The economy can be responsible for good tenants going bad by not being financial able to pay the rent. Retail tenants are especially subject to the whims of the economy. In commercial real estate landlords depend on the rent for space that it leases.
When retail or commercial tenant won’t or can’t pay the rent sometimes they have to be evicted. Given the circumstances affecting the economy, finding a reliable replacement tenant can be a challenge.
Instead of creating an empty space a landlord could wait before starting an eviction process. With retail clients like in a strip mall or shopping center, the tenant relies on the traffic generated by the other tenants.
When unemployment is high, people spend less because they have less to spend which effects their behavior and shopping habits. Less traffic is less revenue and tenants begin to show signs of wear and tear by first being late and then not paying at all.
In some cases the tenant makes an effort to pay the rent which indicates a good chance they will be able to catch up on past-due amounts. In this case it may be in the landlord’s best interest to hold off on an eviction and instead try to work with the tenant, until it becomes clear that the rent won’t be paid.
At the beginning of a new lease agreement, the relationship is collaborative because the tenant is eager to be successful at making a profit. The landlord wants the tenant to succeed, because if it does, the rent can be paid, the space is filled and the increased level of commercial traffic will benefit all tenants.
When times become challenging and the business ends up in a struggle to survive, it starts to miss payments and the once collaborative relationship becomes adversarial. Each landlord is has their own finances to manage and cannot always afford to be sympathetic to the tenant’s issues.
Concessions are sometimes made at the discretion of the landlord by allowing late payments or forgive a portion of the rent. In order to protect themselves under the terms of the lease they must take prompt action to take back the space and collect as much of the past-due amounts as possible.