You need to take the proper steps if you have tenants who fail to pay their rent or only pay portions of it at a time. There are a few things you can do if you notice that the tenants in your Laguna Beach commercial real estate property have started to decrease the payments they make to you.
Keep Track of All Money Owed and Paid
When you own a rental property, it’s important to track every bit of money that’s paid toward the property. You want to be sure that you can prove to a judge that the tenants aren’t paying their rent on time and how much money they owe.
Create a registry that tracks when rent is due, how much is due, and how much has been paid. Provide a receipt to the tenants when they do make payments toward their rent and have them initial or sign the registry you’ve created to indicate that they agree on the amount that you annotated. This will serve as a great way for you to prove how much was and wasn’t paid for the property later down the road.
If you can’t prove what money you’ve been paid, it’ll be hard to prove how much money you’re still owed. Everything needs to be dated and exact amounts need to be annotated so that you can prove to a judge what money you’re still owed if you have to sue the business owner.
Contact the Tenant in Writing
When you start to notice that the tenant has started to fall behind on their rental payments, send them an email that states that they’ve fallen behind, if there are any late fees they owe, and how much they need to pay in order to keep the property. You want to send the information in writing so that you can prove what was and wasn’t said to the tenant.
If you need to go to court, the tenant can claim that you said something that you didn’t say if you talk to them over the phone. By putting things in writing, there will be no question as to what was and what was not said.
When you contact the tenant, ask them if they are having issues with their business. If the business isn’t doing well, it will be hard for them to make payments to you. If the tenant is plunging deeper and deeper into debt, you may want to consider letting them out of the lease early so you don’t have to try to chase them for more money in the future.
Reach an Agreement with the Tenant
Discuss with the tenant if there is a lesser amount they can afford to pay for a few months until their business gets back on their feet. It’s better to get some money from them rather than no money at all. There are many attorneys in Laguna Beach you can hire to create a negotiated agreement between you and the tenant.
Be sure that the new agreement is put into writing and have both you and the tenant sign it. Be sure that there are stipulations as to how long the lower amount will be accepted and what will happen if the payments aren’t made. This allows you and the renter to know exactly what is expected in the end.
If they say that they can’t afford to pay you anything, offer to let them out of the lease. It would be best for them to leave the property so that you can then lease it to someone else who can afford to pay for it. You want to get them out of the property as quickly as possible if you want to be able to move in another business.
Be Willing to Stand By the Agreement
There are some property owners who have a soft spot for small businesses that are just getting started. While it’s great to support small businesses, it’s important to remember that you have bills to pay too. Be willing to stick to the agreement and hire an attorney to file eviction notices for the business if need be. It will take some time for the eviction proceedings to be completed, but once it is done the tenant will have a very short period of time to get everything out of the property.
Take Pictures of Everything When the Tenant Leaves
When the tenant finally leaves the property, go through and take pictures of everything. When someone leases a property for their business, they often make changes to the space to suit the needs of their business.
If part of the lease agreement was that the property would be returned to its original condition and it wasn’t, you can use the pictures to prove your case. You can sue the business owner for the money you have to pay to return the property back to its original condition.
Being a commercial property owner has its pros and cons; it can often be very lucrative, but it requires you to stay on top of things at all times to ensure that you are being paid for the property properly and that it’s being well maintained.
It’s best to start off with only one or two commercial properties at a time so that you can make sure that you’re able to manage them. If you can’t, you may want to hire a property management company to manage them for you so that you can just relax and enjoy the income that you receive from the lease payments each month.