Tuesday, January 4, 2011

Limit the losses of January rent collection

History dictates, January is always a difficult month to collect rent. This year I expect January collections to be no different.

General difficulties for collecting rent over the past 12 months remain valid: loss of income, low savings and an increase in additional rental expense for electricity. In many cases tenants already rely on income subsidised by other family members.

In January there are additional financial burdens which many tenants usually have to contend with: school fees, over spending on festive season items, in some cases salaries are paid early and ill-disciplined tenants spend the rent money before rent pay date, also debit orders run late on the 3rd of the month.

It is already the 5th of the month and I can only encourage landlords and property managers to take early action with their property portfolio:

* Update all tenant’s TPN Rental Payment Profile (RPP). Let TPN communicate with all the tenants via the RPP SMS informing them of their credit profile payment rating;

*Communicate – make telephonic contact with all non-paid tenants as soon as possible (today!) The rent is probably not the only expense the tenant is juggling. The earlier you make your demand for payment the better your chance of collection;

* Set payment settlement dates with tenant and put these in writing, if necessary impose the signing of an Acknowledgement of Debt (AOD). A tenant who is prepared to sign an AOD is serious about settling any arrears.

* If the tenant is non-contactable or appears to be misleading you, send a letter of demand (LOD). A LOD sent by TPN or your attorney is best. Ensure you follow the terms of your lease agreement (stating the appropriate number of days to remedy, reminding the tenant of your rights to cancel the lease, take further legal action such as eviction, the landlord’s hypothec over the goods on the property and your right to load default on the various credit bureaus);

* The earlier you start communicating with the tenant, the earlier it becomes apparent if the tenant is unable to catch up the rent. Make a decision early on if you need to cancel the lease and demand the tenant vacates at month end. This early decision will give you enough time to source a new tenant.

* The opportunity cost of a non-paying tenant equates to no rent. I always suggest, if it becomes necessary, to take legal action sooner rather than later. The tenant’s deposit will be used up quickly in the coming months should the tenant remain in the property and not pay. The cost of the eviction is not comparable to the loss of rental income for the months of lost rent.

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