You don’t have a tenant; you have a guest. Tenants pay rent; guests raid your refrigerator

Print
Print Friendly, PDF & Email

If your days are spent on behalf of a landlord with (internally or externally) professionally managed properties, then think of a topic you’d like to read about and search for it through Ruminations’ back library of over 400 blog postings. If, however, you have a relationship (even in a mirror) with the owner of a property or two, read on.

Too many times over too many years, our phone has rung with this question: “I have a tenant who is now five months behind, what should I do?” Self-help, even where “lawful,” is illusory. The risk of “doing it wrong” is pretty great and the damages a tenant can rightly claim aren’t pretty. So, we never advise “lock ‘em out.” We get pretty uncomfortable when asked, “Can I cut off the water or the electricity?” If your answer would be “Yes,” stop reading now.

Before we give advice, our reply is: “Have you spoken to your tenant? Is this a case of ‘won’t pay’ or is it ‘can’t pay’?” Far too often, what we hear back is: “No, I haven’t.” In such cases, our advice begins with: “Talk to your tenant.”

In that same conversation or one that follows shortly thereafter, the original question returns: “What do I do?” Sometimes, admittedly in a minority of situations, the caller and its tenant have worked out some kind of payment arrangement and that second call doesn’t come. It turns out that the tenant was too embarrassed to call its landlord, increasingly so as it got “behinder and behinder.” It fell behind and as the amount of back rent grew, it felt that the landlord would want “all” at once. There’s a lesson there, and this is one point of today’s mild rant: “Landlords, when your tenant is late with its rent even the first time, call or visit that tenant. Don’t be complicit in allowing a tenant to get into the weeds. Getting in touch with the tenant (and we don’t mean by mail) may help the tenant, but doing so is really for your benefit. If you don’t contact your delinquent tenant, you already know the rent isn’t coming. So, what’s the downside? The worst that can happen is that you’ll figure out that the rent won’t ever come. On the other hand, maybe you can get the money flowing again, even if only for a few months while you get in the frame of mind that you’ll need to find a replacement tenant.

In the majority of cases, however, for whatever reason, the tenant isn’t going to pay the rent. So, we now offer the nuclear option: evict the tenant. Here’s where it almost always gets weird. The “Family Feud” number one come-back is: “But then the space will be empty – I won’t have a tenant.” Here is our copyrighted response: “You don’t have a tenant; you have a guest. Tenants pay rent; guests raid your refrigerator.” Landlords: “If you don’t get the space back, you can’t put another tenant there.” We know that one shoe doesn’t fit all feet and we are always are open to recognizing the very unusual situation where the non-paying tenant’s business is good for the property even if the rent checks aren’t being written. That could be when the property is in a “rough” neighborhood and occupied properties are “safer” than empty ones. Or, it could be when it makes a multi-tenant property with vacancies look viable in the rental market. But, even in those cases, a tenant is better than a guest.

So, what do we hear back? No longer surprisingly, it is: “But I need the rent.” So, we repeat “You don’t have a tenant; you have a guest.” Almost always, the caller says that she or he will talk to the tenant (again or for the first time) and we don’t hear back for months. Then, inevitably, the call comes: “I have a tenant who is now nine months behind, what should I do?” So, we respond” “Evict.” If we’re feeling that the caller hasn’t already realized that the time to act has come, we add that the reason the telephone company gets paid is that when they don’t get paid, they cut off the service and their customer (your tenant) needs the phone. While a landlord can’t “cut off service,” it can seek eviction.

Not surprisingly, the act of actually seeking eviction sometimes triggers a miracle. The tenant finds the money to pay the back rent. See, just as for these landlords, “hope springs eternal,” it does so for tenants as well. The “trick” however is that this “miracle” happens much more often when the amount owed is three months’ worth and almost never when it is nine months’ worth. For landlords looking for a miracle, start the process right after a discouraging personal contact with the non-paying tenant. That’s why it is important to get in touch with such tenants at the first instance, not when owed six months’ rent.

There are some corollary points to be made. Some even pertain to those readers in the “large landlord world” who ignored our first paragraph’s advice and “read on.” If you’ve read through this blog posting and haven’t discerned that it really isn’t about evicting a misbehaving tenant; it is really about communicating with your tenants, then go back and read it again. Does the tenant’s dirty window bother you (and it really is dirty?), then don’t send a nasty letter by first class mail, return receipt requested. You wouldn’t do that when your spouse left the front door unlocked. That’s how to start a fight. You don’t want a fight – you want the window cleaned or the door locked. So, just as we advise when it comes to unpaid rent, we make give the same advice when it comes to any other important default: get it touch with the tenant right away – before your high blood pressure impairs your judgment.

Second, if the tenant is viable, some rent relief may be warranted and might be smart to work out. But, you can’t really judge whether the tenant’s business could be viable unless you talk to the tenant. Remember, we aren’t talking about Sears. Its rent will come every month until it doesn’t (anymore). [Perhaps – we don’t have a crystal ball revealing its ultimate viability, and we wish it well.] We are talking about tenants whose lives and businesses are entwined. In tough rent markets, a space could remain vacant for six months or more. That’s six months without rent. That’s a new brokerage fee. That’s money you’ll need to spend to ready the space for a new tenant.

The best tenant prospect you have is the one already in place. So, overlook the principle of “the rent is the rent” and be practical. Can you help the tenant get through a rough period using the money you’d be losing if the space were vacant awaiting a replacement tenant? Maybe yes; maybe no, but you aren’t going to know the answer unless you do your homework and talk with your tenant. By the way, the homework is due about 10 or 15 days after the rent check fails to show up in your mailbox. Act early and often if, for no other reason, I’d like to retire my advice that: “You don’t have a tenant; you have a guest. Tenants pay rent; guests raid your refrigerator.”

Print

Comments

  1. Along the same lines, when I have a tenant client that tells me it can’t pay its rent, I tell them to call the landlord and ask for a meeting. Bring along financials showing why it can’t pay the rent (and, if possible, how it can make it up in the future). I find that landlords are much more willing to work with a tenant that alerts the landlord to the problem up-front.

Leave a Reply