The Step by Step Guide to Avoiding Late Rent Payments

One of the most common causes of disputes between a landlord and a tenant is late rent. Often it is an innocent case of forgetfulness. However, tenants that don’t pay rent on time, whatever the reason, cause a number of issues, from financial stress to legal trouble.

Neglecting to pay rent is a serious breach of contract and as with many things, it is a problem best avoided. There are a number of actions that a landlord can take to avoid missed or late rent payments. From efficient tenant screening practices to sending regular reminders.

In this article, we take you through 5 steps to help secure timely rent payments as well as looking at how to settle rent disputes should issues arise.

5 Steps to Avoiding Late and Missed Rent

1. Screen Tenants Effectively

An effective tenant screening process allows you to verify an individual’s employment status, rental history, criminal background, and credit. Additionally, you should get references from past landlords to learn if they have ever caused problems in the past while renting.

In general, when determining the most suitable tenant you should avoid any red flags associated with these factors. For example, an eviction, in the past could signal that they are at a higher risk of evictions in the future. Other red flags are things like lying on their application form, which could be about anything from their employment to their smoking habits.

Finally, a key factor to look at in determining if an individual has sufficient income. It is recommended that their income-to-rent ratio is no less than 3-1. Evidence suggests that those individuals who spend more than a third of their paycheck on rent are more likely to face financial strain because of it and miss rent payments.

Screening tenants, checking their income, and setting guidelines for the minimum income you require is an important first step to avoiding late payments.

Related: The Ultimate Guide To Tenant Screening For DIY Landlords

2. Clearly Communicate Rent Details

Your lease should clearly state how much rent is due, when the rent is due and how you expect them to pay. It’s a good idea to also communicate these details upon move-in to ensure they are properly understood, for example, is a welcome letter. Leave no ground for any misunderstandings or miscommunications.

3. Have a Late Fee Policy in Place

A late rent fee is a fee charged to the tenant if they don’t pay rent within the established grace period, as stipulated on the lease agreement.

A late rent fee is not a way for landlords to squeeze extra rent out of their tenants. It serves two purposes, first to incentivize timely rent payments and secondly to compensate the landlord for the stress, time, and increased risk associated with chasing and collecting late rent.

Generally speaking, it’s a good idea to have a grace period to provide tenants with extra time should they need it to complete the transaction. In some states grace periods are mandated by law, so check your local and state laws when considering your policies around late fees and grace periods.

The most common late fee amount is between $20 and $50.

4. Automate your Rent Reminders

Chasing tenants for rent payments is not a fun or conducive activity. It’s a time consuming and largely thankless task. However, it’s also effective. With software like Landlord Studio, you can set up automated rent reminder emails to go out a set number of days before the rent is due. Our users have found that this increases timely payments from otherwise forgetful tenants.

Additionally, should your tenants still not pay you can automatically apply your late fee and send an automated follow-up email. Our email templates draw data from the lease and current tenancies and are completely customizable.

5. Make it Easy to Pay with Online Rent Collection

The easiest and simplest way for tenants to pay their rent is to do so online. Online rent collection has several advantages, not least of which is convenience. Additionally, payment information is documented for you and your tenants which could be vital if disputes do arise later.

There are numerous solutions for online rent collection such as Zelle pay, or landlord-specific solutions such as Landlord Studio which allows your tenants to view upcoming and historical payments, set up automatic rent payments, and more.

What to do if the Rent is Late

Sometimes, everything you do is for naught. The tenant is late. There could be any number of reasons for this. Before you begin legal procedures you will want to consult with your lease and communicate the contract’s details with your tenant. For example, remind them of rent amount, due date, your grace period if you have one, and the additional fees that are associated with late payments.

If the tenant doesn’t pay shortly after the rent due date and they have not communicated with you, then make sure you follow the procedure for late rent accurately and promptly. You may then need to begin eviction procedures, starting with a notice to pay or quit. Make sure to follow the local or state laws, carefully document everything, and if your tenant believes you are doing anything unfair, refer to the lease to explain the procedure.

Document Everything Accurately

Keep an accurate and up-to-date record of when all payments are received and how much was received, as well as documenting all communications and actions taken.

Do not accept partial rent payments during an eviction process. If late rent results in an eviction, accepting any amount in partial payments, even an amount as small as $1 can halt or delay the eviction process altogether.

Plus make sure to track when you receive payments and who they’re from. Everyone on the lease should be responsible for the full amount being paid unless otherwise outlined in the lease. The same goes for guarantors and co-signers on the lease — it is legal to demand rent from any signee on the lease, and failing to pay rent is a breach of contract.

Conclusion

It is always best to avoid late rent through preparations and the careful selection of tenants. However, that’s not always possible, sometimes unexpected and unforeseeable events can impact an individual’s life. The majority of people don’t want to pay their rent late. They don’t want the threat of eviction hanging over them. So, before pursuing legal action for late rent payments it’s important to talk with your tenant and when possible come to an amicable solution.

However, frequently paying rent late, especially if they don’t communicate their reasons to you is a clear warning sign. It suggests they can’t pay on time, that the rent is beyond their means and it makes you question what else they might not be taking care of in the unit.

If your tenant is consistently and unacceptably late or stops paying rent altogether, make sure you follow local or state law and have a detailed step-by-step process as you deal with the situation.