It’s no secret how challenging the economic climate is right now. It’s hard even for some established businesses to meet their financial goals. When your tenants struggle to pay rent, they can end up defaulting. If this happens, your business can face serious risks.
A clear plan for handling defaults can help protect your property while maintaining good relationships with your tenants.
Reasons a tenant may default on their lease
A lease default occurs when your tenant fails to fulfill their contractual obligations. Aside from late rent payments, reasons for defaulting may also include unauthorized property modifications and improper use of space. Your lease agreement should clearly outline these terms and specify what constitutes a default.
Steps you can take after a tenant defaults
Before taking action, review your lease agreement carefully and ensure there’s no doubt whether what your tenant did counts as default. Here’s what you can do after that:
- Send a formal notice: Write a detailed letter explaining the problem and give your tenant a specific timeframe to fix it. You may also inform them of possible consequences if they fail to resolve the issue.
- Charge penalty fees: Impose late fees or interest charges as outlined in your lease agreement.
- End the lease agreement: You may cancel the lease if the tenant doesn’t resolve serious violations by the deadline you gave or doesn’t respond to your notice.
- Take legal action: You can file a lawsuit to recover unpaid rent or other costs linked to their reason for defaulting.
- Request a court-ordered eviction: Seek a court order to help you regain control of your property, essentially evicting your tenant.
Talk with your tenant about their issues rather than immediately resorting to legal measures. This shows you handled the situation professionally and gave your tenant fair chances to make things right.
Smart steps for property protection
Good landlord-tenant relationships start with open communication. A well-written lease agreement also helps. Your tenant may not have to default if they understand the lease terms clearly.
An experienced attorney can assist you in drafting contracts to prevent misunderstandings or confusion in the future. If your tenant defaults, your attorney may help you protect your property and business.