Commercial Property Managers – Arrears Management in Commercial Property Leasing

When the property market or economy gets tough, you will usually see a rise in property rental arrears and vacancies. It will happen quickly and it does require immediate action to control.

With managing any commercial or retail property you are working with business people as tenants who are all balancing a number of challenges in the function of their business. When they have problems paying the rent (and some will), you have a choice to take the ‘hard line’ and force rental payment, or manage the process through so you keep a tenant.

In this property market, a tenant that you know is better than a tenant that is unknown. It may mean that a lower rent is required for the immediate future but it can then avoid a vacant tenancy space and the costs associated.

Assess just how lettable the space is in the local property market before you make a final decision regards any vacancy, struggling tenant, or lease negotiation. There is no point ‘burying your head in the sand’ when it comes to rental and outgoings Commercial Rent Arrears Recovery and retail property management.

Getting all the facts and seeking instructions of the client in a timely way will help you stay in control of the tenant mix and the property performance. There is nothing worse than dealing with an arrears matter that is weeks old and you did not see happen.

Here are some rules and ideas to help with the rental arrears process.

Watch your rental payments on a daily basis and identify the arrears the moment they occur. Written notices of default that are legal and accurate should be sent under the terms of your lease documentation.

Talk to your tenant as soon as rental arrears occur, taking full notes of the conversation. Critical comments should be documented and advised back to the tenant in acknowledgement of the conversation. Copy the landlord in on the documentation.

Get to the real reasons for the arrears and how the matter will be remedied by the tenant and by what time and day. There may be a method of resolve which sees the rent come in soon and before the next rent is due.

Staggered rental payments may be an alternative given that the tenant may just have a seasonal downturn in trade. You can create a plan for rental payment ‘catch ups’ over an agreed time (maybe 6 months).

The legal position for the landlord in the recovery of arrears will vary from lease to lease, and location to location. Local laws apply in the enforcement of rental arrears recovery. The best action to take when you have a default under the terms of a lease is to read the lease first and then see an experienced property solicitor who can advise you of the correct next steps to take.

Meeting with the tenant will be productive to the ongoing strategy. You cannot handle rent arrears and lease defaults over the telephone. Go to the property and meet with the tenant. Inspect the property whilst you are there to see if any obvious levels of business difficulty can be seen (low levels of stock, no staff, locked doors etc).

Assess the local property market activity and the supply and demand for space before you decide to enforce lease compliance and potentially create a vacancy that will be hard to fill.

Arrears can be managed through in many situations. In this tougher economy that is sometimes the better thing to do. Vacant premises are not always the appropriate way to head given that any new tenancy leasing will usually involve costs and incentives to be covered by the landlord. The tenants that have now (with a rent arrears problem) are sometimes better than those new tenants that you do not know and losing money in the relating process.