Defaults and Collections

Defaults and Collections

Defaults and Collections

What Are Defaults and Collections?

Defaults are when your tenants are failing to pay rent on an agreed upon time. These times should be outlined within your lease agreement, and are obligations of your tenants to meet.

Collections are how you as a landlord collect the unpaid/outstanding rent. There are many legal remedies available to the landlord, as well as the option of negotiating payment of the outstanding rent with the tenant. Sometimes, negotiating a resolution for the repayment of the outstanding rent is not possible. When this happens the landlord can turn to the terms of the lease or the Commercial Tenancies Act for further legal options. Legal options include termination of the lease, re-entry into the leased premises and the right to distrain against the goods of the tenant to recover arrears.

When it comes to defaults and collections, there are many things to consider as a landlord before you rent out your commercial property. It is something that you have invested time and money into. Now, you’re ready and willing to trust it to someone else.

Maintenance, repairs and external expenses may all need to be covered if you own a property. The rent that is coming in isn’t simply straight profit. If your tenants are failing to pay rent, as per your lease agreement, then they are defaulting on it. If they are defaulting, they are going against the lease agreement and leaving you in a tough situation.

When this occurs, it is called an arrears of rent and it must be collected.

What are your options as a landlord?

Defaults and CollectionsUltimately, if your tenants are failing to pay their rent in obligation with your agreed upon lease contract, then they’re in the wrong. It complicates your situation, adds stress to your daily life and you lose trust in them. An arrears of rent begins to accrue on the first day of the rent cycle if the rent is not paid on that date.

When seeking to collect the arrears of rent, you must notify the tenant of the situation and of the sum of money that has accrued. This amount needs to be paid off and can be done through an agreed upon payment plan. To ensure it is documented, it is encouraged that you do this through a written and signed agreement.

If you’ve notified your tenants and they aren’t going to pay their accrued difference, more drastic measures need to be taken. This can include seeking out a collection agency that will collect the rent for you. This is done outside of a court proceeding and may be more appealing for that reason.

On the other hand, a Notice to End a Tenancy Early for Non-payment of Rent form is the safest option available. This form provides the tenant with notification and a 14-day grace period to pay their rent, or they are forced to move out.

However, you can also seek legal guidance on the issue. Ontario’s Commercial Tenancies Act (CTA) is in place to ensure that both the landlord and tenant are protected. Also, the Landlord and Tenant Board is a wealth of resources for landlords who are struggling with defaulting on rent.

Things to Remember In Regards To Defaults And Collection

Before you do anything, legal counsel is highly encouraged. Legal advice can help you see how the CTA applies directly to your unique situation. With this information, you can make the best decision moving forward.

Whether it is a simple overdue rent situation or a pressing court matter, we want you to come to a cost-effective and pragmatic resolution. It is not always a clear-cut situation. Make sure that you know your lease agreement and what your options are.

Contact our civil litigation lawyers today to seek advice about default and collection of arrears of rent. Hummingbird Lawyers can stand behind you to make sure you find a fast and efficient solution to your commercial tenancy problem.

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