What are the steps landlords can take if the rent is late? And how can you encourage on-time rent with tools like online rent collection?
Even the best tenants are sometimes late with the rent. There are, however, a few best practices that landlords can follow in order to chase up and secure the rent payment as quickly as possible. If the last year has taught us anything is that there are numerous reasons a tenant might miss a payment, often for reasons entirely outside of their control.
In this article, we take a look at the steps that you can take after a rent payment is deemed to be late. As well as, how to track and manage rent arrears, and what tools you can use to encourage on-time rent so that this scenario never happens again.
If a tenant is continually late with their payment you need to communicate this to them with a late rent notice. Additionally, if they are regularly late it is worth determining why. For example, it could be that they don’t get paid at the end of the month. And simply by changing the date that the rent is due to coincide with their payday, you can make it more viable for them to pay on time.
Communication is key when determining the reason for late or missed payments. All communications should be in writing for your records if the situation devolves further.
In your lease document, you should have outlined how much the rent is due when the rent is due, and the punishments (such as late fees or grace periods) if the rent is late.
Refer to the lease when communicating with your tenant and highlight the relevant details so that the tenant is aware of the consequences of making late rent payments.
The late fee is not a strategy for the landlord to make more money off of a tenant. The late fee instead does two things. First of all, it incentivizes a tenant to pay on time. By applying the late fee you are discouraging a tenant from paying late ever again.
The second purpose of a late fee is to reimburse the landlord for the extra time taken up and any extraneous costs incurred as well as for the potential risks involved.
Should your tenant still not pay after you’ve chased them for their payment then it may be time to issue a Pay or Quit Notice.
This is a more official document and is technically the first step in the eviction process. It shows the tenant you’re serious about pursuing action and can be delivered in-person to the tenant as soon as rent is overdue.
This notice needs to clearly convey your intent to evict, the amount of money you are owed (including all late fees), and the deadline to pay in full. If you have an eviction attorney, this is something they can draft.
Many states and cities have specific requirements about how, when, and where you must post an eviction notice. If the issue proceeds to court, landlords may have to prove that they made a good faith effort to make sure the tenant received the notice, so be sure to check local laws and follow the guidelines.
If all else fails and the tenant still doesn’t pay, you will need to follow through with eviction proceedings, for this, it is recommended that you get an eviction lawyer. At the earliest possible opportunity (aka when the Pay or Quit waiting period ends), file a tenant-landlord complaint in court. In many places, it is illegal to evict a tenant until all court proceedings are over. This process can take months.
You’ll need to pay a fee and thoroughly complete all paperwork before you get a date for a hearing. Make sure you have records of all payments made, all payments owed, and all communications that have gone on throughout the process.
Remember, it is never acceptable or legal to lock someone out, move personal belongings, or shut off utilities before the eviction process is complete. Equally illegal are threats, humiliation, or physically attempting to remove the tenant. Not only can these be morally questionable, but an ex-tenant can easily turn around and sue you for unlawful eviction or harassment. As frustrating as it can be, let the court do its job.
1. Be consistent and take action fast
You need to enforce the rules otherwise tenants will believe that missing a rent payment here or there will hold no consequences. To prevent future late payments take the appropriate action fast – if they continue to pay late then you will need to follow through with eviction proceedings.
2. Don’t accept partial payments if you think the case may go to court.
In many locations in the US accepting a partial payment will actually void any legal actions you have taken up to that point. Meaning, even if the tenant only pays you a single cent you may have to restart the entire eviction process again.
3. Document everything in writing.
Make sure you have everything documented in writing in case you do need to pursue legal action. For example, if you create a payment plan for your tenant to help them catch up, make sure it is in writing and signed by both parties.
4. Hold co-signers responsible
Co-signers on a lease (for example, parents) should be held equally responsible for missed rent payments. Any lawsuits that get filed should thus name co-signers on the legal documents.
5. Follow local and state eviction rules
Local and state laws surrounding managing late rent payments and evictions can vary. Failure to follow the rules and regulations could result in costly delays or even end the eviction process entirely.
An important part of dealing with late rent is to make sure that you’re keeping meticulously accurate records of what rent is still owed when it was due, and how much (if any) has been paid.
If you initiate a payment plan to help the tenant catch up with arrears you will want a system such as Landlord Studio, which will allow you to track their income accurately and calculate the total amount of arrears that is built up and is still owed.
Having a quality income and expense tracking tool will prove invaluable should a tenant fall into rent arrears for this reason.
There are a few things that landlords can do to help encourage tenants to pay on time every month. These include:
Using a system like Landlord Studio, you’re able to set up reminder emails to go out a number of days before the rent is due, and a rent reminder email a number of days after the rent is due.
Online rent collection makes it easier for tenants to pay by removing the friction and challenges that can be associated with more traditional payment methods. On top of this, if you implement a specifically designed system like Landlord Studio, you can set the rent amount and the rent payment due date. And the tenant can simply log into the tenant portal and set up automatic payments to be deducted from their account and transferred directly into your bank account every single month.
Late rent is one of the leading causes of evictions, evictions take time, they’re stressful, and they can cost a landlord $1000s.
By implementing some of the strategies outlined above, as well as employing a proper income and expense tracking system like Landlord Studio to manage and track rent arrears you can reduce the likelihood of late rent payments and the eventual scenario of having to pursue an eviction.