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Last Monday, we talked about “renovictions” and how a tenant took her landlord to small claims court and won.
But just as there are bad landlords, there are also bad tenants. Today, we’re going to hear the opposite side of the story—a landlord who had to evict a tenant who hadn’t paid rent for over 6 months!
As you know, it’s already a pain the ass to evict a bad tenant, but during a pandemic? That sound you just heard is the sound of landlords collectively screaming and pulling their hair out.
Let’s find out from “Big City Landlord” what it’s like to evict a horrible tenant during covid-19:
1) How many properties do you own?
2) What are 3 things you enjoy about being a landlord?
- Stable cashflow – people will always need a place to live
- Potential Good investment – I put the word potential in front because you need to run your numbers
- Semi-passive income
3) What are 3 things you don’t like about being a landlord?
- Finding new tenants
- Tenant headaches
- Property Maintenance (new properties aren’t so bad but if it’s old you may need major repairs)
4) Tell us about the eviction process. How difficult was it to evict a tenant during a pandemic? Was it more difficult than during normal circumstances?
Under normal circumstances the process to evict a tenant is already pretty long once you start the paperwork. I was told it can take around 4 months however I’ve heard of cases from other landlords that it can take a year if the tenant knows their way around the legal system.
During the pandemic this process became longer because court dates were paused. There was an eviction ban so even for non-payment of rent, you cannot evict your tenant. After this ban was lifted, there was a backlog of cases which further prolonged the process.
In Ontario, to evict a tenant for not paying rent – the process looks something like this:
- Give the tenant the “N4 – Notice”. This tells the tenant how much they owe and the termination date (ie. the due date for their payment). You also must give them at least 2 weeks notice.
- At this point if the tenant pays the full rent owing, then you can’t evict them. BUT, if they still don’t pay the rent or move out by the termination date, you give them a “L1” (Application to Evict a Tenant for Non-payment of Rent and to Collect Rent the Tenant Owes). Since hearings are all held online during covid, I got an email with my hearing date. I had to make sure to submit all evidence to my tenant and the board at least 5 days before my hearing date. Then the board had me fill out a “L1/L8 application”. This was a form to update the board on the current situation (ie since the L1 above was filled, did the tenant move out? Did the rent owing change?)
- During my hearing, for non-payment of rent, all of the board’s orders were payment plans with a future hearing date. If the tenant fails to comply to the board’s order, the Landlord and Tenant Board can refuse future evidence and not consider any new issues.
5) Why did you have to evict the tenant?
The tenant had not paid rent for over 6 months when I filed the N4.
6) Have you ever had to evict a tenant before?
No – in over 15 years of being a landlord I never had to evict a tenant.
I did have other tenants before who was late on their rent due to personal reasons but once they got those sorted, they paid the amount of rent owed in full.
7) Do you have any regrets after this process?
My main regret is not serving the N4 sooner and starting the process earlier.
8) Did you learn anything from this process?
Yes, the entire process was new to me (what forms to fill, attending the hearing). In my situation, the tenant didn’t make the payment ordered by the board. I’m guessing she knew the eviction order would be coming on the next hearing and moved out before it occurred, so we never had to get an official eviction order.
9) Is there any advice you would give to readers who are landlords or thinking of becoming a landlord?
Run the Math:
You should run and know your numbers well. This includes having a good understanding of the opportunity cost of money i.e. is there anything better I can do with my money? There are a lot of people purchasing cashflow negative properties without truly knowing the impact this has on their life and taking a chance on what happens if things don’t turn out as expected.
Commercial or Residential?
If you do want to be a landlord, consider whether you prefer a residential property or a commercial property and why. In general, you should vet a tenant for a commercial property more thoroughly. Their cashflow should sufficiently cover rent and they should also have some sort of insurance.
For residential, sometimes if a tenant does not pay rent, it is because they simply are unable to (this isn’t always true but most of the time from my own observation).
There is no point in trying to get blood from a stone. You either cut your loss and begin the process of eviction as soon as possible or try to recoup it. I do this by trying to understand their situation and working out a repayment plan if they are in between jobs.
The repayment plan must give them enough room to live normally. Try to be understanding. If they are unable to follow a generous repayment plan, proceed with eviction because they are hopeless.
It helps to understand the nearby job opportunities, even if they are just minimum wage ones as these are opportunities that you can point out for people to take to tide them over until they get their next job. If their situation seems hopeless, proceed with the process of an eviction. It is unfortunate, but you are running a business and not a charity.
Consider the location of your property, as that will determine your demographic of tenants. It will also determine whether there is future potential of further development of the area. Guesstimate a rough timeline because that might also be when you’d look to cash out and move on.
Keep a list of trustworthy contractors/services handy because having an answer ready for a stressful situation is important. That way it’s just a situation instead of a stressful situation.
For residential properties, some questions I would also ask myself:
- Does owning this property tie me down to a specific location for the foreseeable future and am I OK with this?
- Is this property cash flow positive if someone else managed it? This is not necessary but adding a stream of income via real estate and increasing your cashflow should give you more freedom and I feel that it’s counterintuitive to restrict yourself when increasing your cashflow.
- Am I able to meet mortgage payments if for some reason I can’t collect rent for a whole year? Give yourself some breathing room in case things go south. You never want to be in a situation where it is outside your control and financial means.
- Would I ever live in this residential property?
- Am I only renting out a portion of this space/rooms within my house?
- Am I sharing any space with a tenant? How does this affect my quality of life and how long will I be in this situation?
Know Your Tenant
When you do share a space with a tenant, make sure you spend the time to build the rapport and get to know them, even before the lease is signed because you will be living with them. Make sure you have systems and items in places where it is easy for them to maintain cleanliness of the spaces.
Some examples would be
- providing a good cordless vacuum in an easy to access space
- keeping plentiful kitchen towels abound and within an arm’s reach
- replacing them with fresh ones when washing the dirty ones
- providing a place to easily throw the dirty ones into
The fewer barriers there are between a habit you want your tenant to have, the easier it is for them to consistently do it.
I run on the belief that people are generally good, but they are also lazy. If the task doesn’t feel like an inconvenience, they will generally do it.
If you were to choose between a tenant who pays slightly less vs a tenant who is willing to pay slightly more but your gut prefers communicating with the former, go with the former. I have never regretted a tenant for whom I had a good gut feeling about but many regrets for the latter.
10) Would you change any of the laws regarding tenants and/or landlords?
I would expedite the eviction process. Luckily, I have been a landlord for many years before this eviction and my cashflow is good. During covid, I’ve heard horror stories of single property landlords having their only tenant stop paying rent with no ways to evict them then waiting for the eviction backlog to come to their turn. Luckily most tenants I dealt with are really nice people though I think the laws adequately protect tenants against bad landlords but not landlords against bad tenants.
What do you think? Have you ever had to evict a bad tenant? Would you do anything differently? Do you think the rental laws need to change?
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