Negotiating With Tenants for the Fayetteville, North Carolina Property Owner.

Property management companies are often faced with the decision as to how to deal with tenants who are not living up to their end of the lease agreement.  Some common issues include, having to evict is the tenant is late with rent; repairs to the property; access to the property by the property management company or landlord; noise complaints; lack of upkeep of the premises; or other issues which may make it necessary to evict the tenant, or put the tenant on notice as to the violation.

Equally as important is the landlord who could also end up on the wrong side of a lawsuit for things like discriminatory tenant screening, not keeping the property in conformity with the lease, or other housing violations.

As the only property management company in Fayetteville, North Carolina led by an attorney, the advice we are going to provide to you is, to avoid court as much as possible.  At Linchpin Property Management, we believe that the first step should be to negotiate with the tenant.

Suing Your Tenant is Not Always  the Best Answer 

We constantly hear landlords, who are not out property management clients, say “I want to sue my tenant.”  The use of the court system, with all of the expenses and uncertainty of outcome, is not always our first choice on how to resolve a dispute.

While we would like to think that the courts will be in our favor, this is not always the case.  The outcome of any legal fight with your tenant is based upon, not only the law, but if the person hearing your case believes you are in the right.

Equally as important, is the fact that even if you are right, the damages, or money, you are awarded may not outweigh the expense to go to court, as well as the actually requested damage amount. Additionally, you may end up litigating a case for years, as the litigation process sometimes is not as quick as we all would like it to be.

This is where a negotiated settlement agreement with your tenant may be the best option.

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Take Emotions Out of the Equation

As a landlord who manages your own property in Fayetteville, North Carolina, your goal should be to achieve the best result possible, at the lowest cost to you.  What clouds this vision is the landlord who wants to be right; whose principles become intertwined with the possible lawsuit; and the landlord who is too emotionally involved with the entire process.

This combination of factors is a deadly combination, and will often lead to an outcome that is worse than one that could have been negotiated without the use of the court system.

So how do you go about the negotiation process with your tenant? 

Well, in the event you have a property management company in Fayetteville, North Carolina working on your behalf, your first step is to identify the issues, and inform your property management company of the outcome you desire. 

As a matter of practice, your property management company should have already identified the issues, and as your representative, should have addressed them prior to them reaching your level.  Sometimes, however, property management companies fail to do their jobs correctly, and the landlord is left with the responsibility of cleaning up the mess.

Communicate With Your Tenant When an Issue Comes Up

Step one should be for you to actually communicate with the tenant.  This can be a call or an email to the tenant to arrange a time to discuss the issues with the tenant.

As a point of practice, we recommend sending a nonthreatening email to the tenant first, with the issues spelled out, and following up the email with an in-person or remote meeting with the tenant.

We do not, however, recommend just dropping in on the tenant.  This is a recipe for disaster, as it puts the tenant on guard, the tenant becomes defensive, and the lines of communication start to close.  The first point of contact with the tenant via written communication allows the tenant to prepare for the meeting, identify what they are doing wrong, and possibly come up with a solution to the problem.

In other words, it strengthens the possibility of a productive, rather than destructive, meeting with your tenant.

The initial email should include an offer to compromise, or settle whatever dispute you are having with the tenant.  You can find a copy of an example of an offer to compromise in our Linchpin Property Management Landlord Resources section.

You must view the settlement process as a negation.  As property managers, we look at what is the best outcome for the properties we manage for our landlords.  This may not be getting everything the landlord wants, but it should include a result that is favorable to our client.

As a landlord, you must put on your property manager’s hat.  What we mean by this is that you must be unattached, unemotional, and realize the steps you are taking are part of a bigger set of business decisions.

Our experience as property managers in Fayetteville, North Carolina, have led us to 11 key points for a successful negotiation process while managing your own property:

Point 1:  Get Your Tenant’s Point of View

This is where you are a property investor must become an active listener.  Listen closely to the tenant’s complaint, be an active listener, and make mental or physical notes of what they are saying.  Even if you don’t agree with what the tenant is saying, you should remain an active listener. 

A method that is sometimes useful, is to paraphrase the key points either during or after your conversation with your tenant.  This will provide a feeling that you are actually listening to what your tenant is saying.  Again, however, avoid interrupting.

Point 2:  Don’t Attack the Tenant

Personal attacks on anyone, especially during a business relationship, are never a good idea.  What personal attacks do in property management, is they bring up walls, and make the negotiation process all the more difficult. 

Similarly, at all costs, try to refrain from allowing the tenant’s remarks to make you become impulsive or emotional. Like personal attacks, these are equally as ineffective.

Point 3:  Be Cordial, But Know Your Strengths

It is one thing with engaging in negotiations with your tenants in a friendly manner.  It is completely averse to your position to come from a place of weakness.  As a property owner, and business owner, the best interest of your business needs to be protected, even during friendly negotiations.

We assume you are in the “legal right” with the concerns you are bringing to the tenant’s attention, and it might be a good idea to also explain this to the tenant in an objective, and tactful, manner.

Don’t be afraid to let the tenant know the strengths of your case, as well as the evidence.  This can go a long way in the negotiation process.

Point 4:  Evaluate the Tenant

As property managers, we see both property investors and tenants, who fail to evaluate both sides objectively.

As a landlord, your job is to view both the tenant, as well as the tenant’s complaints.  Is the tenant really being a pain in the rear that you want to break ties with, or is the tenant only mildly annoying and has other attributes which make him an otherwise good tenant.

Evaluating your tenant as a whole, and in light of the complaints, will lead you to making a business decision, as opposed to an emotional one.

Point 5:  Make the Negotiation About a Mutual Goal

While full tenant buy in isn’t necessary to make a negation successful, it can’t hurt.  What you will find is that if the tenant is involved and feels co-ownership of the process between either yourself or your property management company, the tenant will be more willing to compromise.

It is when you as a landlord, or your property management company, attempt to come from a position of power that things seem to fall apart.

The “Hammer of Thor” should only be reserved for the most necessary situations.  Until then, work on a compromise, with active listening and input from both sides, for a more effective solution.

Point 6:  Evaluate What Your Tenant Wants

This goes hand in hand with Point 5. 

Both sides want something out of the business relationship.  If you are at the point where you are having to talk to your tenant about things, it may be because you feel as though the tenant has violated the terms of your lease agreement.

Finding out what your tenant wants, or needs, is a good way to bring them into the negotiation, and can structure how you reach a compromise. In fact, it might even be different than what you proposed in the letter you sent to your tenant when you requested the meeting.

Point 7:  Put the Shoe on the Other Foot

Another good point of practice is to place yourself in your tenant’s position to evaluate what is being said or complained about.

Sometimes, property owners invest in properties that they would not necessarily live in, because the margins are better for them.  This is fine, because it allows the real estate investor to buy properties and provide housing.

The downside to this is that sometimes, because of the nature of the tenants, the property investor does not maintain their end of the lease agreement.

The important thing to remember is that you have to place yourself in your tenant’s shoes.  Are you, in fact, engaging in behavior that you yourself would find unacceptable?

When you evaluate the situation from both sides, this will allow you to bring a more informed, unemotional, approach to the negotiation table.

Point 8:  Make Your Offer to Compromise Clear

When you draft your letter, make sure you include language in it that the letter is written as an offer to compromise.

Many landlords and property management companies don’t want to attempt to compromise situations, because they erroneously believe it will be used against them in court.

This isn’t how the law works however.

Settlement offers, that are clear as to the intent, cannot be used against a party in court. This is one of the good things about the law.  Courts want to avoid having too many cases, and they want you to settle disputes if you can, beforehand.

An offer to compromise provides the landlord with the tools to get the matter resolved, while protecting anything contained in the offer from being introduced in court.

Point 9:  Cash, or Some Form of It, Is King

On of the things our years in property management has taught us, is that sometimes you may come up on the losing end of the stick.

As a property investor, it is your goal to protect your bottom line.  If you are in the wrong, or the financial implications of what you are trying to correct is small, it might be wise to avoid a fight.

As stated earlier, litigation is costly.  Winning a case is uncertain.  The time invested can be wasted.

As a property investor, it might make more sense for you to understand your position might be just to lose some cash in order to make the deal favorable for you. 

What this means is that, if the tenant is complaining about things that need to be repaired, and is threatening to sue, even if you might be right, it might be a good idea to just pay for the repairs.

If you are cash strapped, and haven’t set up your investment properties for success as we set forth in our 7 Thoughts on Successful Fayetteville Property Management, then you may need to find creative ways to avoid paying hard cash.

One option is to look at a rent reduction based on the degree of the problem relative to the current rent.  The tenant will like the cash back, and it alleviates you of having to make the repairs.

An important point to note, make sure the repairs are not those that affect the habitability of the property, or what is required under law.  This is it’s own separate topic.

Understanding, for a property management company and investors, that tenant’s may settle for some form of cash in hand, saving you as the landlord the time, delays, and costs from a lengthy eviction process, or litigation.

Point 10:  Everything Needs to Be in Writing

The spoken word is worth nothing anymore.  As a landlord, you should ensure the negotiated agreement between you and your tenant is in writing.  You don’t have to get fancy about it, and you don’t necessarily need a lawyer. 

As the one who is offering the compromise, you should draft it, or have it drafted by your attorney.

There are a lot of things that go into an offer to compromise, but the most important is that the tenant acknowledges that the offer is in full satisfaction of all claims the tenant has.

You can download an example of an offer to compromise on our website in our Linchpin Landlord Resources Portal.

Point 11:  Is this Part of a Bigger Problem

We know it may seem like overkill, but active listening helps you identify not only the root of the problem, but other problems you may have in your systems. 

If the tenant is complaining to you, or your property management company, about the plumbing and HVAC unit, is that an indication that the tenant just complains, or is there a problem with your maintenance workflow?

If the tenant is complaining about a lack of communication on your part, is that an indication that you are too busy with other aspects of your life, and need to hire a property management company?

The point is, you have to look at everything in conjunction with your current systems.  You may believe that rent collection is enough, but there are a lot of other issues that can cause you to end up in court.

While you may believe your property investment business is running smoothly, it never hurts to have an unemotional, unbiased, objective view of your systems to refine them to maintain and increase the return on your investment.

At Linchpin Property Management, we have created a Property Investor’s Property Management Checklist. 

The checklist is available for free to download at the link below, in our bio, or on our website under Landlord Training and Resources.

You can use this checklist to evaluate how you are conducting business, and to make you a more successful property manager and real estate investor.

As always, don’t hesitate to reach out us a the link below, follow us on social media, and subscribe to our newsletter to get weekly tips delivered to your Inbox.

The Team at Linchpin Property Management