Offering my Retail Tenant a Credit line on past due rent

[Jason Mak]

Hello Bper's

I recently acquired a retail building and I have a tenant who has trouble paying his rent. His rent is 6k a month and he is sometimes able 3000 in two separate payments. His business is somewhat seasonal and he is usually able to get current after a few months. The lease has a late payment penalty written in, however I don't think the previous owner collected as they were more concerned on just getting rent collected. Serving a 3 day notice and eviction wouldn't be my ideal scenario as who knows how long it will take to get another retail tenant back.

I was thinking of offering this tenant a line of credit for rent. Meaning that he can hold keep an overdue balance with me and I'll charge him interest [5-10%]. I was thinking about putting a cap on his ageing of one months, meaning that he can't fall more than one months behind on rent or he would default.

Anyone have any thoughts on this? Good/Bad idea?

Thanks,

Jason

[Uwe S.]

Hello Jason,

maybe a bad idea. Try to change the rent contract from $6k installment to 4x $1,5k each month, payable at 3rd, 10th, 17th and 24th of each month.

If he cannot supply your own business can be dangerous so no I wouldn't serve him a line of credit. Even seasonal business must be able to pay his rent all months in his calculations.

-Uwe