Managing Commercial Rent Arrears by Anna Deam
The process of ensuring that commercial rent is paid on time each month starts well before a lease is signed, but more often than not arrears are not considered until the rent is late.
A diligent managing agent will ensure that a strict tenant selection criterion is set out. Ensuring that any prospective business looking to secure a lease can prove they can pay and maintain paying rent. Proof of income, current references and previous rental history all help ensuring that the correct tenant is selected.
Once a lease is signed a good managing agent will ensure that a hand over meeting is completed. During this time, what is expected when it comes to rental payments will be explained to the tenants, the method of serving invoices will be explained and confirmed. It is during this time that the agent should explain the commercial rental arrears process in the event rent is not received on time.
It is important that commercial rent arrears are managed by following a consistent procedure, the same procedure that has been explained to the tenants at the time they commenced their lease.
Tenants should be provided with their invoices for rent payments at the same time each month clearly showing the due date. Managing agents should monitor payments coming into the trust account daily. As soon as a tenant falls into arrears the tenant should be contacted and diary notes made outlining the reason for the late payment and the expected date when payment is expected to be made. This conversation should also be communicated to the owner, so they are aware the rent has not been received on the due date.
Should arrears continue, it must be ensured that any notices issued are done so as outlined within the lease. The lease will outline if arrears are to be dealt with under the Retails Leases Act or the Property Law Act. Failure to ensure the correct procedure is followed may result in beach notices or termination notices issued becoming void.
One item that is very often over looked when arrears are considered is that of the relationship and communication between Tenant and Managing Agent (on behalf of the landlord). If a conducive relationship can be formed between the two, managing all areas of the tenancy becomes much more productive. Chasing up late rent and terminating leases can be time consuming and costly, establishing good communication and expectations at the commencement of the lease has the potential to avoid such issues and results in a constant income stream for the landlord.