Owning commercial property has a lot of benefits. For example, having a solid group of tenants brings you a regular income stream, which you can use for improvements or to expand your real estate investment portfolio. But what happens when one or more of your tenants won’t pay their rent? Here are some tips for addressing this type of situation.
What to do If Tenants Won’t Pay Their Rent
One of the main reasons you likely invested in commercial property is for the steady rental income. When a tenant fails to pay, this can be a problem. Here are some of your options as the property owner and landlord.
1. Double-Check Your Records
Before you do anything about a missing rent payment, double-check your records. First, make sure you haven’t overlooked a check in the mail or automated payment. Then, re-read your lease agreement and pay particular attention to any grace periods you’ve allowed for payments. Finally, avoid charging late fees unless they are spelled out in your lease agreement.
2. Send a Late Rent Notice
A written late rent notice would be the next step. This piece of paper should notify the tenant that their rent is past due and include a list of any late fees. It can also include a warning about the potential consequences of failing to pay rent, such as legal action.
3. Give Them a Call
You can decide to call your tenant before or after sending them a late rent notice. Sometimes, an informal call and reminder is all it takes to get things back on track. However, landlords are forbidden from harassing tenants, so be cautious with phone calls and emails.
4. Deliver a “Pay-or-Quit Notice”
This is a written demand sent to the tenant advising them they must pay all rent immediately, including late fees, or vacate the premises. Many states and cities govern when and how these notices can be delivered. For example, a 5-day notice to pay rent is something landlords serve to tenants in South Carolina.
5. Consider “Cash for Keys”
Many landlords don’t want to deal with the costly and lengthy eviction process. The longer your space stays occupied by a non-paying tenant, the longer you are losing money as a business. One option is to offer the tenant a small amount of cash for them to surrender their keys and vacate the property.
6. Begin the Eviction Process
The eviction process is a costly and drawn-out legal proceeding that should result in a non-paying tenant’s removal from the property. The process varies from state to state. The general steps involve serving a written notice of eviction, suing for eviction, going to court for a hearing, and having law enforcement assist with the removal.
Get Assistance Managing Your Commercial Property
Owning commercial property can be profitable and fulfilling. But you may not want to deal with tenants not paying rent or other challenges associated with these endeavors. Let an expert handle these issues for you.
At Caldwell Commercial Real Estate, our team of knowledgeable property managers and realtors in Charleston, SC, has over 80 years of combined experience in the industry. Contact us today to learn more about how we can put our resources to work on your behalf.