Renting out a commercial property is, at its most basic level, an income generator. So the key part of that process is ensuring that your due monies are received. This may, at first glance, seem like a very rudimentary concept but it is littered with pitfalls and potential challenges if approached in the wrong way.
Often overlooked by those keen to crack on with the business of tenancy, potential rent issues can often be identified before contract stage by undertaking the necessary checks before you enter into an agreement with a prospective tenant. So, take the time to:
- complete a full credit check
- follow up on direct references from previous landlords or property managers
- follow up any history on previous company names linked to your prospective tenant
- follow up available history on other directors of company names linked to your prospective tenant
- ensure that a deposit is paid
Undertaking due diligence may seem like a massive administrative job but it is extremely worthwhile and works not just to flag potential problems, but also to offer protection for your company should defaults occur. A benefit to employing a property management company, such as Wadham and Isherwood, is that we undertake these checks regularly and can provide comprehensive due diligence checks in a fraction of the time.
While negotiating and drawing up your lease, it is paramount that clauses laying out the terms of rent collection and consequences of any defaults are clear and transparent. You should clarify what any late payment fees are, detail interest that these will accrue and where the responsibility of legal fees lies. The wording that you choose for your lease documents must be clear and effectual. Wadham and Isherwood expert managers benefit from an up-to-date knowledge of practices and procedures, so their advice and guidance can mean that many future issues are avoided.
There is some debate over whether Standing Order or Direct Debit is the most appropriate method of paying sums of money. Although there is a small cost associated with direct debit, this automatic payment method certainly offers more reliability and flexibility as you, the owner, is in control. You can amend the amount paid which is ideal for fluid rent agreements that have fluctuating sums month on month. Although a tenant can cancel or default on a direct debit, you will be immediately notified should this occur.
No matter how healthy and optimistic the bank balance of a new tenant is at the start of a lease, and indeed no matter how long you have enjoyed reliable regular payments from a tenant, the business of tenancy is not future-proof. Circumstances are never entirely predictable and even the most dependable tenants can run into difficulties. Should this happen, it is key that the defaulted payment is followed up immediately. You must manage the communication process with clarity and be sure to keep on target until you have collected the payment. Here, an outsourced service can really offer advantages and can avoid the costly route of formal rent collection or bailiffs. The resource available is considerably greater, especially when it comes to keeping track of multiple properties and tenants.
Commercial property management offers the fundamental advantages of resource, expertise and experience to take the stress out of rent collection for you, the property owner. Cash flow becomes more reliable and any problems are resolved quickly and effectively. This leaves the property free to simply do what it was intended to do in the first place: generate income.
To learn more about the commercial property management and rent collection services that Wadham & Isherwood can offer please contact Tim Alden on 01252 710822.