Silence. It’s Just Good Business

Our first tenant from hell story comes from Greg McFarlane.  Greg runs ControlYourCash.com and wrote the book, Control Your Cash: Making Money Make Sense, a financial primer for people who want results, not coddling. Get the physical or Kindle edition and contact him at Greg at ControlYourCash dot com.  The original entry can be found at the post about their commercial tenant from hell.

The Control Your Cash authors own an office building. In a couple of weeks, the tenant is supposed to start the 3rd and final year of the lease. It calls for a fixed annual rent increase.

The tenant was late with the rent once before. That time, the good-cop author waived the 10% late fee after listening to an excuse from the tenant’s octogenarian chief financial officer. The good-cop author stressed that this would be a one-time-only thing.

A few weeks ago, the tenant asked that the rent not go up next year. He offered nothing in return, he just hoped he’d get $6000 by asking for it. Maybe he thought he had leverage – the building’s been half-empty for some time, leading him to believe it’s a renter’s market. Perhaps, but a contract is a contract.

We refused, and December’s check never arrived. The bad-cop author left a polite and unambiguous voicemail with the boss and spoke with the CFO, who refused to give a straight answer to the complex and nuanced question, “Did you send a check?”

The tenant himself called the good-cop author a few minutes later, claiming that the bad cop threatened and disparaged the CFO (he didn’t.) The tenant added gratuitous lies, such as “the CFO thought he meant January’s rent.” The bad cop overheard this, grabbed the phone, stated his position, and the tenant started spewing profanities and, swear to God, asked if anyone would be interested in “tak(ing) it outside.”

Indisputable conclusions:

calculating finances

The fees start adding up.

  • in Western society, the standard strategy for requesting a favor involves groveling and pretending to like the person who can dispense the favor. Berating and threatening are almost never part of that strategy. Therefore,
  • the tenant has no intention of sticking around past December.

Additional points: the tenant opted to communicate exclusively via text from that point, and exclusively with the good cop. In fact, one of the texts stated that the bad cop “is not to contact us anymore.” Yes, the delinquent tenant is making demands while stealing office space.

Also, the tenant stated that he’d refuse to pay the 10% late fee. He asked the good cop if she really wanted to “destroy this

business relationship” and if she’d want to “lawyer up” in lieu of caving into all the tenant’s demands. These would include, apparently, refusing to pay the current month’s rent. Nowhere in his diatribe was there a word about where December’s rent check is.

In the later chapters of Control Your Cash: Making Money Make Sense (available at Amazon and Barnes & Noble), we argue that if you’re going to invest in houses and rent them out, hire a property manager and pay her 10% to assume control of your headaches. Commercial property doesn’t typically work that way, and shouldn’t, but we at least weighed the benefits of hiring a property manager while dealing with this idiot tenant.

We didn’t get mad. We sent a cold and impersonal email to an eviction company and hired them. They charge $200 to put a notice on the door telling the renter he has 10 days to pay the balance (which just got $200 larger) or get out. The renter would still be legally obligated for not only December’s rent, but the remaining year on the lease. The security deposit we initially collected covers only a small part of that.

So he started using intermediaries. We got a call from the broker who originally engineered the deal, a quasi-friend with no dog in this fight. This is the equivalent of having an argument with your significant other and placing a call to the person who introduced you. We didn’t bother calling back the broker who, to her credit, had only two things to ask the renter: What am I supposed to do about this? and Did you pay your rent?

Then yesterday, a voicemail from someone we’d never heard of. Another real estate broker, but one who talked as though she was representing the tenant in court (“Mr. Smith really wants to pay the rent, and hopes both parties can agree to a mutually beneficial solution.”)

Huh?

kick butt

Time to kick some butt.

If the tenant’s talking to other brokers, he clearly wants out of his lease. Which we’d grant, as soon as he cuts a $70,000 check for the entire remainder of the term. His threats to “lawyer up” notwithstanding, his would be one of the weakest cases in the history of jurisprudence. And why the tenant chose an intermediary whose very identity shows his hand made no sense at all.

The point of all this is manifold for people who want to make money by selling their goods and services to others (which is the only ethical way to do it):

  1. If you’re going to be in a position where people can potentially owe you thousands, you need a written contract. (We did.)
  2. When previously semi-reasonable vendors/customers/clients/tenants start acting irrationally, sever the relationship before they have a chance to. At least then you’re in control. Even if this tenant had never been late with the rent, why extend the lease of someone so bellicose? Let alone give him a price break.
  3. STAY EMOTIONLESS. Take feelings into account in your personal relationships, not your professional ones. If you don’t, you will stay as poor as someone who buys lottery tickets and puts them on her credit card. Crap, this idea is so profound that it should have been a chapter in the book.

We could have made forceful but non-threatening calls to the tenant. We could have shown up (tempting, given his offer of a fight). We could have done what most people in these situations do, which is engage in unproductive conversations that don’t change anything (“When are you going to pay the rent?” “What do you mean you’re not going to pay the late fee?”, et al.) As if he’s going to give worthwhile answers.

Instead, put the phone down and don’t answer his calls (or any intermediaries’.) Because unless he says “here’s a cashier’s check for the full amount”, which he won’t, there’s nothing to talk about and anything beyond that is a waste of time. Hiring a pro and having the law on your side (plus a personal guarantee, agreed to at the start of the lease) makes life a lot less hectic.

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