What should I do about this RTO tenant?

[surfermoe]

I have a triplex in New Brunswick that was set up as a rent-to-own deal almost three years ago. The tenant-buyer is now in a bit of financial trouble and is looking to me for guidance as to where he should turn.



The tenant-buyer has been collecting the rents from 2 of the 3 units, and living in the third. But over the past winter one of the tenants stopped paying rent (and he says he couldn't kick them out because "it was winter") and the power bills were extremely high. The tenant in the second unit also just vacated. So now he's behind in paying rent to us, and also has a big utility bill to pay.



Compounding things is the fact that the tenant-buyer just found out from the bank that he won't be able to get financing to buy the property from us this year. This is the third year of the deal, so he was supposed to buy us out this year.



He would like to extend the contract for another three years, but he's leaving it up to us and would understand if we just want to cancel the contract (which, judging by the contents of the contract, we're allowed to do, because he's been late with rent payment on multiple occasions).



We're wondering what to do. If we cancel his contract we'll obviously get to keep the property (and his equity), but then we'll have to find a property manager (we're living overseas), find new tenants, and absorb the cost of his power bills and lost rent.



Any advice?

 

[invst4profit]

I would begin the process of seizing the property and proceed with court action to recoup any losses including the hydro costs.

This individual is no longer a viable candidate for RTO so there is no point in stalling on the repo. He believes by allowing you the option he will be able to walk away scot free but that is not the way business is operated.

Failure to close is common in RTO deals and is simply part of doing business. RTO businesses need to build in a the advent of a percentage of deals failing to close as a benefit to increase their profit margin.

 

[kfort]

I'm not an RTO specialist but it seems to me if this tenant needs another 3 years they must have done zero to improve their situation for the first 3 years...



Examining both your screening and ongoing maintenance processes might prove useful. Either way, chances are in the next three years you'll have an issue, possible major one, with this tenant.