Hi Tina! My booth renters never pay on time, but lately, several of them haven’t been paying at all. They are week-to-week, and we have no formal lease agreement. Most renters are at least a week behind, and a few are almost a month behind. It’s affecting the business and causing me a lot of stress.
I love my tenants, and I think we cohabitate well, but my resentment is building towards them, and it’s starting to create some tension. I don’t want things to be this way! What do you recommend?
Every salon landlord faces this issue at some point. Welcome to the club!
I’d like for you to think of this as your first real leadership exercise, because how you behave and how you treat the renters who are behind on their payments matters a lot and could impact your business significantly.
If you don’t already, start thinking of your renters as your customers, because they are. Your job, as their landlord, is to provide them with suitable workspace and collect their checks, but those are bare minimum requirements. If you hope to be the kind of salon landlord everyone wants to rent from, you’ll have to do better. You have the opportunity to demonstrate that right now.
Start with the assumption that the renters in arrears likely have good reasons, but also with the understanding that the salon’s welfare comes first.
If you’re willing to work with renters who are going through a slow patch, figure out how you’re going to accommodate them. Are you going to drop a great tenant over a bad month? Probably not.
You likely know which tenants deserve a payment plan for their overdue rent. Do the math and get your offer straight. Have the plan typed out and ready to present. Here’s an example of what those plans could look like:
- Lisa owes $400. She’s been with you two years and seems happy, so you don’t think she’s likely to leave any time soon. For her, you are willing to accept $50 each week ($200 each month) for the next two months, or until she terminates her lease.
- Glenn owes $400. He’s been with the salon for a little under a year, and he complains a lot…about everything. He has a history of job-hopping, so you can’t trust that he’ll stick around. For him, you are willing to accept $100 each week for the next month, or until he terminates his lease.
- Laura owes $800. She’s had it rough the last few months. She and her kids have been sick almost constantly since school started. But Laura has never missed a payment in the last five years she’s been renting from you. She’s responsible, professional, and the kind of tenant you definitely don’t want to lose. For her, you are willing to accept $25 each week ($100 each month) for the next eight months, or until she terminates her lease.
I recommend having the tenants pay in a separate transaction, rather than adding it on to their rent. Use Excel or Google Sheets to record their payments, so both of you have documentation, and only take traceable payments—no cash. (This isn’t up for debate; both of you should cover your asses.)
Meet with each renter privately, starting with those who are furthest behind.
Tell them exactly what you’ve said here: their non-payment is affecting the business. You’ve been very patient and understanding, but you cannot subsidize their salon.
These conversations probably won’t be easy. Especially if you’ve developed close personal friendships with some of your tenants.
Too many people depend on the facility’s continuation to allow a few renters to jeopardize the whole operation.
Establish a firm due date for payment, and don’t be surprised if the meeting goes poorly from there.
If you were operating under the assumption that these renters were your friends, you’re about to learn whether or not that’s true. Unfortunately, more often than not, these meetings don’t end well. Don’t be surprised (or upset) if the renter gets nasty with you. Don’t be shocked if they seem apologetic during the meeting, then secretly pack up and disappear overnight.
Remember that you’re dealing with people who shirked their only obligation to you and their colleagues. In doing so—assuming they’re not drowning in an unexpected personal financial crisis—they’ve demonstrated irresponsibility, unprofessionalism, and a severe lack of consideration. Keep your expectations realistic.
If you prefer not to offer payment plans, you can provide renters with a simple formal written notice that states the balance owed, the payment due date, and the consequences of nonpayment (eviction and small claims court, usually). A written lease isn’t necessarily required to hold renters accountable. By paying you a fee in exchange for your space, they’re establishing a common-law lease agreement. In many states, common-law leases are considered valid.
You know your situation better than I do, but I generally recommend saving this measure for the renters you’re eager to get rid of or implementing it as a last-resort option. Attorneys may advise you otherwise, but as someone who has been on your side of the desk during these talks, I certainly would not, except in dire circumstances. (The last thing you want is Glenn complaining about how “heartless” you are to every professional in town.)
Require all renters to sign written lease agreements. This is non-optional. Common-law leases are much harder to enforce than written ones. Contracts are critical, so every renter needs to sign an agreement showing that they understand your expectations and their obligations. These documents don’t have to be long, and they shouldn’t be written in legalese.
If your lease exceeds two pages, you’re doing it wrong.
Get a local real estate attorney to review and approve your lease, someone who knows your state’s commercial rental laws and understands that you’re subletting co-working space to beauty professionals. (I routinely consult with attorneys who are unfamiliar with the industry, and I often collaborate with them on rental and employment contracts. If you need help, request an appointment with me here.)
Once those leases are signed, you’ll have a system for keeping this from happening in the future, a document that neatly outlines everything—the payment amount, the due date, and the consequences for failing to adhere to the lease terms.
Don’t mourn the tenants you lose. You will very likely lose a few renters, and some of them might say some cruel, unfair things to you before they depart, but don’t cry over it. Anyone who leaves is doing you a favor.
Good people get run over sometimes.
You were very kind to allow the past-due rent to pile up. People may have taken advantage of that kindness, which is unfortunate, but of all the crimes a salon landlord could commit, it’s certainly the least offensive.
Enough of these experiences can harden people over time, and that’s not necessarily a good thing. Learn from this, but don’t let it change who you are.