Business & Real Estate: What a landlord can do when a tenant stops paying rent

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photo credit to mortgageintroduce.com

This column was formulated after I met my client, who I have been doing business with for 14-plus years, at an evening event. He and his wife will remain nameless due to the fact they had to go to court to have his tenant evicted due to nonpayment.

This tenant had been living in my client’s other space on his property for many years. Rental payments had been timely in the past, but then a few years ago she began to become tardy in her remuneration to my client.

It became a real issue when his tenant just stopped paying, even though her salary was over $100,000. I asked, “What was the reason for not paying?” My client didn’t know and wasn’t given any explanation.

From years of experience with tenants, there is an important factor called communication and everyone being on the same page when it comes to having rapport and long-term business relationships as a landlord. Of course, from the beginning, you have to lay down the ground rules in your lease and explain to your tenant how things will work. The most important item is paying the rent on time.

I have always said that if your tenant(s) has any issues, loss of job, potential divorce, sickness or whatever their real reasons are, that they should be upfront and candid about their situation and that they should let you know at least a week or more before rent is due.

I firmly believe that the majority of tenants are honest people, but sometimes events occur to make them not pay, but even worse, communication with their landlords can either lead to heated conversations or none at all.

Since they have possession, going to an L&T court (landlord and tenant court) becomes the solution of last resort to proceed with an eviction. But it’s not always an easy road to take and costs time and money, if you are not taking on the task yourself and have to hire and L and T attorney (I have a pit bull of an attorney who can assist you).

Recently, I have had another client who had to do this with a tenant who had been paying for many years, but unfortunately loss of employment became a problem in paying the rent. It wasn’t so much about not paying, but the lack of straightforward and honest communication to figure out a plan and a way to pay something.

The landlord made every attempt to try to settle the rent payments, but the tenant promised and never delivered. The deadlock escalated and then all discussions became futile and ceased, which made L&T court the only option.

These two situations could have been made easier for both parties, if a level playing field was created by having a common denominator, called communication and discussions,  but in both instances, the tenants not coming to the table to talk caused the breakdown.

In deference to tenants, however, there are some bad landlords out there who really could not care less about their tenants or their properties, but only care about making money, which can cause tenants not to pay or pay less.

But sometimes new landlords who constantly have difficulty with bad, or what I call “professional tenants” who find ways not to pay, can make some into bad landlords. But  then if you can’t take the heat, get out of the fire of being a landlord and take your money and make other types of investments, REITs (real estate investment trusts), tax liens, discount mortgages, purchasing notes, etc., where direct contact with tenants is eliminated.

 

There is always some type of risk when putting your money in some type of investment, and as I say, “no pain no gain,” “no risk, no reward!” You can always choose to put your money into triple tax-exempt bonds, but the return will never be like other types of investments. Yet for older adults, this may be the safest place to park their money.

Most important in being a landlord is to screen your tenants in the proper fashion by asking pertinent questions.  Then again if you are in an area where Section 8 or any other type of social program tenants with vouchers are, one must be extremely careful and cognizant of what you can and cannot ask them.

It is a very complicated and involved process and I will not get into it in this column. You can always reach out to me for a consultation. This is why it is crucial for a landlord to seek out a knowledgeable and professional real estate broker, who should know what questions to ask. The broker still gets paid by the local or state agency and relieve landlords of most of the responsibility of doing a job that they really shouldn’t be involved with.

Moreover, qualifying tenants under other situations is a job for a seasoned professional broker and not for a landlord, unless they are very experienced. But then again, we get paid by the tenant, so it costs nothing and there is less risk in hiring us, since our job is to seek out potential tenants, by eliminating those who don’t meet the necessary qualifications. Nevertheless, we can never guarantee how an excellent tenant paying her rent from the start will do in the future, due to unforeseen circumstances that might and do occur.

I am sure everyone or most everyone has heard of the term, “slumlord.” These landlords could care less about their tenants or their well-being and do whatever they can to keep their properties in disrepair, whether it be not providing heat, utilities or keeping unwanted pests (roaches, mice or rats) at a minimum.

They are earning income, but consistently refuse to keep their rentals in “a habitable condition,” making it difficult for their tenants. On the other hand, there are good and caring landlords who want to keep their buildings in proper working order.

There are very complicated and difficult issues: rent control, rent stabilization and new potential laws on the agenda that are causing some landlords to have reduced or insufficient income to fix and upgrade their investment properties, even for some who live in their own buildings.

This discussion requires state and federal politicians to sit down and figure out the answers and solutions, to possibly come to a win-win conclusion. What I see sometimes, however, are parties that are not serious about solving anything, because it involves real work, discussions and communications, which is severely lacking in some environments. So being a landlord poses some risks, but the rewards are worth it if you have the knowledge, thick skin and can handle the potholes.

Philip A. Raices is the owner/broker of Turn Key Real Estate at 3 Grace Ave., Suite 180, in Great Neck. He has earned designations as a Graduate of the Realtor Institute (GRI) and also as a Certified International Property Specialist (CIPS). He will provide you with “free” regular updates of sold and new homes in your town via the Multiple Listing Service of Long Island (MLSLI)or go to WWW.Li-REalEstate.Com as well as a “free” value analysis of what your home might sell for in today’s market without any “strings” attached. He can also provide a copy of “Unlocking the Secrets of Real Estate’s New Market Reality or Our Seller’s or Buyer’s Guides for “Things to Consider when Selling or Purchasing your Home. Just email or snail mail(regular mail) him with your request with your name, email and cell number and he will send it out ASAP. For a consultation, he can be reached by cell: (516) 647-4289 or by email: Phil@TurnKeyRealEstate.Com to answer any of your questions or concerns.

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