Should you or shouldn't you accept partial rent payments? And if you do what's the best way to handle them so that everyone wins?
Sometimes tenants will, as a sort of compromise, attempt to pay part of the rent instead of the full amount owed. There are no laws as to whether you have to accept or decline partial rent payments. If you do choose to accept a partial rent payment, you want to ensure the situation is handled correctly so that the result benefits both parties.
In this article, we answer some of the common questions that landlords have about partial rent payments; should landlord accept partial rent payments? What are the dangers of doing so? And what’s the best way to handle them?
Read: How to Collect Rent from your Tenants
Very simply, a partial rent payment, as the name suggests, is when a tenant only pays a portion of the month’s rent. This could be for numerous reasons, they might not have the money for a complete month’s rent, or maybe they just don’t want to pay.
There could also be valid reasons, for example, they might believe that the property is no longer habitable and they are withholding rent until necessary maintenance work is completed. If this is the case they could be willing to go to court over this, and they may win. It’s best to resolve this issue quickly with your tenant and ensure the habitability of the property is compliant with regulation.
Read: How to Make Low Income Housing Work as a Real Estate Investment
If a tenant only pays part of the rent it still means that months’ rent is late, and as they are late, you are within your rights to begin the eviction proceedings after the grace period. It’s worth noting that in some states if you have already filed for eviction, then you should not accept partial payments as some states will make you restart the eviction process if you accept a partial payment after filing at court.
The majority of people don’t want to be in a position where there is a threat of eviction lingering over them. Circumstances though could put anyone in such a position. Even the best tenants might struggle with rent if they have large medical bills or family crises. By accepting a partial payment you will ease the stress and burden for the tenant. This being said, it also conveys another message, which is that partial payments are “okay”. This could lead to a tenant taking advantage of the situation and making partial payments repeatedly. Keep in mind as well that if you have already filed for eviction you may have to restart the eviction process which will further drag out an already arduous process.
Here’s some more food for thought: In some jurisdictions (you’ll need to check your state law on this), if you accept partial rent payment, you might not be able to evict your tenant if, despite what they told you, they never got around to paying the remaining balance. If you accepted an amount less than the full amount, you may waive your right to collect full payment for that month in some jurisdictions.
If you do decide to accept partial payments the first thing you need to do is establish why they can’t make a full payment. You might be more lenient with someone who has just had a baby for example, than someone who has no reason or only flimsy excuses. You can combat the above drawbacks in a few ways:
If you decide NOT to accept partial rent payments:
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If you choose to use Landlord Studio as your system for online rent collection then you will have complete control over whether or not to accept partial payments from your tenants.
By default tenants will not be able to make any partial payments through Landlord Studio. However, if you choose to allow it, you can enable this feature in the general settings. Your tenant can then go in and adjust the amount of rent they will make for this particular months payment.
The payment will then automatically be reconciled in the Landlord Studio system and the arrears calculated.Tenants will be able to see the rolling balance of rent due on the tenant portal and pay the remainder of their rent as soon as they are able.
Managing partial payments like this through Landlord Studio mean you have complete control over if and when tenants are able to make partial payments, and both you and your tenant have an up to date rolling record of the rent arrears still owed.
Your lease will state how much rent is due and when it’s due each month. Having language about when rent is due each month means you don’t also need a clause that addresses partial rent payments.
However, if you don’t want to accept partial rent payments and want to make that clear in writing you can include language in your lease that prohibits tenants from making partial rent payments. It could be something like this:
In the event that any rent payment required to be paid by Tenant(s) is not paid IN FULL by the [Rent Due Date] then a late fee of [amount] will be applied.
Other consequences you could outline in the lease for partial rent payments are:
At Landlord Studio we understand that late rent and partial rent payments are annoying. They make things harder for you as a landlord. Which is why we have made it easier.
With Landlord Studio your tenants can easily and quickly pay their rent through our tenant portal directly into your bank account. Additionally, they can set up up automated recurring payments meaning they’ll never miss a payment again. When handling partial payments you have complete control over whether you will allow them through the system.
Use our Automated Rent Reminder Emails
Set up automated rent reminder emails in the app to automatically email tenants so you don’t have to. These emails can be set to go out several days before the rent is due and as well as remind them after the rent due date of any remaining rent due.
Set up your late fees in the app. These will automatically calculate how much your tenant owes in late fees if they don’t pay on time. They will also calculate and automatically add this to the reminder emails if they are late.
Store all your documents in one place and add notes to properties, tenants, income, and expenses to keep everything organized.
Easily Keep Track of Income and Expenses
Use Landlord Studio to easily keep track of your rental income and all property associated costs at an organization, property, and unit level. Plus, you can instantly generate professional reports with a tap of a button to send to your accountant.
Read: Should You Use Quickbooks For Rental Properties?
Now and again you may receive a partial rent payment from your tenants. You must know what to do and how to handle this situation. You are relying on their timely rent payments to pay bills and the property mortgage.
You need to understand the reason behind their late rent payments, however, you also need to be firm and quick to act to ensure prompt and full payments in the future. What you don’t want to happen is to let a tenant think that it’s okay for them to be late repeatedly.
Using a tool like Landlord Studio can help you manage partial rent payments and ensure future on-time payments.