Landlords: 12 Proven Strategies for Avoiding Nonpayment and Other Nightmares

Strategy #1: Establish budgets and profit projections based on 70 to 80 percent of potential rental income, not 100 percent.

When rent is not received on time, the landlord may have trouble meeting his/her own financial obligations. This cash-flow problem is compounded by the legal fact that a landlord does not have an automatic and immediate right to replace a non-paying tenant with one who will pay rent on time.

Strategy #2: Invest time and effort to identify financially-solvent tenants, and then check facts to be sure they are who they say they are.

Once a tenant moves in, that is, gains legal possession of the unit, evicting that tenant becomes a legal process, which the tenant may legally lengthen, even if the landlord has not been paid. The costs in time and money are substantial compared to the investment required to initially identify an ideal tenant.

Ontario Superior Court Justice Ted Matlow wrote in his August 2012 ruling on landlord Melissa D’Amico’s legal battle to collect rent from tenant Rony Hitti and his wife: "My recent experience sitting as a single judge of this court to hear motions has convinced me that there is a growing practice by unscrupulous residential tenants to manipulate the law improperly, and often dishonestly, to enable them to remain in their rented premises for long periods of time without having to pay rent to their landlords." The agreed to but unpaid rent of C$3600 per month totalled over C$25,000 in arrears while legal costs were over C$13,000. The court ruling in favour of D’Amico does not guarantee these sums will easily be collected by the landlord.

Strategy #3: To protect their income stream and real estate, landlords must become very familiar with details regarding the legal responsibilities for landlords and tenants, which are spelled out in applicable legislation.

Strategy #4: A landlord’s interpretation of his/her rights may not match that of judicial bodies, so following relevant cases and judgements is essential for accuracy.

Private landlords do not have the deep financial pockets of government or corporate landlords, so keeping up to date on precedent-setting contract law and tenancy cases may head off future legal bills and lost rental income. For instance, in the September 2012 British Columbia Supreme Court case, which pitted a single mother who was late with a February 2009 rent cheque, against the Metro Vancouver Housing Corporation. The housing corporation felt it had the right to evict because of a history of late payment between 1995 and 2008. The Court interpreted the law differently. The tenant won the right to stay in her C$1,062 per month rental townhouse, where she had lived for 28 years.

Strategy #5: Landlords should always verify information or advice since legislation varies across the country even though terminology seems similar.

Landlord and tenant legislation and regulations vary markedly across the country and across North America. Different government departments or ministries in each location administer locally-applicable legislation. The office responsible for consumer affairs can usually direct you to the correct group if phone books and online searches don’t.

Strategy #6: Landlords who learn as much about tenant rights and responsibilities as their own, including how tenants can complain about them, can manage outcomes for their dynamic rental business relationship.

Government websites offer introductory content, but check details locally. Industry Canada is one of many government information sources.

Strategy #7: Landlords must never forget they are running a business, especially when the rental unit is in their home.

Verify with an accountant or directly with Canada Revenue Agency (CRA) the applicability and pitfalls of any attractive tax tips. For every great tax advantage, there are CRA rules that are expensive to ignore.

Strategy #8: Wanna-be landlords should investigate the real estate aspects of renting before they buy the chosen building since municipal zoning bylaws dictate what can be rented out, and which fire and safety provisions must be standard.

Strategy #9: Renovation and maintenance short-cuts which side-step building permits and inspections may come back to haunt landlord/owners when property insurance is compromised by these deficiencies. Claims may be disallowed if building codes or zoning bylaws are not followed.

Strategy #10: Landlords should aim to be their own best advocate and advisor by learning how every aspect of a rental business works, and where efficiencies lie. Join a professional landlord organization to facilitate learning and gain access to lessons-learned by more experienced landlords.

Strategy #11: Landlords shouldn’t get so excited about rental income and tax advantages that they ignore the possibility of a tenant not paying rent and not willingly vacating the premises.

Strategy #12: Landlords must expect to keep learning even when they believe they know exactly what will happen next, because surprises are expensive.

Investigate how your life could be affected once you’re a landlord, including what could go wrong. Tenants who understand their rights and your responsibilities better than you do, will have more power over you than you will over them. That’s no way to run a business, or put your real estate to work.



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