A tenant failing to pay rental is every landlord’s nightmare, and it can happen at any time. This can happen whether you lease a residential or a commercial property. However, how you deal with this situation may differ based on the type of lease as well as the terms of the agreement.
It is for this reason that it is important that your lease agreement contains a proper breach provision, so that in the event of failure to pay, you have a clear guideline on how to act.
Example of breach clause
Your lease agreement should specify the date on which the rental is due and owing. Your agreement should then provide that should the tenant fail to make payment on that date, the landlord will provide a notice in writing advising that the tenant is in breach and giving them a certain number of days to remedy the breach. For example, this notice will allow the tenant 7 or 14 days (either business or calendar days) to pay the outstanding rental.
Should the tenant fail to make the payment after this notice, the agreement must provide that the landlord is able to then elect to cancel the lease, and the tenant must then vacate the premises. It is important to note that depending on your jurisdiction there may be certain eviction laws that apply, particularly for residential leases.
It is also important to state in your agreement that any outstanding rent will incur interest.
Making sure you secured a security deposit will assist in offsetting at least a portion of the outstanding rent.
Your lease agreement should also provide for the manner in which the landlord will institute legal action against a tenant for outstanding rent – you can elect to utilise the normal court process available in your area or, alternatively, you can agree to private arbitration, which tends to be a quicker process.