The property investment strategy of buying a property and letting it out to tenants may be sound, wise and good strategy. But what happen if you rent your property or house to a tenant who refuses to pay his rental or refuse to return vacant possession upon the expiry of the tenancy agreement between you and him? This problem often occurs and as a prudent investor, you should be prepared and equipped with the knowledge on how to deal with these tenants.
Recently, a friend came to us and told us his story:
“My tenancy agreement with my tenant will be expiring end of this month and I told my tenant that I want to increase the rental. My tenant declined my proposal to increase the rental and told me that he will continue occupying the premises without paying me rental for the next three months because I’m holding his rental deposits. He refuses to vacate by end of this month and refuses to pay me rental for the following months. I’m lost.”
There are also situations of tenants who are in arrears of rental for months and refuse to vacate the property on the request of the landlords.
If you happen to have similar tenants whom property investors categorise them as “uncooperative tenants”, what should you do?
Do Not Enforce Self-Help Rules
What are self-help rules? These are actions by the landlords themselves to repossess the property without using the legal remedies. For examples, cutting the utilities connecting to the premise, ‘break-in’ the premises and change the padlocks or simply lock the premises with new padlocks.
The above actions are STRICTLY NOT RECOMMENDED because you could land yourselves in hot soup! Under Section 7(2) of Specific Relief Act 1950, the landlord must use legal recourse, ie proceedings in court to repossess the property.
If you decide to take the law on your own hands and cut the utilities or take every mean to evict the tenant without going through the legal process, you could be sued for damages or for disturbing the enjoyment of property as stated under Section 8(1) of Specific Relief Act 1950.
Instead, hire a lawyer to get you through the legal processes
There are few options available in the legal recourse.
File for distress proceedings in court to claim for arrears of rental.
Section 5 of Distress Act 1996 provides landlord to apply for Warrant of Distress to claim the arrears of rental not exceeding 12 months. This process involves bailiff and seizure of property in the premise. The seized items would be sold to cover the arrears of rental. If you afraid that this may cost a lot to you, you can pray to the court that the cost be paid by the tenant. But of course this is subject to the discretion of the court.
Apply for Eviction Order in Court.
Apply for a simple summons in court for eviction order and to claim the rental arrears. This will allow you reclaim the possession of the property and at the same time allowing you to recover the arrears of rental.
Letter of Demand or Eviction Notice.
Before applying for eviction order from the court, the landlord should serve an eviction notice to the tenant and give the tenant a certain grace period to pay the arrears and surrender vacant possession. This is a simple procedure and most of the time, tenant give in upon receiving letters from lawyers.
Section 28 (4) of Civil Law Act 1956 allows landlord to claim for double rental from tenant holding over the property after the expiry of the tenancy up to the date of giving up the possession of the property.
So the next time you meet an uncooperative tenant who refuses to give up possession of the property upon expiry of the tenancy, tell him that he could be liable to pay for double rental.
Negotiate With Your Tenant
At times, legal recourse may not be necessary. Make an appointment for negotiation with your tenant and reach a mutual consensus where it benefits both parties. You get your rentals; he enjoys staying on the premises without the need of moving or shifting to other premises. But sometimes, we just need to be a bit harsh on the uncooperative tenants. A letter of demand from a lawyer would probably help at times.
This was what happened to our friend mentioned above. We helped him to issue a letter of demand to the tenant and arranged a negotiation session between the landlord and tenant. In return, the tenant subsequently agreed to renew the tenancy at an increased rental price agreed by both parties. Our friend, the landlord, continues to receive monthly rental and avoided the hassle of finding new tenant and possibility of zero income for the next few months. On the other hand, the tenant enjoys occupation on the premise and saves the hassle of relocating his goods for business to new premises unknown to the loyal customers.
As a reminder note, although it’s common practice for people to rent their property to tenants without drafting any formal agreements but based on verbal agreements, it is always advisable to engage a lawyer to draft a proper tenancy agreement that can protect your interest in the property. We never know a good tenant today can be an uncooperative tenant tomorrow. A proper contractual relationship between you and your tenant could better protect your legal interests.