How to Deal with a Difficult Commercial Real Estate Tenant
If you’re a landlord, then at some point you will probably face a tough situation with a tenant. Not that the landlord and tenant relationship is necessarily adversarial. To the contrary, it can be a win-win. The landlord provides and maintains the property that the tenant occupies, and the tenant runs a profitable business and pays the rent. And so the beneficial cycle continues. Like all human relationships, however, disagreement and conflict are possible. As the landlord, you must know how to deal with a difficult commercial real estate tenant for the sake of your business, your property and your other tenants. Here are some helpful tips.
Avoid Problems in the First Place
The best way to avoid conflict with a tenant is to have a lease that thoroughly anticipates and addresses potential problems. How each problem is solved should be spelled out in detail. For example, what constitutes a default under the lease? What will be done to rectify the default, including eviction, recovery of damages, lawyers’ fees and any other costs associated with enforcing the lease? Ensure that lease agreements are written in such a way that makes it difficult for a tenant to dispute a justified eviction. A lease that is unclear can lead to disputes between a landlord and tenant.
In addition, landlords must carefully vet prospective tenants. Be sure to ask for and review detailed financial statements in order to check that a tenant is solvent and trustworthy.
Get It In Writing
A strong lease is only the first of many written documents that will help in case you find yourself in conflict with a tenant. What else should be in writing? Everything! With a file on each tenant that includes a written and dated record of conversations and all interactions, you’ll likely decrease the number of disputes. And if there is a difference of opinion about a previous communication, you will be able to refer back to your notes. And while you’re at it, don’t be afraid to use your smart phone’s camera if you think a photo or video of a tenant’s space might be helpful.
Know Your Tenants’ Businesses
When a landlord understands the businesses that his or her tenants are running, then there’s a better chance of creating a mix that is cooperative rather than competitive. Let’s say, for example, that you are already leasing to a chiropractor when a physical therapy clinic becomes interested in renting space, too. Knowledge of the chiropractor’s work may help you discern that the two businesses could compete. Always aim for a synergistic mix of tenants in order to avoid conflict and promote more business to the property.
When a tenant calls about a maintenance issue or an occupancy concern, the landlord should respond promptly. Having the names and phone numbers of reliable maintenance contractors is worthwhile. A quick response is essential when there is a risk of injury and can certainly breed goodwill between you and a tenant in cases of routine upkeep.
If the tenant has caused damage to the premises, or is engaged in an activity that could be hazardous to people or property, then the landlord may need the courts to intervene. Steps to be taken should be enumerated in the lease.
Commercial Tenants 101
Sometimes tenants need instructions on how to be—well—good tenants. Who better to offer such a course than the landlord? Make sure your actions reflect how you expect to be treated. A landlord must always be professional and maintain high standards of behavior. Doing so sets the tone for how you think tenants should behave.
One behavior that must be reinforced is the expectation that rent will be paid on time. If a rent payment is late and there is no reaction from a landlord, then tenants may believe that not paying on time is okay. Landlords should treat their tenants well and respectfully, however, strictly adhering to your rules is often the key to avoiding problems.
Hire a Property Manager
Tenants are people, too, and some are just difficult to deal with no matter how hard you try. If you find yourself unable to work with tenants, then you may need to consider hiring a property manager. Look for one with experience managing the type of property you own. They should be organized and detail-oriented, skillful at communication, and preferably have relationships with vendors as well as knowledge of your local market.
As a landlord, you are bound to run into challenges with tenants every now and then. Although each situation may be different, rest assured there are steps you can take ahead of time to make disagreements more manageable or even less likely.
The information contained in this article is general in nature and should not be construed as financial, tax or legal advice. As with any financial or legal matter, consult your tax advisor and legal counsel.