Our Thai tenants have just asked for a rent reduction

[SomchaiCNX]

Consider yourself lucky. I know 2 people who rented to Chinese. They started renovations right away but stopped paying after a couple months due to Covid and left both places unfinished.

 

If they are good people (I guess they are) they probably spent more on the renovations than anticipated (like many people do) I would give a temporary reduction and after a given date the rent will go to the agreed level again.  The Chinese and American capitalist mentality is good for business people but sucks for entrepreneurs.  If you have people who treat your building as if they were the owners, consider yourself are lucky.

Edited May 3, 2021 by SomchaiCNX

[Travel Dude]

If I was the landlord I would handle it as follows:

* give them May and June a 30% reduction on the rent. 

* from 1st July onwards rent back to contract level. 

 

This way you have showed some form of empathy and compassion for the situation while not compromising the deal as I guess 3 years lease is still good income.

 

You have a contract for a fixed term of 3 years. This is legally binding and them moving out or stop paying the rent would be a breach of contract, which you can fight in Court. It does not matter if it is registered at the Land department or not. 

 

Be wise and good luck!

 

 

[SheungWan]

Given the current situation re Covid which has developed since the beginning of the year, I would offer a 3 month reduction in rental. The test will be whether these 3 months are paid without issue.

Edited May 3, 2021 by SheungWan

[Scouse123]

59 minutes ago, GreasyFingers said:

Depends if you want to think like a Thai landlord verses a farang landlord. Both ways you will have empty premises if you listen to some of the posters on here. You wonder if they have ever run a business or been a landlord.

As a previous commercial tenant, landlord and managing agent I would think of that old English saying: "a bird in the hand is worth two in the bush"

 

Just done that in the UK. I had a small house for rent. Within 1 hour of advertising on FB I had 50 inquiries as its in a desirable location for local schools etc

 

I was offered in excess of asking rent.

 

One guy came along and asked for 10% discount., however, he had just sold his house, wanted the house for 2 years and would pay a year in advance. He was known to me via good mutual friends who vouched for him.

 

Bearing in mind I am 95% of my time in Thailand, I took that deal. A bird in the hand, and I will think again in a years time.

[Sydebolle]

Let common sense prevail:
- you find an other tenant easily = keep the present monthly rent
- you DONT find another tenant easily = consider a reduction

You still can adjust the rent back to "normal", i.e. do it on a month-to-month (or two months) basis; once the tide turns it would justify a rent increase, latest then when the present agreement on the rent amount is to be reviewed - me thinks! 

Had a tenant in a furnished house in Udon with two kitchens, all rooms (except Thai kitchen) air-conditionable, CCTV - the works at THB 13K/monthly. Reduced 15 months ago to THB 12K/month which was highly appreciated by my German tenant. Now he terminated the lease as he found something at THB 8K/month; albeit smaller, less a/c etc. Was my reduction a mistake? Not really, as he might have moved more than a month earlier than now which would have cost me more than the above reduction. 

As said, common sense! 

[Scouse123]

39 minutes ago, Russell17au said:

Sorry but this new strain of virus does enter into it because many things were starting to pick up until the new mutation hit and now many people are a lot worse off than they were since the end of March this year.

 

No,

 

I don't say there isn't a new strain, there are many, but I don't believe it factors into the equation in this instance. It's dodgy opening anything at the moment with the pandemic and government flip flopping.

 

If that excuse becomes acceptable, we carry on forever. Next there will be the Burmese strain, then the Malaysian strain and so forth.

 

They know the risks of opening in an unsure world and if those are their thoughts, they would not have entered into it.

[BTB1977]

My wife has a hair salon and a signed contract for 8.500 a month. Last year when corvid hit and customers stopped coming the government ordered her to close. She asked her thai land lord for a rent decrease.  The response was not my problem. Can not do. She owns the property.  No mortgage. Even once back open my wife made maybe 500 to 1,000 baht a months after paying rent and electric.  Who works 30 days a month for a 500 baht profit?  She made good money before corvid. We are very close to cleaning out the shop and put everything in storage until this is all over. Have seen many thai land lords do the same. So thais don't care. Why should you. 

[gunderhill]

Get Wife  to  tell them you  had to travel to somewhere far away with no  communication and avoid answering, Thai  style, she can lay on the "she feels for them  at this  moment drivel".

[Scouse123]

6 minutes ago, Sydebolle said:

Let common sense prevail:
- you find an other tenant easily = keep the present monthly rent
- you DONT find another tenant easily = consider a reduction

You still can adjust the rent back to "normal", i.e. do it on a month-to-month (or two months) basis; once the tide turns it would justify a rent increase, latest then when the present agreement on the rent amount is to be reviewed - me thinks! 

Had a tenant in a furnished house in Udon with two kitchens, all rooms (except Thai kitchen) air-conditionable, CCTV - the works at THB 13K/monthly. Reduced 15 months ago to THB 12K/month which was highly appreciated by my German tenant. Now he terminated the lease as he found something at THB 8K/month; albeit smaller, less a/c etc. Was my reduction a mistake? Not really, as he might have moved more than a month earlier than now which would have cost me more than the above reduction. 

As said, common sense! 

 

I agree,

 

I have gone the opposite way after listening to members here. I have a spare house in Kalasin. A good house, European standard and 3 beds with parking spot, private land etc in a compound. I have been getting previously 6K a month. I give it my other half anyway, I don't want it.

 

Recently advertised it at 5.5K as its been empty since my German tenant left. I have had western people and African teachers who teach in local school asking me to furnish it, does that include WiFi, am I cheating them on the 400 baht a month electric,  etc.

 

I am turning it now into a sports room and games room, Karaoke lounge room, and the bedrooms will come in if we get visitors., I cannot be bothered with the bloody nonsense.

[AlfHuy]

I got as well a nice discount.

Plenty of empty condos, new, new furniture, etc.

I made clear that if there is no discount, I'm off.

 

She accepted.

They know that exactly and many have bank loans to repay.

Better accept a 20% discount than having an empty unit and if another tenant found, they must pay the agent.

 

Definitely a renter's market.

[Russell17au]

8 minutes ago, BTB1977 said:

My wife has a hair salon and a signed contract for 8.500 a month. Last year when corvid hit and customers stopped coming the government ordered her to close. She asked her thai land lord for a rent decrease.  The response was not my problem. Can not do. She owns the property.  No mortgage. Even once back open my wife made maybe 500 to 1,000 baht a months after paying rent and electric.  Who works 30 days a month for a 500 baht profit?  She made good money before corvid. We are very close to cleaning out the shop and put everything in storage until this is all over. Have seen many thai land lords do the same. So thais don't care. Why should you. 

We were in the same situation being closed by the government but our landlord offered to halve the rent so we accepted as we had no income from the shop but this time we will close the shop and leave, place all our things in storage and then open a shop again in a different premises so the old landlord will lose out on the rent as there is no one else to rent here and we will not renew the lease with them but instead open in a new shop. I believe that we have been good tenants as we repainted the whole premises and fitted new air-cons. 

[natway09]

So you are the lucky one whose business is doing well. Your tenants have had to close 3 of their businesses due to Covid

I do not see the Thai" situation in this post & your comments on that score seem to make you a bit of a "Wally". There are businesses all over the world suffering & getting rent relief 

of different degrees.

Show a little heart, it may in the future come back & help you in the future

Stop being a Scrooge, we all need a little help

[AlfHuy]

Play the game.

 

Arrange a few of your friends and have a walk around the property and ask the tenant to have a look inside too.

 

They should act as potential new tenants, delighted with the state of the property, especially the location.

[Russell17au]

11 minutes ago, AlfHuy said:

Play the game.

 

Arrange a few of your friends and have a walk around the property and ask the tenant to have a look inside too.

 

They should act as potential new tenants, delighted with the state of the property, especially the location.

And then your tenant packs up and moves out and you are left with an empty property that neither your friends nor AlfHuy will pay the rent for. It does not pay to get too smart if you still want the money coming in for your property 

[chilly07]

Perhaps a reduced rent for 3 mths to see if their business works then back to the agreed rent then if they walk away you can rent to someone who wants to run a business? The rental contract is binding even if it's not registered.

Edited May 3, 2021 by chilly07

[desert dueller]

On 4/29/2021 at 10:29 PM, jack71 said:

Thanks so much for your 2 comments. 

 

Having thought about them more... back in Jan I was thinking they were very astute business people and are negotiating with us now. When they split the monthly rent between them I dont think its the end of their world. They said that they have closed all their other businesses but have salaries to pay. Probably B.S

 

Your questions:

1. Is your rental fee at a fair market level?

Its high end fair value based on being the best position in town. 

 

2. Is there any impact to their proposed trade from covid that was not apparent in Jan when they signed the lease?

No, same covid situation. We are not in a red zone or anything and no lockdown.

 

 

3. Are they behind in preparing the opening so expect you to cover the shortfall in their income while they finish there fit-out and open? In this case i would not give a reduction.

Its possible but I dont know. A good point you make though

 

4. Did they get their feasibility assumptions on construction cost wrong and spent too much and again want you to support their mistake?

Its possible but again I dont know. They made some quite big changes to my building which I agreed to in the contract. The biggest being that they took out 4 big new windows that we previously installed and knocked out the brickwork under the window frame area. We agreed to it spefically in the contract. After they did this we got a message from them asking if we can store the glass and the frames at our place.... ha ha. A big no to that one. 

 

I think Im going to say to them that they must pay the rent in a few days at the agreed amount and that I will discuss with my attorney and let them know. 

 

What Ive learnt from 20yrs of tenants is that if you give them too much they will expect more down the line. 

 

Your idea is excellent and this is what I want to discuss with my attorney. 

 

I do worry about our deposit being so low. I wonder if we could ask for more if we agree to reduce the rent??

 

Thanks so much for your comments

 

Based on your past experience, if they are asking for a reduction so early in the piece, having signed up not pre-covid but during covid, then covid is just a sham excuse to soften you up. There will be more niggling troubles down the track. Better to bail out now. Call their bluff and say no to a reduction. If they don't like it, they can pack up and start afresh somewhere else. See if they are prepared to do that, with all the modification completed already to suit their business operation. Say no, and let them make the call to stay or leave.

[Russell17au]

What you need to think about is that when this Covid rubbish finishes there are going to be an abundant amount of vacant premises for rent and  they will be offering big deals to get the tenants to sign up

[sead]

As a former landlord you know signed papers is everything and registration at landoffice is same As someone already mentioned your rent shouldn't include your loans since it then will be to high. Already staying there 2 months free and now already asking for reduction. They are already planning to leave since they got 2 months free and are now threatening you that if you don't lower they will leave for sure. You were too soft from the start

[jacko45k]

They got 2 free months, have paid only for one, and now want a reduction. Tell them you will consider it for the 2nd year.

The deal was made in the midst of Covid..... had you  already included that in the rent you agreed upon?

[GreasyFingers]

1 hour ago, jack71 said:

So what would you do in this situation if you were in my shoes?

The easy solution is listen to your wife. Otherwise I would accept a reasonable reduction in rent for a short period, say 4-6 months, with the situation to be reviewed then.

I have found that many Thais will respond to a falang who helps them and is sympathetic to their needs. It is quite possible that they underestimated their setup costs. You should know how Thais plan - have an idea and sort out the details later, and only think of the good things that can happen and not the bad.

 

[Nojohndoe]

When it was a "man cave" what income was there to offset the mortgage?

If there was no tenant  how long could it have stayed a "man cave"?

Why a non registered lease? Tax avoidance?

 

[holy cow cm]

Ask them for the real reason they need a rent reduction. But honestly it is quite circulated around media that landlords are reducing rents during this pandemic and maybe this is the card they are playing. If you think they are above board people and will be good long term renters then support them if how they answer is reasonable. On the other side, why would you remodel back to the normal side when it is almost or already set up to be a restaurant. If not them then there will be some Thai coming along to snap it up eventually. Thai's love to sell food. Anyway, if you have a good thing and they are genuinely good people and makes sense to you, then why look any farther. 

[DefaultName]

At the moment restaurants can't open, so they will have no income from your property.

How about this;

You forgo rent completely for any days when they can't open due to Covid restrictions.  i.e. 14 days closed, that month you get 16/30ths of the rent.

The rent is due in full for any days when they are allowed to open.

 

Being closed while they make alterations is down to them.

 

Any use?

[Cake Monster]

I would get back to them with the Question

" What would you consider to be a fair reduction in the Rent  "

Based upon their reply, you are more able to make a decision.

10% reduction - Ok can you live with that ?

25 % reduction tell them you will give an answer after you have considered the Market Place on whether your Rent is fair.

50 % tell them they have to vacate the premises.

Most Thais seem to be the same.

We have a few Apartments and very rarely do they move in and are completely happy.

Have had the same _ can you reduce Rent , Want a bigger canopy to cover the pickup Truck , Want WiFi , Want Cable TV, can I have 3 Dogs and a Cat in the Apartment., can 6 people share.

Nearly all of these people Drive a nice Vehicle of some kind, which tells me they love their car, and have bought a Car they can hardly afford.

 

[Russell17au]

Let's have an honest look at it. They must have approached you last December to lease your property from around end of March/beginning April but YOU decided that they should move in, in January free of charge for 2 months. You coerced them with the 2 free months rent. This was done in December last year when the infection rates were low and there were no restrictions on businesses and everything was going fine. But, now when there are record infections and deaths and restrictions on all types of businesses your tenants come to you and ask you for a reduction in rent and you have to ask the members on TVF for their advice instead of being a man and making your own decision about this. There is a word of warning about what some of those on here have advised and that is don't even think about court because you will lose. I saw this happen 4 years ago and the farang lost big time when he thought that he was in his home country and took the Thai tenant to court for breaching a contract. This is Thailand and not your home western country and things happen different here. Now you need to ask yourself would they still have signed the contract at the end of March/beginning of April when the infection numbers were starting to rise and the restrictions were starting to be placed on businesses. Did the coercion of the 2 months free rent encourage them to sign earlier than they would have.

Edited May 3, 2021 by Russell17au

[sitti]

I own multiple buildings and here is what I've done with my tenants (Thais and foreigners) since last year. When tenants asked for lowering their rents because their incomes are substantially reduced due to covid. Before I offer anything, I always first explain to them that we also have expenses to pay, what they're asking is outside of signed contracts, and will have negatively impact on us. Depends of how much they ask for but I mostly offered them 50% off for 3 months with one big catch. They have to sign another contract. That contact is if they still couldn't pay 50% or full rent after 3 months, they will vacate in timely manner without protesting in any shape or form. I had my attorney drafted it btw. So far, all tenants who couldn't pay left without much of troubles or having to go through a court for eviction process.

[connda]

Better to get something than nothing.  Be glad you don't own a rental in California.  Then you'd get nothing.

[sitti]

27 minutes ago, Russell17au said:

don't even think about court because you will lose. I saw this happen 4 years ago and the farang lost big time when he thought that he was in his home country and took the Thai tenant to court for breaching a contract. This is Thailand and not your home western country and things happen different here.

You're being too biased there. Just because farang lost his case, that doesn't automatically mean court was unfair. I've done lawsuits in Thailand, and I won. It's case by case. Contracts are not above the law. There laws that protect tenants, including farang tenants. I'd say he didn't do enough of his studies.

[Ventenio]

Maybe they know the contract is worthless.  

 

Paid one month, got two free.... and this is not enough.

 

So this is NOT good enough.   pay 1......2 free

 

so expect MORE in the future.  Maybe pay 2, get 10 free!!!  

 

and expect meeting every month for more reductions.  maybe every week.

 

I think you will be lucky if they ever pay again....maybe this is the start of staying free until you get them out.

 

good times.  

[malthebluff]

My thai landlord reduced my rent 500 baht a month  I didnt ask for it he just phoned and says because covid he doing it for all his rentals. Now been 12 month and not gone up