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RESOURCES ON LEASES FOR BUSINESS USE
IN THE OHADA ZONE

Lessors: Is law alone always sufficient to secure your lease ?

 

Everything is often all for the best in the best of all worlds at the time of the lease signature.

It is ‘later’; as soon as ‘the ink is dry’ that is, for some of them, immediately after the signature, for others, after the ‘grace period’ following this vital stage; thus, it is “after” that the masks come off and the slips start.

Yet, the lease for professional use is the bedrock of the activity planned in the premises, so the tenant does not come just for a few days there because he needs stability, as in a marriage, this  is why some provision  are included in the law in this regard.

The future lessor should therefore not forget that by accepting such a tenant in his premises or on his piece of land, he will not be able to decide to evict him whenever and however he wants, hence the importance of a ‘reliable tenant’.

But then, how can he make sure this tenant will be reliable? Some people will tell you that it is somehow a lottery game since sometimes a tenant complies with his entire obligations well at first or even for a while, then stops. Others, more careful, try to find reliable reference points to reduce the risks related to this choice and even go as far as to draft ‘blacklists’ of tenants who will never have access to their premises.

If it is true that the behaviour of human beings is not 100% predictable, it is not a reason for the lessor to sit back and watch. The search for information on the potential tenants may enable him to see a little more clearly with whom he is going to sign the contract, some from the potential tenant himself (information on his activities, on his past rents etc.), others from outside sources (profiles set-up in the sector etc.).

With endless series of missed phone calls, outstanding rent payments and damage in the rented places, a number of lessors go through hell, far from the rental scheme they set up on their property.µµ

Check the background of the tenants

Some checks on the background of the future tenant may be an interesting reference point to see his surroundings.

During the discussions with the potential tenant, it is indeed not useless to try to get some information on his past  rents, for example:

. the name of/the previous lessor(s);
. the reasons why he left the premises previously rented etc.
. Lessors' frequent change may be an indication of the tenant’s instability which causes should be clarified as he is knocking at your door.

The collection of this information will not always be easy (reluctance, fanciful or false information provided etc.), but totally skipping this step will, for the lessor, be equal to directly dive into a swimming pool to realize, once in the water, that it is icy and that he cannot stand it.

Be informed on the nature of their activities

The tenant must tell you which activity/ies he plans to carry out on for several reasons. First of all, it may be an activity you do not want to be carried out on your property (because of the noise, hygiene problems etc.). In addition, this information will necessarily have to be included in the lease contract, but this will also enable you to ask the tenant some additional elements such as the license related to this activity if such a document is compulsory. You overlook this detail, the administrative officials will come to shut down and seal the place, and this will be an alibi which the tenant may hurry to put forward to justify the non-payment of the rent. Don’t also forget, if this license has a limited validity, to ask for the renewed document.

How to ‘separate the wheat from the chaff’ within difficult tenants?

Is it possible to separate the 'wheat from the chaff' with a typology of difficult tenants?

Knowing how the person in front of you behaves enables you to better manage your relationships and here, lease management of course requires a quite different level of vigilance according to the tenants’ behaviour.

Knowing some tenants' behavioural trends may enable either to avoid some tenants' with bad profiles from the outset, or to better manage them afterwards (for those already in the premises).

Tenants’ typologies on which bases ?

A classification of the various types of bad tenants is not necessarily easy in view of the diversity of situations and characters with corresponding rather broad variety of practices and behaviours.

It is however possible to set up a typology of  behaviours on the basis of some important parameters of the tenant-lessor relationship such as the  tenant’s behaviour as to :

. compliance with his obligations in general,
. payment of the rent,
. the correct use and the conservation of the rented place.

Are tenants’ typologies useful ?

When watching the behaviour of your various tenants over time within the framework of your leases, you manage to identify some signs you may use as landmarks, and thus many lessors draft lists of acceptable tenants and those to exclude.

Taking into account such information can enable the lessor to better see the behavioural patterns (bad or good behaviours) common to some tenants, and this allows them to anticipate on the surroundings of their tenants management to be set up (standard, or with an increased level of vigilance).

Such management optimization will of course contribute to secure the recovery of the rent, therefore, as the case may be, the investment which the lessor has made (the scheme of which should not be endangered by the tenants’ malpractices) or even more simply the fulfilment of his essential needs.

Such an optimization becomes even vital when the recovery has to secure the repayment of a credit or the covering of the above-mentioned needs, and in these cases, there should be a zero-tolerance. Thus the lessor in   these cases may tend to refuse tenant X while a lessor having none of these constraints will perhaps allow himself to be less rigorous and let the same tenant in.

Conclusion.

Even if the various methods reviewed above do not guarantee to separate correctly and in a scientific way the wheat from the chaff within difficult tenants, and sometimes even lead to unfairly exclude good tenants, if they are intelligently used, they can nevertheless contribute to optimize the management of the leases and secure the lessors better.

 

For an additional analysis on the matter and exchange your related experiences, go to our blog. « Is-it possible to separate the wheat from the chaff with profiles of difficult tenants? ». Click here.

You can download some fact sheets on difficult tenants in the Welcome Kit: « Some tenants / lessors' profiles to avoid/ requiring your vigilance ». To do so, click here.








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