Recovery Of Rent Arrears And Treatment Of Difficult Tenants In Residential And Commercial Properties

Project and Seminar Material for Estate Management

Recovery Of Rent Arrears And Treatment Of Difficult Tenants In Residential And Commercial Properties


Abstract


Recovery of rent arrears has been one of the major problems identified in real estate management. The main purpose of the study is to show the root causes of default in rent payment and to look at the prevailing methods of rent recovery, and to proffer proper solution to prompt payments. The study will also look into the issue of difficult tenants and examine the best ways of approaching the matters. Conclusively the .study will provide likely solution to the problems of the recovery rent arrears and treatment of difficult tenant will be strictly looked into. This study will equally provides recommendation in alleviating the problems identified in this study.


Table of Content


  • Title page
  • Certification
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of content

Chapter One

1.0 Introduction

  • 1.1 Background of the study
  • 1.2 Statement of problem
  • 1.3 Aims and objectives
  • 1.4 Methodology of study
  • 1.5 Scope of study
  • 1.6 Limitation of the study

Chapter Two

2.0 Literature Review

  • 2.1 Who is actually a difficult tenant
  • 2.2 Types of leases
  • 2.2.1 Monthly leases
  • 2.2.2 Biannual leases
  • 2.2.3 Annual leases
  • 2.3 Landlord-tenant relationship
  • 2.4 Contractual obligation
  • 2.5 Structure of lease agreement
  • 2.5.1 Conditions of lease
  • 2.5.2 Express and implied conventions
  • 2.6 What is rent
  • 2.7 Causes of rent default
  • 2.8 Method of rent recovery
  • 2.9 How to treat a difficult tenant

Chapter Three

3.0 Research Methodology

  • 3.1 The study area
  • 3.2 Data collection
  • 3.3 Sample frame and sample size
  • 3.4 Sampling techniques
  • 3.5 Uses of questionnaire to collect data required for the study.
  • 3.6 Method of data analysis and presentation

Chapter Four

4.0 Data Analysis and Presentation

  • 4.1 Distribution of the respondent according to their age
  • 4.2 Distribution of the respondent according to gender
  • 4.3 Distribution of the respondent according to marital status
  • 4.4 Management of property
  • 4.5 Types of properties (residential and commercial)
  • 4.6 Factors affecting quite enjoyment of the respondent
  • 4.7 Maintenance of the property
  • 4.8 Payments of tenements rate
  • 4.9 Auxiliary services
  • 4.10 Duration of tenancy
  • 4.11 High consistency of rental value
  • 4.12 Rental value of some residential and commercial properties.
  • 4.13 Opinion of the respondents on whether there is difficult tenant or not
  • 4.14 Distribution of the factors that make tenant to be difficult
  • 4.15 Method of recovery of rent arrears for difficult tenant

Chapter Five

5.0 Summary of Findings, Recommendation and Conclusion

  • 5.1 Summary of Findings
  • 5.2 Recommendation
  • 5.3 Conclusion
  • References
  • Appendix

Chapter One


Introduction

1.1 Background to the Study

Recovery rent arrears and treatment of difficult tenants has been identified as a major set-back in property management. These aspects of management functions are being confronted with many problems because rent payment depends mostly on income earn from business carried out in the property. These earning and income are usually affected by changing economic condition and personal circumstances of tenants which cannot be predicted and out of control of tenants, the managing agents and the landlord.

This topic no doubt has drawn priority attention in several seminars, symposia and even in one of the annual general conference of the Nigeria institution of the Estate Surveyors and valuers all with the view to arriving at a lasting solution to the problem. And as all efforts are being channeled towards the eradication of this incident in the property industry. More cases of the rent default by demands .continue to discourage the efforts.

The urge to write on this topic started when we visit one estate surveyor and valuer called Ajilex property which is located at “itakogun” area of Ilesa, he had so many properties on his hand with concern was the property that was located at No. 36 Oke Opo GRA at Ilesa. The tenants was arrears of rent for over four years, and him remit all his rent arrears to the property owner, knowing the legal implication of litigation which will not be in the interest of their client they continued by the way of dialogue to a point that the landlord decided to take the matter to the point that the landlord decide to take the matter to the court and it dragged him for more than two years before the matter was pulled out of the court for amicably settlement.

This was a result of the parties unanimously appointing an arbitrator to the matter. The arbitrator’s judgment was accepted by the parties. In this judgment he made the tenant to see the reason why the rent arrears should be paid to the landlord.

It was equally agreed that the arrears should be paid installment to enable the tenant to cope with the payment, with this issue of arrears treated, the landlord agreed to carry out his obligations effectively. The decision on the mode of payment took time before it was resolved. The landlord who claimed that he has lost so much money within the period of arrears and court actions would prefer the total sum paid to him at once. However this request was not granted by the arbitrator instead he made the landlord to understand why he should accept the quarterly payment.

More so, drastic action cannot be taken to enforce payment of rent on lease hold property unlike chattels which can be taken away by the owner from the person to whom it is hired for a failure to meet the agreed obligation. Rental payment on leasehold is in respect of right of use, possession and enjoyment conferred on the tenants and act in respect of tangible thing. There is usually a complicated legal relationship between the landlord and the tenants. There actions to enforce payment and recovery of rents must follow due process of law. This takes time and may fail if a landlord fails to meet contracted obligation towards a tenant.

Enforcement of payment of rent through eviction of tenants by landlords id often mitigated by government social policy on some kinds of landed properties. There are legislation a s regards security of failure, tenants are protected from forcible ejection and lease for failure. Government owned and managed properties have added problem of need to get political support for its management policy and action. Political climate and influence may not permit the manager of government owned properties to take appropriate action as decision is usually centralized.

However efficiency in recovery of rents on leasehold properties depends on efficient management based on good lease term and effective control.


1.2 Statement of Problem

It has been observed that in recent times rental defaults on leasehold properties are on the increase.

This development has been agitating the minds of several interested groups including property investors and their agents. This paper is set out to study that causes of default in rent payment and prefer solutions.


1.3 Aim and Objective

The aim of this dissertation is to examine the possible ways of recovering of rent arrears and treatment of difficult tenants.

The objectives are:

  1. To examine the root cause of default in rent payment
  2. To examine the prevailing method of rent recovery
  3. To investigate the issue of difficult tenants
  4. To make recommendation in eliminating problems identified.

1.4 Methodology of Study

The study was successfully carried out by using information from relevant publications, especially the Journals, magazine and seminar papers and through the use of textbook which provides a good background for theoretical and conceptual issues discussed. The source of the data will be both primary and secondary.


1.5 Scope of Study

The study covers the recovery rent arrears and how difficulties tenants should be treated. To do this, the method of rent recovery and dealing with difficulties tenants were looked into with specific reference to select properties in Ilesa, Osun State.


1.6 Limitation of the Study

The only presumed or perceived limitation of this study is the shortest time, nevertheless everything pertaining to the recovery rent arrears and treatment of difficult tenants would be fully exercised.


Chapter Five


5.0 Summary of Findings, Recommendation and Conclusion

5.1 Summary of Findings

From the findings it was observed that some tenant are extremely difficult into the extent that they are too hard for estate agent to control more so a difficult tenant is the one who does not comply with the tenancy agreement.

Different tenant will not contribute to the weekly or monthly house clearing and he will not carry out any repair works having entrusted in him.

Managing agent or surveyor usually use some measure to treat or handle a tenant like, this such action is by charging them to court or by serving them a quit notice to vacate the premises so that another tenant can come in into the property but if you want to serve tenant a quit notice at least six months notice must be giving to such tenant so that he or she can get another accommodation between that six months.

Based on the previous chapters, we have discussed on the causes of problems that leads to rent defaults and also discussed about the aim and objectives of findings with the limitation of the study which covers the method of rent recovery and how to deal with difficult tenants.

Besides we have expansiate much on the types of leases that we have and also described who actually is a difficult tenants. This work will introduce you to the causes of rent default and also to let you know the source of data used for collection of findings and also the types of questionnaire used, with the method of data presentation and analysis used.,


5.2 Recommendation

Apart from careful tenant selection, it is advisable to make it a tradition to collect at least 3 years rent or more than 3 years rent advance at the commencement of tenancies to hedge against possible future defaults upon renewal.
The argument is that compound interest on fix deposits acquire will be enough to compensate for the loss of rent and interest within a defaulting period of say six months, it is expected that this is enough time to replace the defaulting tenant with a new one. More so, income realized now has a higher value than a slightly higher rental income realized in few years time due to inflation and wrong national economic policies.

Court Action

Managing surveyors find to use legal redress to obtain judgment in matters like this, but then one should not forget the time lad its dragging tendencies coupled with the fact that land matter between landlords and tenants always favour tenant because of government policy.

To avoid these, effects should be made by surveyor to avoid court proceedings. Dialogue is always the best option or ways of settle matters like, its true that some tenants are extremely difficult, such that can still be accommodate by skillful and talented estate surveyor by settle any matter that arises between them amicably, but if the matter cannot be resolve amicably, then the surveyor can now use legal means to eject the tenant out of the property and doing so all the necessary discomfort measure must be employed to force the tenant out of the promises such as serving him a quite notice from a lawyer (from a landlord to estate surveyor to the lawyer). This very action can change a willing tenant if actually he wants to retain the property.

More so, serviced attached enforcement machinery should be contained in the tenancy agreement and deed of sub lease to be executed with future tenant, serviced attached endorsement machinery can be arranged so that the bill for electricity and water rate salted monthly through the managing agent and in-conjunction with rent in the month it falls due.

It should be made a condition that if the landlord want to increase the rent of the property at least six months notice must be given to the tenants.


5.3 Conclusion

The landlords should be advised to endorse the maintenance of a floating account for the fundings of minor repairs maintenance and payment requirement as at when required.

It is important also to enlighten the tenants and the public at large on the need to pay rent as at when due and not in arrears, hence the disadvantages involved in arrears of rent starts to be enormous. And this can be achieve through the effective use of the electronic and print media regular arrangement of seminars, workshop and conferences when the relevance of estate surveyors and valuer in the efficiency of property management will be explained.

Spirited efforts should be made by property owners to accord managing agents a free hand in the handling of the affairs of their properties particularly in the screening and selection of tenants such, freedom will enables the agent put their professional acumen and wealth of experience to bear, in the handling of the caretakers task of selecting responsible and valuable tenants that will enhance the realization of the landlords investment objectives and not the other way round.

Furthermore, in the pursuit of sound policies towards the eradication of arrears of rent and difficult tenants lease agreements should be properly drafted to avoid ambiguities.

In summation, if all that were suggested and recommended in 5.3 are employed in method of rent recovery and treatment of difficult tenants adequately, it will then go a long way in solving long lasting problems militating against methods and approach, there is no doubt that application of these suggested solutions and methods, but ever increasing challenges in future.


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