Running a business is notoriously difficult. Business owners have to juggle a ton of responsibilities, from hiring staff members to contacting suppliers. With so many balls in the air, it’s all too easy to miss one and let it drop. Sometimes, that dropped ball is the rent.

As a commercial landlord, you can only tolerate so many late rent payments from a business occupying your property. What can you do to recover unpaid rent in a commercial lease?

Key Differences Between Residential and Commercial Lease Debt Collection

It may seem like commercial landlords can simply go through the same steps as residential landlords when handling unpaid rent – but this isn’t true! There are key differences between residential and commercial leases and their subsequent debt collection options. 

The Purpose of the Lease

Residential leases cover housing needs, while commercial leases are designed for business operations like offices, retail stores and restaurants.

Tenant Protections

Residential leases provide housing for tenants. People need housing options (whether rented or owned), which is why tenants with residential leases are granted lots of protections, while landlord rights in unpaid leases are more restricted. These protections can prevent housing insecurity and keep tenants from losing the roof over their heads, even when they are struggling financially. 

On the other hand, commercial leases aren’t seen as necessities, so the tenants are not provided as many legal protections as residential tenants. Commercial leases are seen as an issue of contract law. 

Debt Collection Tactics

Residential landlords will have to comply with the strict rules set by the lease and state laws when attempting to recover unpaid rent debt. Landlords are not allowed to use tactics like changing the locks or removing the tenant’s belongings from the unit right away. Doing this could get you into legal trouble. 

Commercial landlords can respond to unpaid rent much differently. 

Actions Property Owners Can Take for Unpaid Commercial Rent

Communicate

Sometimes, the best solution is to talk with the tenant. You may be able to come to a reasonable solution together, like a payment plan. With a payment plan, the tenant could cover the back rent in small installments without hurting their business’s cash flow. 

Send a Formal Notice

Send the tenant a formal notice of default on the rent. The formal notice should include information about the amount owed (along with any late fees) and the deadline to receive the amount before pursuing further action. 

A formal notice does more than incentivize the tenant to prioritize repayment. It also acts as evidence in case you ever decide to take your tenant to court. 

Consider Forfeiture

If the formal notice does not result in repayment, commercial landlords have the option of forfeiture. 

In a forfeiture, you can reclaim the property. You are allowed to enter the premises and change the locks. You can list the property up for lease to find a different tenant to immediately fill in the gap in rent payments. Or, if you’d rather not put your faith in a tenant again, you can sell the property. 

Suing for Repayment

One of the legal options for commercial lease defaults is suing the tenant for unpaid rent. The judge could sentence the tenant to court-ordered repayment. The court is not responsible for collecting the repayments from the tenant. So, if you win your case against the tenant, Summit A*R’s expertise can be of use. Our agents are well-equipped to enforce court-ordered repayments and collect the funds you are legally owed. 

Going through the legal system can be time-consuming and expensive. So, suing for repayment is ideal for situations when a tenant owes a substantial amount of unpaid rent or has been otherwise uncooperative. 

Contacting a Debt Collection Agency

You don’t have to get a court-ordered judgment before coming to a debt collection agency for help. If your tenant hasn’t responded to formal notices and reminders properly, then you should consider putting that unpaid rent up for collection. 
Going directly to a debt collection agency is an excellent option for independent property owners who don’t want to take a tenant to court.

How Our Professional Debt Collection Agency Can Help

Summit A*R is the right agency to call. We offer commercial collection services for landlords so they can get their rent (along with other related expenses) back as soon as possible. These are some advantages that come with using our services for commercial rent collection:

Ethical Debt Recovery

Debt collection shouldn’t be tackled by just anyone. It’s a delicate process to navigate, and far too many collectors try to use aggressive and underhanded tactics in order to get debtors to pay what they owe. When you work with our agents, you can rest assured that the debt collection process will be legal, ethical and compassionate. 

Our agents are well-versed in the Fair Debt Collection Practices Act (FDCPA), which prohibits aggressive tactics like harassing phone calls and threatening language when collecting debts. They will comply with this federal law, along with state-specific laws, throughout the debt collection process. 

Our entire agency follows the “Preserve Human Dignity” (P.H.D.) strategy, which means all debtors (including your commercial tenant) will be treated with respect and understanding. This compassionate, ethical approach yields high recovery rates for our clients. 

Skip Tracing for Missing Tenants

If your commercial tenant leaves the property and seems to disappear completely, without paying what they owe you, our agency can find them. We have an impressive skip-tracing department headed by a private investigator. Our department will use skip-tracing tools to hone in on the debtor’s current location so that collection efforts can be pursued. 

Preventing Future Rent Defaults

To minimize the risk of unpaid rent, these are some steps that commercial property owners can take in the future:

Thorough Tenant Screening

Conduct background and credit checks before signing a lease with a new tenant. These checks will reveal whether a client has had a history of financial instability. By refusing a high-risk tenant, you can protect yourself from handling non-sufficient funds and late rent payments. 

Not Renewing with Past Offenders

You do not have to keep leasing a property to a tenant who has a habit of making late rent payments, even if those payments have since been resolved. Their payment history proves that there is a high likelihood that they will continue to make late payments or miss them altogether. 

So, when the lease term expires, you do not have to renew it. You will have to give proper written notice to the tenant about this decision, giving them plenty of time to plan their change in operations. 

Suggest Consulting

One of the best strategies to prevent lease defaults is to suggest professional consulting services. Professional consultants could help commercial tenants resolve their cash flow problems so that they can manage overhead costs like rent on a regular basis. 

Here at A*R Summit, we know how to provide debt recovery for property managers. So, if your commercial tenant has lapsed on payments, and you want to get what you are owed, our agents can help. 

Did you find this article helpful? Just imagine how helpful our experts could be when it comes to your bottom line! Learn more about our full suite of services, or contact us today to discuss how we can help recover your lost revenue.