Distraints for Unpaid Rent/Terminating a Lease

What do you do when the tenant just stops paying the rent? I wrote about this topic not as an attempt to drum up business, but to shed a little bit of light to one of the most multidimensional tasks a property manager has to perform.

A final attempt to bring rental arrears under control is at the same time groundwork for the beginning of a debt collecting process. Issuing a Warrant to distrain against unpaid rent and Termination of Lease are two essentially very different processes with entirely different outcomes, but because of the identical first step (Demand Notice or Letter of Demand), many people find it difficult to differentiate between the two. The fact that both are commonly known or referred to as a ‘lock out’ does not help either. Both processes are not just one single stage action but a series of required and legally prescribed steps.

Although there are 'lock outs' or termination of leases triggered by some other breaches of the lease, this article is written with only rent-related issues in mind.

It is also very important to emphasize that these processes are used as a last resort when all the other efforts are exhausted and proceeding with the ‘lock out’ is the only viable option left.

From the property manager’s point of view, the 'lock out' situation is extraordinary and could be very challenging to handle - for various reasons. I will mention just few of them:      

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  It is a misconception that only the tenant is in distress
  The fact that tenant is not paying the rent (for one reason or the other) at the same time can cause the Landlord financial strain. A reduced or non-existent revenue stream is an event that often forces a Landlord to take such a drastic but appropriate action.
  
  
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  The outcome of the actions are not entirely predictable and are dependent on so many factors
  Often when faced with a bailiff knocking at the door, the tenant will miraculously quickly find the arrears and cost of the distraint process. Unfortunately, from time to time, we are instructed to proceed with the 'lock out’, change locks and terminate the lease. Although we have had a good success rate in resolving matters, on some occasions things do not unfold exactly the way we assumed they would.
  
  
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  Property managers and Landlords are forced to make judgment calls in a very compressed time frame
  This is one of the reasons inexperienced property managers should not tackle a ‘lock out’ without proper assistance and support. Dealing with angry, sometimes irrational tenants or employees, perishable goods, live animals, cars, dangerous materials, personal belongings, tenant improvement, partial payments, Landlord/Tenant history etc. - on the spot and in the moment - is not easy. It can be equally tricky instructing other parties involved in the process – Solicitors, Bailiffs, Locksmiths, Auctioneers etc.
  
  
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  Paperwork has to be orderly and within time frame prescribed by the Acts
  It is essential that all paperwork is in order and that all prescribed time frames have been adhered to. If not, an attempt to distrain for unpaid rent or terminate the lease could fail and both the Landlord and the Agency are at risk of being subject to a claim for any damages created by inappropriate action.
  
  
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  Sometimes the real progress is not immediately evident
  Yes, the process can end with a vacant property but a situation like that presents the opportunity for a new rent-paying tenant to be found.
  
  
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  Even when acting upon instructions and on behalf of the Landlord, the property manager is under enormous emotional stress
  Lockouts are always unfortunate situations. The breach of the lease could be a result of a bad business decision or an unfortunate economic event. On a personal level it can be difficult to see people going through hardship.
  
  As experienced property operators we understand that ‘lock outs’ appear to be drastic measures, but can be very effective and fruitful with the bigger picture in mind. Throughout our involvement with commercial and industrial assets, we were dealing with a whole range of puzzling situations. Please do not hesitate to contact us if you require our assistance or would like to discuss further anything raised above.

OUR common sense – Key to YOUR success!