Junk Status – Dodging Junk Tenants

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Consumers are feeling the chill of the current economic climate. What effect does this have on the rental market? Over that past two to three years, TPN reports have indicated a steady decline of tenants in good standing. In the first quarter of this year, we have 82.77% tenants in good standing, compared to 84.27% in the first quarter of 2015.

On the one hand, tenants are having sleepless nights about meeting their financial obligations, while on the other we have nervous owners—with non-paying tenants, possibly reluctant to vacate. The challenge, here, is to find a sensible balance amidst the panic, to keep the rental market alive and well.

Communication is Key

Communication between the parties is the most important aspect in all of this, paired with mutually reasonable and realistic expectations. In cases where a tenant approaches the landlord—requesting early cancellation of a lease agreement when he cannot afford his rent—only for the landlord to demand full rental payment for the remainder of the lease period, the tenant will rather remain in occupation of the property.

The tenant will still be unable to pay rent but, in this case, there is an added element of spite towards the landlord, possibly leading to a delay in eviction. The cost of an eviction, loss of income during illegal occupation, and damage to the property would exceed the potential losses the landlord would have suffered were he to accept an early lease cancellation and subsequent vacant occupation.

Dealing with the Problem

In many cases, tenants would rather avoid paying rent than request early cancellation of their lease. The only legal option the landlord would have in these situations, would be to seek an eviction order against the tenant. Lately, we do find that more eviction applications are opposed, with only one objective: to delay the eviction.

The only way a landlord can mitigate damages in this case is to follow the correct process—in terms of applicable legislation—from the start, and act immediately on the first default. The first step in this process would be to place the tenant on terms, by sending a correctly-worded letter, demanding the tenant to remedy the breach of the lease agreement. The tenant’s failure to remedy the breach leads to cancelation, placing the tenant in illegal occupation.

At this juncture, attorneys should be instructed to obtain an eviction order.

Resources: SSLR Incorporated

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