A tenant not paying rent can quickly cause serious cash flow issues for landlords. We outline what landlords need to do if the rent is late.
The costs associated with a tenant not paying rent can quickly stack up and cause serious cash flow issues for landlords. Alongside the lost revenue associated with late rent, there are maintenance costs to cover, mortgage bills and other fees to pay, not to mention the time requirements for chasing payments.
In a worst-case scenario, the situation may even evolve and you may find yourself needing to pursue an eviction. These are time-consuming and expensive.
In this article, we take a look at what steps landlords can take if a tenant does not pay their rent on time as well as a few mitigating actions that can be taken to help avoid missed payments in the future.
The first step to take if the rent is late is to review your lease document as well as double-check your payment records to ensure that the tenant definitely has not initiated a payment yet.
Not every state legally requires a grace period, however, generally, people stipulate the grace period (normally between 3- 5 days) and any potential late fees in the lease document. Applying the late fee will help discourage late payments in the future.
If you didn’t include a grace period and late fee in the lease document you cannot retroactively change your mind and decide to charge one. And remember, no matter how you personally feel about a late-rent situation, a late payment is still a violation of the lease that was signed by all parties, and this effectively makes it a breach of contract.
This is a formal warning for the tenant. It should inform them that the rent is overdue and that you have applied any applicable late fees.
This step is not required by law, however, it is a recommended interim action. Make sure to keep a copy of this notice for yourself. In this late rent notice, you should include the following details:
Keep records of all late rent notices as, if you do need to pursue legal action, these late rent notices could be important in proving a pattern of delinquent payments. Hopefully, this will jog the tenant’s memory and payment will be forthcoming.
With Landlord Studio you can set up automated overdue rent reminders to go out a set number of days after the rent due date saving you the time and hassle of manually chasing late payments.
Should you receive no response from the tenant it’s a good idea to give them a call. It may be that they simply didn’t see your late rent reminder, or they have already initiated a payment or put it in the mail.
Alternatively, it could be that the tenant is facing financial hardship this month. If this is the case you may want to look at solutions to help them get back on track such as a payment plan – though you are not obliged to do so.
This phone call essentially serves the same purpose as the late rent notice but with the benefit of speaking with them in person. However, as you can’t keep a record of what was discussed over the phone make sure to send written notice as well for your records and theirs.
The notice to pay or quit is an official document that is technically the very first step in an eviction. It shows your tenant that you are serious about pursuing the eviction process. This can be delivered as soon as the rent is overdue and the grace period has expired.
A pay or quit notice needs to clearly state your intention to evict the tenant should they not remedy the situation by paying all the money that is still owed (including late fees) by the specified date.
Some states have specific requirements as to how the pay or quit notice is posted. If the issue proceeds to court you may have to prove that you followed the legal guidelines for delivering the eviction notice so be sure to check your local laws.
Generally, you can post the notice on the front door, but you may need to deliver the notice in person or by certified mail. After they have received the notice there is generally a period of time that the tenants are allowed in order to remedy the situation before you can file eviction papers. This is often between 3 – 5 days but varies from state to state so be sure to check your local statutes.
If the tenant does not pay after receiving the pay or quit notice and if they don’t leave, you will need to take the proceedings to court. To do this you’ll need to file a landlord-tenant complaint in court. You will likely not be able to remove the tenant from the property until all court proceedings are completed which could take months.
You’ll need to pay court fees, as well as any costs associated with hiring an attorney, and ensure all paperwork is completed accurately and thoroughly. You will be given a hearing date where all your evidence and documentation will be presented.
Remember, it is never legal to enact a self-help eviction. This includes taking any adverse action against your tenants in order to get them to move. Your tenants’ have the same rights they had throughout the tenancy until such a time as all court proceedings are complete. You may not, for example, lock someone out, remove their personal belongings from the property, shut off utilities, threaten or physically attempt to remove the tenant. All evictions must be handled legally and in the courts.
Should your tenant still refuse to move out after the court orders their eviction, you will likely need to get the local sheriff’s department involved.
The most common reason for missed and late rent is simply because the tenant forgot. Making sure you have systems in place, such as automated rent reminder emails, and a tool for online rent collection is a good way to avoid late rent payments. Should your tenant still be late with the rent it’s worth investigating why and working with them if possible to solve the issue.
For example, maybe they get paid on the 15th of every month and you’re asking for rent on the 1st. By moving the rent due date to coincide with their payday you can reduce the chances of them being short of funds at the time of payment. Or potentially, they are having financial difficulties because of some external issue. In such a case you could offer them the opportunity to break the lease and work with them to implement a plan to collect any overdue rent.
As already mentioned, a worst-case scenario could involve you requiring to go through an entire eviction. If this does happen, you will need to have thorough records of all communications including any overdue rent notices, your signed lease document, and a history of all their payment records.
Using a modern solution for rent collection like Landlord Studio there is no reason for a tenant not to pay the rent on time. Landlord Studio allows tenants to view upcoming and historical transactions and automate payments meaning they can simply set and forget.
On the landlord’s side, once rent is paid, the system will automatically track the income so that you have an accurate record of all your tenant’s payment dates.
In addition to making it as easy as possible for tenants to pay the rent and giving both parties clear oversight as to payments made to date, Landlord Studio also allows for landlords to charge tenant payable expenses to tenants and set automated rent reminder emails. Streamlining the payment process in this way is proven to effectively reduce the chances of a tenant not paying rent.
In most states, you are allowed to withhold some or all of the deposit to cover unpaid rent. However, generally, the deposit is only equal to one or two months’ rent and so this amount may not cover the entirety of the rent arrears. Meaning you may need to pursue additional action to reclaim the owed rent. Additionally, if a tenant is withholding rent as part of their right to repair and deduct you will have to go through the courts before deducting rent from their deposit.
Most landlord insurance policies don’t specifically cover unpaid rent. However, landlords can get rent guarantee insurance which can cover up to 6 months of unpaid rent per year. This allows you to start the eviction process if needed without having to worry about swallowing the costs associated with having a non-paying tenant in your property throughout the entire, potentially lengthy process.
In the case of the tenant not paying rent, you have to act quickly and consistently. Your tenants need to know that you are paying attention, and that should they continue to not pay there will be serious legal consequences.
Additionally, you shouldn’t unless you’ve discussed it formally with your tenant, allow your tenant to make partial payments. Doing so could make it harder to remove them from the premises down the line and reclaim owed rent.
Make sure to familiarize yourself with your local and state laws and follow the legal guidelines exactly. Keep accurate and detailed records of everything including all communications between you and your tenant.
Finally, Landlord Studio’s online rent collection tool paired with rent reminder emails, automated late fees, and document storage, is designed to help you encourage on-time rent collection and stay highly organized.