clocking up costs either

 

[Doovalacky]

I hope your agent has already sent the breach notices. Leaving the tenant there is only going to increase your loss. I would have been sending the eviction notice 2 weeks ago at the latest.

 

[jrc]

Let's see - your options are evict a nonpaying tenant and lose rent while you are looking for a new tenant or keep a nonpaying tenant and lose rent. Can you negotiate for him to go and you keep stock in lieu of rent?

 

[nhg]

I have the same issue, would love to hear what is suggested.

Fortunately have tenant insurance, so that provides some comfort.

It's interesting, tenants came into money recently and paid back all past rent arrears, bought a new car and hired gardeners... and 3 months later, back to broke. I feel like going over and giving them a big slap.

 

[Rooster]

The tenant has to go. Issue the notice and start from scratch.

What have you got in the way of bond / bank guarantees?

Rooster

 

[Terry_w]

Think of trying to recover your money too. Any clauses in your lease allowing you to caveat personal properties?

 

[chilliblue]

Follow the termination clause in the lease and in the meantime start commencing and showing the property for a new tenancy.

Have your solicitor commence a debt recovery process.

For future reference, you should never allow a tenant to default to that extent and ensure that your lease allows a clear path.

Letters at 7 and 14 days and eviction notice at 21 days.

 

[M.Investigator]

Are the reasons for non-payment seem genuine? What about the guarantor’s agreement? Is there any chance of agreeing with the tenant for any plan like series of small rental payments to make payment up to date? Or make a single payment for the entire rental arrears? Make sure you put everything in writing and have the tenant sign the agreement.

 

[handyandy]

Hi,

Our tenant has advised us via our agent frankly that he has "no money" to pay rent. He is in the 2nd of a 3 year lease with a 3 year option to renew.

Honestly, it looks like his business is about to go belly up and likelihood to recover this is rent is near zero. Any advice on how to assess this situation?

The last thing I'd like to do is lose rent, but if it means getting a new and hopefully better tenant, then I'm willing to bite the bullet so to speak.

What I fear is that he will refuse to move out and I can't recover my money.....last thing I want is another headache with a non paying tenant.

Thanks.

I assume this is a commercial tenant?

What are the conditions of your lease. There should have been specific performance clauses that if they fail you should have given notice.

Also do you have any directors guarantees or at the lease a 3 month bond.

Cheers

 

[willister]

So here is what happened:

- Agent used the softly softly approach first, this didn't work...
- Agent then had to threaten legal action if not paid within 14 days and had a notice ready to send.
- Tenant called within 5 minutes of agent ringing him, saying he will now pay for this month's rent but told agent it may be late again next month.

We're now at the problem of whether to keep this tenant or bite the bullet and allow him to exit this lease (it just appears he is going to struggle every month in and out) and look for a new tenant.

Side note, is it THAT hard to get decent tenants? Admittedly, we are in a a "rougher" side of Sydney.

 

[Bird Dog]

I think you already know the answer Will

As discussed HERE
I would cut them loose (parting amicably) and start looking for another tenant or... put it on the market as tenanted, cut your losses, move on and let someone else deal with them as clearly it's not letting you sleep at night.

A good well positioned CIP should not be so hard to
A: Rent
B: Find a decent tenant.

Make a decision either way and commit otherwise you'll very likely be having the same conversation again in Nov, Dec, Jan, Feb..etc etc etc.

All the best.

B.D

 

[JohnHenry]

................

Letters at 7 and 14 days and eviction notice at 21 days.

I thought that supposed to be 60 days ?

 

[Aaron Sice]

 

[Bird Dog]

.
.
I'm not quite getting your message Aaron..
.
.
.

 

[Trogdor]

Boot them immediately (after serving required paperwork)

We had a CIP tenant last year who fell into this category, though without the courtesy of an explanation no less. He received a notice after 14 days and locks changed at months end.

Once late always late.

 

[matto_]

where was your agent in all this? 2 months is a fairly long time.

 

[chilliblue]

Both Trogdor and matto are right.

Once a tenant regularly falls into arrears and an agent/owner allows it, a regular pattern emerges and the time taken to make the payment lengthens.

Once you have bedded this down this situation, you really should have a talk to your agent and ask why was it left to fester.

Any rental arrears needs to be dealt swiftly and the tenant left with no misunderstanding as to their responsibility.

Have a look at your lease clauses and see if they need to be tightened.

It may be a hard decision to evict a tenant but in this case it would be for the right reasons.

Best of luck.