Question
The owner of a small embroidery factory that rented space in my house took loans from various places and left with 6 months of rent arrears and workers’ salary arrears. When contacted on the phone, they expressed inability to pay the rent and said to sell the machines to pay the rent. How should I do the paperwork/proceed to sell his machines so that I don’t face any danger in the future? Note that the owner/lessee of the garment is quite a troublesome person with a very bad past dealing history.
Answer
In order to sell the machines legally and avoid any future complications, follow these steps:
- Check the Lease Agreement: Review your lease agreement carefully to see if it has any clauses related to unpaid rent, seizure of assets, or the tenant’s obligations in the case of arrears. If the lease allows you to sell the machines or take possession of them, this will provide a legal basis for your actions.
- Send a Formal Demand Letter: Before taking any action, send a formal demand letter to the tenant, stating the amount of unpaid rent and workers’ salaries. Request immediate payment or permission to sell the machines to recover the arrears. Give them a reasonable deadline (e.g., 7-10 days). Make sure to keep a copy of this letter and the proof of delivery.
- Document the Machines: Ensure that you have detailed documentation of the machines’ condition and value. Take photos and create a written inventory of all items. This documentation will protect you in case of disputes about the machines’ ownership or condition in the future.
- Create a Written Agreement for Sale: If the tenant agrees to the idea of selling the machines, ensure that you have a written agreement between you and the tenant, stating that they consent to the sale of the machines to cover the arrears. The agreement should include:
- The machines being sold
- The agreed-upon price
- The amount that will be applied to rent and worker salaries
- A clear acknowledgment that the tenant’s debt is settled by the sale
- Obtain a Third-Party Witness: To protect your interests, consider having a third-party witness (preferably a lawyer or an unbiased individual) present when the agreement is signed or when the machines are sold. This can serve as additional proof that the sale was done legally.
- Sell the Machines: Once you have written consent and documentation in place, proceed with selling the machines in a fair manner. Ideally, sell the machines through a legal, transparent process (e.g., via a public auction or to a legitimate buyer) to ensure that the sale is uncontestable.
- Settle Any Debts: If you sell the machines, ensure that the proceeds go towards settling the rent arrears and workers’ salaries. If any amount remains after covering these debts, it should be returned to the tenant. Document all payments and transactions carefully.
- Legal Consultation: Given the tenant’s troublesome history, it’s advisable to consult with a lawyer before taking any action. They can provide specific legal advice, review the lease agreement, and help you draft the necessary documents.