Leasing  |  Property Management  |  Consultancy

RLA 240663

When it comes to rent collection and dealing with arrears, it appears that some commercial and industrial property management agencies are proclaiming they are implementing a zero tolerance policy for the late payers.

Aside from the catchy and intimidating effect for the landlords and the tenants respectively, what is the practical meaning of a zero tolerance policy on rent control?

Does it mean that if the tenant is in breach of the lease by being in arrears, the agency will immediately hand over the case to legal experts in order to either remedy the breach or to terminate the lease, instigating the process of debt recovery regardless of circumstances? Does the amount of arrears play any role in the decision making process? What about the nature of the arrears (i.e. GST issue or maybe a particular outgoing in dispute)? Could external factors such as high vacancy rates in the complex/area have any impact on the policy? Does this mean that the same practice is suitable for every landlord, regardless of quality and quantity of commercial assets in his/her portfolio?   In the current economic climate of uncertainty that we have today, is the empty unit a preferable option in every single case, even if the tenant is cooperating and trying hard to fulfill his financial obligation?

In our opinion, all of these questions should be discussed with the landlord who is unfortunate enough to have a misbehaving or non complying tenant. That will enable him/her to make an informed and appropriate assessment of a particular case and provide us with the instructions for any further steps to be taken.

If this is happening, everything else including carefully crafted procedures on how to deal with rental arrears would have a greater degree of tolerance than zero, wouldn’t it?

With due respect to other agencies, in our opinion making any sweeping generalized statements in commercial property management could be very risky and might often backfire badly. Additionally, we feel that commercial property management is not always about what is right or wrong.   Many times the objective is to achieve the result that best suits the individual landlord and theirparticular situation. Sometimes, for example, a better outcome is to let minor things go or be fixed by negotiation rather than to engage in and even to win at times costly litigation and potentially lose a tenant in a process.

It is not our intention to provide either legal or financial advice. Even though in many instances pulling the pin on the tenancy is the only way to go, we do not advocate that as a first or primary action. Keeping the lines of communication open with tenants to try to resolve any issues as they arise will often diffuse a situation that might otherwise end badly for all involved. This is a time to be preparing staff for the possibility that more formal steps may need to be taken, giving them time to organize necessary paperwork.

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