How to terminate your tenant

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    Last Monday we talked about “renovations” and how a tenant brought her landlord to a minor court and won.

    But just as there are bad landlords, there are also bad tenants. Today we hear the opposite side of the story – a landlord who had to evacuate a tenant who hadn’t paid rent in over 6 months!

    As you know, evacuating a bad tenant is already agony, but during a pandemic? That sound you just heard is the sound of landlords shouting collectively and pulling their hair out.

    From Big City Landlords, let’s find out what it’s like to evict a terrible tenant during Covid-19:

    1) How many properties do you own?

    3rd

    2) What 3 things do you enjoy as a landlord?

    1. Stable cash flow – people will always need a place to live
    2. Potential Good Investment – I put the word potential first because you need to carry out your numbers
    3. Semi-passive income

    3) What 3 things do you dislike as a landlord?

    1. Looking for new tenants
    2. Tenant headache
    3. Property maintenance (new properties aren’t that bad, but if they are old you may need to do major repairs)

    4) Tell us about the eviction process. How difficult was it to quit a tenant during a pandemic? Was it more difficult than under normal circumstances?

    Under normal circumstances, by the time you start the paperwork, the process of evicting a tenant is quite a long one. I was told it could take about 4 months, but I’ve heard of cases from other landlords that it can take a year if the tenant is familiar with the legal system.

    During the pandemic, that process lengthened as court hearings were paused. There was an eviction ban so that you cannot cancel your tenant even if the rent is not paid. After that ban was lifted, there was a backlog of cases that made the process even longer.

    In Ontario, terminating a tenant for non-payment of rent – the process goes something like this:

    1. Give the tenant the “N4 – hint”. This tells the renter how much they owe and the cancellation date (i.e. the due date of their payment). If they don’t pay you by that date, they must move out immediately. You must also notify them at least 2 weeks in advance.
    2. If the tenant pays all of the rent owed by this point, you will not be able to vacate them. BUT, if he still does not pay the rent or moves out by the notice date, give him an “L1” (request for eviction of a tenant for non-payment of rent and collection of rent owed by the tenant). Since all hearings take place online during Covid, I have received an email with my hearing date. I had to make sure that all evidence is presented to my tenant and the board at least 5 days before my hearing date. Then the board had me fill out an “L1 / L8 application”. This was a form to inform the board of directors of the current situation (i.e. has the tenant moved out since filling out the L1 above? Has the rent due changed?)
    3. During my non-payment hearing, all of the directors’ orders were payment plans with a future hearing date. If the tenant does not comply with the order of the committee, the landlord and tenant board of directors can refuse future evidence and not take any new facts into account.

    5) Why did you have to evacuate the tenant?

    At the time of the eviction action (N4), the tenant had not paid any rent for more than 6 months.

    6) Have you ever had to give notice to a tenant?

    No – in over 15 years as a landlord, I’ve never had to give notice to a tenant.

    I have had other tenants in the past who were late with their rent for personal reasons, but once they sorted them out, they paid the rent owed in full.

    7) Do you regret this process?

    My biggest regret is not to deliver the eviction notice (N4) earlier and to start the process earlier.

    8) Did you learn anything from this process?

    Yes, the whole process was new to me (what forms to fill out to attend the hearing). In my situation, the tenant did not make the payment ordered by the board. I suspect she knew the eviction order was coming at the next hearing and moved out before it happened, so we never had to get an official eviction order.

    9) Is there any advice you would give to readers who are landlords or are thinking of becoming landlords?

    Do the math:

    You should run and know your numbers well. This includes a good understanding of the opportunity cost of money, i.e. can I do something better with my money? There are many people out there who buy cash flow negative real estate without really knowing the impact it is having on their lives and taking a risk on what will happen when things don’t turn out as expected.

    Commercial or residential?

    If you want to become a landlord, consider whether you would prefer a residential property or a commercial property and why. In general, you should do a more thorough check-up on a commercial property tenant. Your cash flow should adequately cover the rent and you should have some form of insurance as well.

    Sometimes when a tenant does not pay rent on residential property, it is because they simply are unable to do so (this is not always the case, but mostly from my own observation).

    Be realistic

    There’s no point in trying to get blood out of a stone. Either limit your loss and start clearing it as soon as possible, or try to make amends for it. I do this by trying to understand their situation and working out a repayment plan when they are between jobs.

    The repayment schedule must give them enough space for a normal life. Try to be understanding. If they cannot follow a generous repayment plan, proceed with the eviction because they are hopeless.

    It helps to understand the vacancies nearby, even if it’s just minimum wage, as you can point out those opportunities that people can use to bridge them until they get their next job. If their situation seems hopeless, proceed with the process of an eviction. It’s unfortunate, but you run a business, not a charity.

    Take into account the location of your property as this will determine your tenant demographic. It will also determine whether there is any potential for further development of the area in the future. Estimate a rough schedule because that might also be the case if you want to cash out and move on.

    Have a list of trusted contractors / services ready as it is important to have an answer to a stressful situation. That way, it’s just a situation instead of a stressful one.

    In the case of residential properties, I would also ask myself a few questions:

    • Will owning this property tie me to a particular location for the foreseeable future and do I agree to it?
    • Is that real estate cash flow positive with someone else managing it? This is not necessary, but adding a real estate income stream and increasing your cash flow should give you more freedom, and I find it counter-intuitive to limit yourself on increasing your cash flow.
    • Can I make mortgage payments if for some reason I have been unable to collect rent for a full year? Give yourself some air to breathe in case you head south. You never want to get into a situation that is out of your control and your financial resources.
    • Would I ever live in this residential property?
    • Do I only rent part of these rooms / rooms in my house?
    • Do I share a room with a tenant? How does this affect my quality of life and how long will I be in this situation?

    Know your tenant

    If you are sharing a room with a tenant, make sure you take the time to build the relationship and get to know them even before the lease is signed as you will be living with them. Make sure you have systems and items in places where it will be easy for them to keep the rooms clean.

    Some examples would be

    • makes for a good cordless vacuum cleaner in an easily accessible space
    • Keep enough kitchen towels within reach and close at hand
    • Replace them with fresh ones when you wash the dirty ones
    • provide a place to easily throw the dirty ones in

    The fewer barriers there are between a habit your tenant is supposed to have, the easier it is for them to consistently do it.

    I assume that people are generally good but also lazy. If the task doesn’t feel like an inconvenience, they’ll usually get it done.

    If you should decide between a tenant who pays a little less and a tenant who is willing to pay a little more, but your gut feels like communicating with the former, go for the former. I have never regretted a tenant for whom I had a good gut feeling, but very much regret the latter.

    10) Would you change laws regarding tenants and / or landlords?

    I would speed up the eviction process. Fortunately, I was a landlord for many years before this eviction and my cash flow is good. During the Covid period, I heard horror stories from sole proprietorships where their sole tenant no longer pays the rent without an eviction being possible and then waiting for the eviction backlog to come. Fortunately, most of the tenants I’ve dealt with are really nice people, although I think the laws adequately protect tenants against bad landlords, but not landlords against bad tenants.


    What do you think? Have you ever had to evacuate a bad tenant? Would you do something differently? Do you think rental laws need to change?


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