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How to handle defaulting tenants

Whether handling a rental property personally or through a reputable agent, the most crucial way to avoid defaulting tenants is to be equipped with the facts and knowledge of how to act decisively to protect your asset as a landlord, says Grant Rea, rental specialist at RE/MAX Living. 
 
He notes that the first line of defence against this predicament is the initial screening process, which should include meeting a tenant face-to-face when the property is shown initially as well as the collection of essential personal information from the prospective tenant. There is also the matter of vetting the tenant by verifying employment, references, their identity and conducting general background checks.
 
Rea says that using a professional rental agent in the vetting process can be a massive benefit the landlord, as their expertise and experience can prove to be critical in these situations.
 
Rea advises that landlords facing the worst case scenario should consider the following important elements and possible recourse:
 
1.    Communication

Often in a scenario where tenants have withheld rent, they face an embarrassing situation and, depending on the circumstances, may simply avoid contact with the agent or landlord. At this point the landlord is advised to get the ball rolling towards eviction or another form of legal action. “However,” says Rea, “if the tenant is willing to communicate, make the arrears known to them and the course of action you intend to take if the breach of their lease is not remedied.”

It is important to note that action such as changing locks, interrupting services, aggressive and threatening action and forcible eviction without a court order are unlawful acts as per the Rental Housing Act. Nothing beats fair, flexible and reasonable communication and compromise.

2.    Decisive action

The Consumer Protection Act (CPA) applies to the majority of residential leases and requires that the notice of breach to the tenant gives them 20 business days to remedy their arrears. Essentially what this means is that if immediate action is not taken when the rent is late, the landlord will find themselves a month down the road with a possible second unpaid month looming. If the breach is not rectified within the 20 business day notice period, the landlord may proceed to terminate the lease agreement in writing, notifying the tenant that they are in unlawful occupation of the premises and that they need to vacate the premises immediately. Most courts will require that due process is followed and it must be proven that adequate notice was given as per the CPA. An eviction can often take as long as three to four months, depending on the circumstances.

3.    Legal action

“If such a notice fails, as a rental specialist, I would, without hesitation, employ the services of an attorney to further communicate with the tenant and to advise on further action,” says Rea. “I am a firm believer in using a specialist contract or lease attorney. If you have clear, written communication you can employ the attorney to approach the courts for a ‘rent interdict summons’ to recover arrears and, in some instances, the legal costs incurred. The court procedure can be a long-winded and costly one, but if you feel the relationship with your tenant is so strained and they are refusing to move, it is the best course of action.”

He notes that in some cases the landlord may approach the courts with a ‘Section 32’ application, which is an attachment of property in security of rent application, permitting the sheriff of the court to immediately itemise and remove the contents of the property until such time as the arrears are settled. This application is usually used where the landlord believes that the tenant is about to remove the movable property upon the said premises in order to avoid the payment of the arrear rental. Rea warns that this action can result in backlash from the tenant which can be devastating to the property as the response may occasionally be vindictive.

“The most important aspect of dealing with a defaulting tenant is not to let a day go by without taking action. Many tenants will abuse the grace shown by landlords and stretch the situation as far as possible. It is important to get things in writing and send registered letters or emails with ‘read receipts’. Remember to quote elements of the lease and state amounts owed with original documents indicating utility amounts outstanding. If adequate records are kept and the landlord acts decisively, there is no need to lose sleep over a delinquent tenant,” Rea concludes.


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