Commercial Rent Arrears Policy

Commercial tenants must honor their lease obligations and pay their rent, other occupancy expenses, and fees in full and on time. Those who have rent arrears are obligated to make full payment. Staff must, to the best of their ability, treat tenants fairly and consistently.

Reason(s) for the Policy

From a University-wide perspective, it is important that there is some consistency of treatment towards commercial tenants or those who advocate on their behalf. It is also important to maintain the sustainability of the commercial tenant portfolio by ensuring that all lease obligations are met. Whether through economic conditions or business decisions, some commercial tenants may experience challenges staying current on their rent and occupancy expense obligations. The response to these challenges should entail procedures that require consistent communication and follow up with tenants.  Additionally, these challenges should entail procedures that allow for discretion to create individual payment plans to resolve arrears or empowerment to escalate arrears cases to more stringent enforcement as warranted.

Responsible University Office & Officer

Commercial Real Estate, Vice President for Real Estate
CUFO Finance, Vice President for Finance
Office of the Controller, Manager, UAH Accounting and/or Deputy Controller, Financial Reporting & Accounting Operations

Who is Governed by This Policy

Staff of Commercial Real Estate, CUFO Finance, and Office of the Controller

Who Should Know This Policy

Staff of Commercial Real Estate, CUFO Finance, and Office of the Controller

Commercial tenants who have leases or licenses with the University are obligated to make all rent occupancy expense and fee payments on time. It is important to the University that these payments are made on a timely basis. When a commercial tenant has arrears, the University will try to work with the tenant by following a consistent procedure that includes communication with the tenant and exploring options to resolve the arrears. If a tenant fails to fulfill its obligation, those that govern the policy will escalate collection efforts to the legal process.

Commercial Real Estate, CUFO Finance, and the Office of the Controller all participate in managing the process for resolving commercial tenant arrears.  Management of the commercial tenant arrears includes addressing and reporting arrears in the real estate portfolio. Led by Commercial Real Estate, the policy and procedures for addressing and reporting commercial tenant arrears are as follows:

Addressing commercial tenants arrears

  • Stage 1 - PAST DUE NOTICE
    On or about the 11th of the month, Commercial Real Estate will pull a tenant aging report to find out which tenants have not paid their current month's rent. Commercial Real Estate will send a past due notice via BCC email to all tenants whose current month's rent has not been received.

  • Stage 2 - COLLECTION NOTICE
    On or about the 22nd of the month, Commercial Real Estate will pull a second tenant aging report to find out which tenants are still owing the current month's rent. Commercial Real Estate will send a collection notice via email directly to any tenant whose current month's rent has not been received.

  • Stage 3 - PRE-DEFAULT NOTICE
    For any tenant who is 30 days past due on rent, Commercial Real Estate will send via email a Pre-Default Notice on or around the 35th day of past due arrears. With the intent of being a courtesy notice, the Pre-Default Notice will inform the Tenant that their account will be forwarded to the Office of the General Counsel and outside legal counsel unless the Tenant resolves the past due balance within 72 hours of receiving the notice or enters into a structured payment plan that includes scheduled payment amounts with payment due dates.

  • Stage 4 - RENT DEMAND AND DEFAULT NOTICE
    For any tenant who has not resolved their past due rent after being 40+ days in arrears or fails to enter into a structured payment plan, Commercial Real Estate will forward their account to the Office of the General Counsel and outside legal counsel and will instruct them to prepare a Rent Demand and Default Notice. The Office of the General Counsel or outside legal counsel will prepare the notices, facilitate disbursement of the notices as required by the lease, and work with Commercial Real Estate to monitor the legal process.

Reporting commercial tenant arrears

  • Stage 1 - GENERATE REPORTS
    After the Office of the Controller posts all incoming cash receipts to the respective tenant accounts for the monthly period, Commercial Real Estate will generate a month-end AR reconciliation report and download the month-end aged arrears report.
  • Stage 2 - PROVIDE COMMENTARY
    Commercial Real Estate will provide monthly commentary by tenant in the aged arrears report. The commentary will include what the arrears is attributable to, any status updates, and Commercial Real Estate's action plan to follow up or resolve the arrears.
  • Stage 3 - INTERNAL REVIEW
    Commercial Real Estate, after conducting its internal review of the commercial arrears report, will submit the arrears report with commentary to CUFO Finance and discuss any critical issues in its monthly meeting with CUFO Finance.
  • Stage 4 - ESCALATED ISSUES
    Commercial Real Estate Senior Management (VP/AVP) will discuss major arrears issues that impact the portfolio at the Executive Staff Meeting. They may also keep the EVP of Facilities and Operations and the VP of CUFO Finance directly informed prior to the Executive Staff Meeting.