By Steve Rennie, managing director of Rennie Property
With South African financial experts still concerned about the threat of a global double dip recession, Steve Rennie, managing director of Rennie Property warns landlords to be extra vigilant about keeping a handle on bad debt.
Collecting incoming payments should always be at the top of any landlordís agenda, but with the risk of there still being a fall-out from last yearís economic downturn, landlords need to be even more proactive about debt collection.
Landlords and their property managers need to get their hands dirty, says Rennie. First and foremost is accurate and timely reporting that will flag problems early on, giving landlords a chance to take action before the debt starts to gather.
Once landlords or property managers have spotted a problem, itís vital that they act quickly. This generally involves a few tough decisions on whether or not it makes sense to keep the tenant or not.
If the tenant is an attractive one, that complements the propertyís tenant mix, and runs a generally sound and sustainable business it is most likely worth nursing them through the tough times to benefit from a longer term gain.
Put a manageable payment plan in place, or be creative about extracting value from the tenant. For instance, retail tenants might be behind in their rent, but will still be marketing their business. Landlords should strike a deal to ensure that their property features prominently in the tenantís marketing campaign. Another good option is to agree that the tenant arranges a promotional event in the shopping centre to help attract new shoppers.
On the other hand, if the tenant is not a particularly desirable one and/or appears to be suffering from deep-rooted and systemic financial woes, it may be better to cut for a landlord to cut their losses before they escalate Ė within the confines of the lease agreement with that tenant, of course.
Other tips from Rennie include: