We are not attorneys and statements made about collection are from a property managers perspective and not legal advice. We work with attorneys on rent collection and eviction matters. An attorney should be consulted when the need for an eviction may be necessary.
You have a tenant that has not paid rent. Rent is due on the 1st of each month and a late fee assessed on the 10th of the month. What do you do?
- On the 12th or 13th the manager sends (email or letter) a request for payment of rent. If the rent is paid on the 11th or 12th look at the date mailed on the envelope. Remember the goal is to collect the rent not to assess late fees. Use late fees to motivate timely rent payments. If this is the first-time, rent is late be willing to credit back the late fee as a “one-time credit”. Talk to the tenant and send a ledger to the tenant showing the late fee and credit of the late fee, showing it is a “one-time credit”. We believe this policy promotes good tenant relations.
- Before filing notices and involving an attorney you should try to talk to the delinquent tenant. Events in people’s lives can affect their business obligations. There may have been a death in the family or an accident occurred and the tenant is in the hospital. Business may be down or the tenant just forgot. It is important to find out what is going on, so talk to the tenant. Do not use email; meet in person or call if a meeting is not possible. (You will find out more about what is going on by observing “body language” with a meeting).
- If the tenant wants to remain, try to work out a plan to pay back rent and keep the rent current. The plan must be reasonable and in writing. If an attorney is already involved have the attorney prepare the agreement.
Why work out a payment plan? Why not evict and get a new tenant?
It is very expensive to evict a commercial tenant and it is not that easy. We live in California and must deal with the California Courts. We recommend that your attorney be involved to file the Notice to Pay or Quit followed by an Unlawful Detainer. You can serve the notice to Pay or Quit but this can be objected to as not a proper service and you may need to start over. We recommend with office and retail tenant (rents over $1000/month) that the notice be handled by an attorney’s office. There will be pressure by the court to “work it out” with an agreement. If it cannot be worked out the, judge will give the judgement and if we are talking only non-payment of rent you should receive the judgement. Your attorney will write it up for the judge’s signature which will take a few days and then; if possession of the premise has not been returned, you will have to have an officer of the court (sheriff’s deputy or constable) do a “Lock Out”. This means that you meet the officer with a locksmith and take possession. If personal property remains in the premises additional procedures must be followed (future subject for the blog).
Looking at just the money side of the problem:
- Legal fee will cost between $1,000 and $10,000 to do the unlawful detainer
- New leasing commission will be paid on a new tenant’s lease can cost $3000 to $5000 depending on the term and amount of monthly rent.
- An unlawful detainer can take 3 to 6 months which means that you have lost rent.