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Negotiating 101 – Landlord Edition

This is an article from our regular real estate columnist Rachelle.

Negotiation is an important skill to develop as a landlord. Using the principles of negotiation and planning how to deal with difficult situations will save you a lot of money and keep you out of the Landlord & Tenant Board. It may salvage the tenancy and will save you turnover, vacancy and advertising expenses.

I highly recommend prompt legal action while negotiating. The legal paperwork must be started ASAP simply because it is a long drawn out process. You both negotiate and commence the process of eviction simultaneously.

Species of Distressed Tenants

There are four kinds of non-paying tenants. You should try to find out what kind of tenant you are dealing with so that you can take the proper precautions. Once your tenant has revealed their nature, your path becomes clear.

1 – Professional Tenants (AKA Deadbeats)

These are people who will never pay, have no intention of paying you and will drag out the Board proceedings so they can enjoy a free life. They may tell you that they have been at the Landlord & Tenant Board before. Some even gloat.

Solution – If you have no experience with the Landlord & Tenant Board, immediately hire someone who is very competent. Early in my career I met one of these professional tenants and it took 9 months and a visit to the Supreme Court of Ontario before she was evicted.

2 – Extreme Late Payers

I have had several tenants that never paid rent willingly and voided every Tribunal Order by paying after we went through the entire process. These characters are extremely irritating.

Solution – I once went through the eviction process with one tenant like this four times in one year. She never paid rent to our office ever. Fortunately these tenants are not legal experts. Just keep evicting them and after the lease is up get rid of them using a continual late payment form.

3 – Tenant Activists

I’d rather have a root canal then deal with this type of tenant. They look for every excuse not to pay you, tell you that you are a slumlord and are abusive. They complain about everything and withhold rent for the slimmest of excuses. They prey on landlords who don’t keep their properties in good condition. If you ever needed a reason to keep your property in tip top condition, this tenant is it. Just this year I had a tenant like this, and it took 9 months to get rid of her. The first clue the owner had about her true nature was when she started claiming she had mice, then her proposed solution was to charge the landlord $150 for a cat to kill the mice because she didn’t want inhumane pest control. Then she claimed she had cockroaches and rats. Every single email she sent I offered to send pest control and it was refused.

Solution – Do not ever start appeasing this tenant. Document everything, stop talking to this kind of tenant and get them to write things down, email is great for this. They’ll send you all kinds of good stuff to use against them in court. This will be another long drawn out legal nightmare, with all kinds of unsubstantiated accusations, talks about their human rights and more. In person they are unpleasant and abusive and they will call you 20 times per day for the most minor issues. Hire a paralegal immediately if you are not extremely competent at the Landlord & Tenant Board.

4 – Good Tenants – Bad Circumstances

Thankfully most non-paying tenants fall into this final category. There are good tenants that just can’t pay because they have lost a job or they rented an apartment as a couple and they can’t manage on one income. Alternatively they just may be very poor and paying a huge percentage of their income to rent, I have seen people pay 80% of their income to rent. This tenant will do what they have to do and either pay the rent or move out before their last month’s rent is over if they can.

Solution – These people want to pay the rent. Encourage them to find a more affordable place, give them payment plans. These tenants can be negotiated with and generally will find a way to pay or move. They may need more time. One tenant like this I dealt with had all her bank accounts seized by Revenue Canada due to the death of her spouse a year previous. It took 8 months but she eventually paid every single red cent.

Negotiating Guidelines

Step 1 – Clarify your goal

Decide what your goal is and stick to it. You must be clear on what you want so that you can steer in the proper direction.

One state of mind I have encountered is that some small landlords are apologetic about collecting rent. As a landlord you will often be dealing with someone below your means. You may feel guilty to collect rent. To these landlords I say “You need to keep your business healthy and you must collect your rent or you will eventually go broke, sell your property and stop providing housing for people.” Providing places for people to live is an important service. There’s nothing wrong with getting paid for a service.

Step 2 – Ask for what you want – then back it up with legal forms

Learn to state exactly what you want. Ask why they are not paying rent and then be quiet and listen. Do not make this a personal issue. They are not doing this to punish you and make your life hard. Giving them a guilt trip is not going to accomplish your goal of collecting your money.

When I worked in a building I used to hand-deliver all the non-payment of rent forms. I delivered them when most people were home. By delivering the forms myself and talking to people I was able to find out if there were issues and encourage people to pay on time.

Step 3 – Create a bond

I try to create a bond with people. I remember what it was like to genuinely have no money and be unable to meet my obligations. In cases of job loss and separation people are already struggling. The people I paid back first when I did get back on my feet weren’t the nasty people. So think about what it was like when you couldn’t meet your obligations and be kind. Then hand them the proper legal form for non-payment of rent. You still need to protect yourself.

Step 4 – Remember Win – Win

I always ask what the non-paying tenants plan is. Many times if they can no longer afford the place they will move. You would be the world’s greatest idiot if you chose this time to tell them they have a lease and they can’t move. If they cannot pay you the rent, you want them to move! If things are amicable they will even let you show the place to new potential tenants.

I also allow people to pay part payments. I allow them to split up their rent payments and pay part rent each pay period. The important thing here is to create a system that does not involve you going to the property every week to pick up $200. I love email money transfer for this reason. As soon as people’s pays get deposited they can pay me and I don’t have to chase them.

Benefits of Learning to Negotiate

Dealing with tenants and people in general can be very difficult and psychologically demanding. You may be dealing with people with all types of very serious issues. Effective negotiation is the key to saving your sanity and minimizing your losses. Practice this skill and reap the benefits.

P.S. Most tenants range from good to great. About 90% will never cause you any problems; don’t let the bad ones scar you.

About the Author: Rachelle specializes in renting property on behalf of landlords. She also works with investors to find good investments in Toronto and surrounding areas. Her passion is bringing multi res properties back from the brink and maximizing profitability.

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About the author: This is a guest post. You can read more about the author in the biography above.

{ 13 comments… add one }
  • ahmed June 3, 2010, 11:55 am

    TD Bank has a great feature that (as far as I know) no other bank has: automatic deposits from any bank. I have a duplex and live in and rent. TDB allows me to setup an automatic withdrawal from my tenants bank account on any periodic basis. And it doesn’t cost anything!

    I use the TD savings account. It has unlimited deposits so you can collect from as many tenants as you want automatically. The catch – you only get 2 free withdrawals from this account. So I do one transfer from savings to my mortgage. For me this works out really well and it doesn’t cost me anything.

  • The Passive Income Earner June 3, 2010, 12:32 pm

    Thanks for the post. Lots of wisdom. One key learning for me is to start the legal process right away. That way you are not months behind when it’s gone from bad to worst.

  • Rachelle June 3, 2010, 12:55 pm

    If that’s the main thing people get from this post Passive Income Earner then I’ve done my job. I’ve seen too many landlords wait for a couple months after the initial non payment situation to start proceedings.

    As a bonus starting the long process quickly automatically strengthens your negotiating position.

  • The Passive Income Earner June 3, 2010, 1:11 pm

    I’d like to add that your negotiating points are really good. I happen to do a lot of people negotiation from a leadership / management position. Being aware of the situational experience is very important and it will take some time for someone to do it naturally. Still, very good tips and always a good reminder.

  • Rachelle June 3, 2010, 1:23 pm


    Another great thing about TD which I love apart from their great hours of operation and their customer service is that they will deposit post dated checks for you.

    If you get a bunch of post dated checks you can just give them to the bank….. and they will put them in. No more going to the bank on the first to give a bunch of post dated checks.

    Oh and another great thing about TD is that they will verify funds before you put a check in your bank. This only applies to TD checks but it’s fantastic. There is no charge and if the money isn’t there you don’t have to put it in and get charged for NSF checks on your end. You don’t have to wait for the check to come back from the bank before calling your tenant.

    I have to say that I love TD bank. I used to be with BMO and they drove me crazy. First of all their hours were horrible. I mean who isn’t working from 10 to 3. Then they screwed up my business account too many times to count. One time of note they replaced my bank card and reset my account to new account status. They held all my deposits for 7 working days. Not knowing this I wrote about 10 checks to pay my bills and they all bounced. What a nightmare !!!

  • Dirk June 3, 2010, 2:42 pm

    Great article. Thanks.

  • Elbyron June 3, 2010, 4:56 pm

    I had a bad tenant last year, but I’m not sure which species he was. He seemed a really nice guy, and his employment and credit history checked out. He had limited funds at the time so I agreed to accept the security deposit in two installments. However, he gave me post-dated cheques, and when I cashed them they both bounced. Only a couple weeks in, he lost his job, and started making excuses (I’ll be getting a loan next week… money from my mother is coming in 2 weeks… etc). He didn’t pay the 2nd month’s rent, and late fees started accumulating. I gave him one last chance, but he didn’t return our attempts to contact him. So at the end of the 2nd month, I put a note on his door and put an eviction notice under the door. Two weeks went by and still no response from him, so we posted a notice of entry and came back the next day – to find the place vacated. I figured he left without telling me because he was going to hide and avoid me forever. But to my surprise he eventually responded to an email, saying he still intends to pay me back once he gets his life back in order. He even acknowledged that he continued to owe me rent even while the property is vacant. I was able to find another tenant within a week (a really good one too… still got him a year later), so the deadbeat guy only owes me the 2nd and 3rd months of rent, plus late fees and some minor damages (stains).
    So, is he just in bad cirucumstances (type 4), or do you think this guy is a professional deadbeat (type 1)? Do you think I should undertake legal action to try to recover the $3000 he owes me? Should I file a complaint with a credit bureau?

  • Rachelle June 3, 2010, 6:27 pm

    This is a number 4 you didn’t even have to go to the Landlord & Tenant Board.

    You may do as well as a collection agency by just emailing him and asking him for even $50. This kind of dude never gets $3000 at once.

    Without a court order you can’t file with the credit bureaus but you can possible submit it to a collection agency.

  • Ms Save Money June 3, 2010, 8:31 pm

    Yeah, you’ve pretty much narrowed it down. Dealing with tenants can seriously be a full time job on its own. Imagine having a real 9-5 job in addition to owning/managing real estate investments.

  • Mitchell June 4, 2010, 12:36 pm

    Hi Rachelle,

    This is a great post and very informative for a new “landlord”. Thanks for pointing out some of the pitfalls associated with dead-beat renters.


  • This is why I opened an ING account June 6, 2010, 3:37 pm

    Put ads for your apartment in the newspaper and on the Internet (Craigslist is an excellent choice). Make sure you put nice pictures of your apartment on the Internet to attract more tenants. Use sign boards if they’re allowed by the condominium association or building. Make sure you put your contact numbers whereever you list your apartment.

    Step 2

    Be ready to show your apartment to your prospective tenants. Do not get frustrated if your efforts yield no results. Be patient and carry on.

    Step 3
    Forward a standard rental application to whoever comes for showing. Since many people will not tell you up front whether they liked your place, it is advisable to give your rental application to all those who see your apartment.

    Step 4
    Standard rental application can be downloaded from the Internet. Type “rental application” in Google to find them. Many are free for download.

    Step 5
    Make sure your rental application requires the prospective renter to list the previous landlord’s phone, the reason for leaving previous place, any bankruptcies or foreclosures. Find out the tenant’s employment status and get contact information for the employer. All these things will help you screen your prospective tentants. Make sure that your rental application has a “Authorization for Release of Information” signed by the applicant. You should have written permission to contact previous landlords and employers.

    Step 6
    Call each reference and any previous landlords listed on the rental application. Its better to have your appartment vaccant rather than have a tenant who don’t pay rent on time.

  • Amateur Landlord June 7, 2010, 8:42 pm

    The article needs a correction: there is no “Supreme Court of Ontario,” however, there is an Ontario Divisional Court (the first forum for appeal) and an Ontario Superior Court of Justice.

  • Rachelle June 8, 2010, 11:05 pm

    @ Amateur Landlord

    I’m embarrassed, you are indeed 100% correct. It is Ontario Divisional Court.

    It was a very long time ago, I went once and haven’t been back since.

    Good eye !

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