Minimizing tenant risk

[fudosan]

The latest Total Property magazine has an article on how to minimize tenant risk. Here are some major points.

• Screen tenants. Assess their financial strength by looking at their financial statements, business plans, profit forecast, etc.
• Obtain guarantee (personal, parent company, shareholder). Bank guarantee (say 12 months' rent) is also very good.
• Rent deposit

Source: http://www.e-preview.net/AsFlippy/Ma...?PlanNo=236123

[Glenn]

Too right but when a man is drowning any straw will do.
I have recently been given an impossible situation to manage.
Tenant's restaurant business prospect is hopeless.
One of those ethnic eating places but the tourist market is down and the town is swamped with that type of ethnic food.
So the tenant asks for a liquor licence. This surely will make the customers flood in. The council demands another set of toilets. The owner pours heaps more money in to build them and the tenants turn over drops even further.
So surprise the rent stops coming in. The tenant get snarky with the owner and the owner throws me at the situation to stir up things and perhaps make the problem go away.
Talking about making sure the tenant is good is all too late at this point.
The landlord is committed to a business that is failing and that business is taking the landlord with it.
What on earth am I supposed to do now?

[Keys]

What on earth am I supposed to do now?

Join the goldfish.

[Davo36]

Start up a restaurant business?

[Tan]

Stop letting the tenant dig a bigger hole for themselves & start reading up on lock out rules.

[Glenn]

Well things seem to be creaking back into order.
I issued the tenant a 10 day notice to rememdy as prescribed for in the Property Law Act. I never even knew that act had them just like the RTA.
It got issued in both the name of the business and in the name of the owner who had a personal guarantee over the lease.
I got another threatening email but some money with promises for more.
I did not respond with like email but surprise the message must be getting through. In the bank this morning was lots more money.
What a lovely Christmas gift. Lets hope his business has lots of happy customers over the festive season that make things better for the both of us.
Are any of you experts familiar with the proceedure for issuing and acting on 10 day letters for commercial tenants.

[Davo36]

Glen, I didn't know you could do that either. Well worth knowing, and seems to have had the desired effect too.

[Glenn]

Glen, I didn't know you could do that either. Well worth knowing, and seems to have had the desired effect too.

Well so far it does.
We had a chance to add all the money up this morning and he has paid the back rent and the full body coporate back payments.
He had been moaning about the body corporate costs and disputed how it was split up between the various tenants.
Stupid things like his customers did not use the common area as much as the other tenants customers so he should have to pay the full apportioned cleaning and so forth.
I am waiting for the next round of agression.
He says he wants to sell his business. It would be hard to sell if there was a big padlock on the door.

[Tan]

He had been moaning about the body corporate costs and disputed how it was split up between the various tenants.

He signed the lease with the Body Corp % clear as day in the first schedule, probably with legal advice too.

In this situation we just keep pointing at the lease. Kind of "It's not up to us, you signed it".

BTW, keep a really beady eye on this guy and ring him as soon as he is a day late. In my experience, once this happens it will keep happening. Hopefully you have the exception.

[Glenn]

Thanks Tan.
I do this sort of stuff day in day out for residential and when it happens with commercial I sort of lost the plot.
Great advise there. The sort of stuff I should know but somehow think it will be different.
I think the different culture of the tenant along with the aggression and threatening language is what can be a put down.
Those times I have acted with unkind reaction to his aggression he has come into line. Perhaps I better hone up my skills as a commercial landlord.