Strategies You Can Implement Now to Help with Future Nonpayment of Rent

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Rental income is one of the primary reasons many people invest in rental properties. Unfortunately, rent collection doesn’t always go smoothly—especially if your tenants have been impacted by COVID-19. The federal eviction moratorium and state moratoriums make nonpayment of rent even more complicated, as qualifying tenants cannot be evicted due to nonpayment.

Whether you’re dealing with tenants affected by COVID-19 or have tenants who are just not holding up their end of the lease, here are a few strategies you can implement to get your tenants to pay their rent on time. Please note that this is for informational purposes only and is not intended as legal advice.

Tenant Screening

If you currently have a vacancy, the first step in preventing nonpayment issues is to find reliable tenants. Tenant screening and tenant verification will help you determine if the applicant has a history of meeting their financial obligations on time, if the information they’re providing you is accurate, and whether they’ve been a good, responsible tenant overall. You’ll also be able to see if they make enough money to comfortably cover the rent, if they’re currently employed, and other helpful information to base your rental decision on. Although tenant screening can’t 100% predict the future, it will give you a clear idea of the type of renter an applicant has been in the past.

Read Up on Your Local Laws

The eviction moratorium makes nonpayment of rent complex, particularly because some states have enacted their own moratoriums in addition to the federal moratorium. This means the rules can vary greatly depending on where you’re located. In some areas, you’ll only have to consider the federal guidelines, while in others, there may be state restrictions as well.

Keep in mind that if a tenant doesn’t qualify for the protections under state or federal moratoriums, you may still have the right to move forward with eviction. Under the federal moratorium, tenants may still be evicted for reasons such as nuisance, committing a crime on the property, or if the owner has a justified reason for taking back the property. Make sure to consult with legal counsel to get more insight into your options.

Depending on the state your property is located in, you may be able to find specific resources to help guide you on how to handle rental and eviction questions. For example, California has created this handy checklist for landlords.

Keep Communication Open and Document Everything

If your tenants are having difficulty meeting their rent payments, keep the lines of communication open. Talk to them about their situation and see if you can come to an agreement, whether it be a payment plan, paying partial rent, or forgiving back rent. Ask them if they have a solution that you haven’t offered. Whatever you discuss and decide, make sure it’s documented. If your tenant agrees to a payment plan, for example, make sure you add it as an addendum to your lease, with all the agreed-upon terms and the start and end date. Have your tenant sign the addendum as well to verify that they are aware of the new terms.

Offer Multiple Ways to Pay Rent

Make sure you don’t give your tenants a reason not to pay when the rent is due. Offering several options for rent payments (such as check, credit card, debit card, online, mail, or in-person) makes paying the rent more convenient and gives tenants the choice to choose whichever method works best for them. If possible, avoid accepting cash as other methods leave a paper trail you can refer to if needed. If a tenant pays partial rent, make sure you’re documenting how much they paid and how much is still owed.

Offer Incentives for Paying Rent on Time

Get creative and think of some ways you might be able to reward your tenants for paying rent on time. One example is you could offer a small discount if the tenant pays before the due date. Or, you could let your tenants know that for every on-time rent payment, they’ll earn a small kickback at the end of the year or lease period. If a tenant pays rent on time for a certain number of consecutive months, you can offer a percentage off the following months’ rent. Likewise, you could offer other incentives, like small upgrades to the property or gift cards.

Look into Rental Assistance

Although the CDC order doesn’t include rental assistance, the American Rescue Plan Act (ARP) passed in March 2021 includes nearly $50 billion in housing and homelessness resources, including $27 billion for rental assistance and $5 billion for utility assistance—in addition to the $25 billion Emergency Rental Assistance Program (ERA) passed in December. Many state and local organizations are also offering rental assistance programs that may be able to help your tenants get back on their feet – and allow you to continue collecting rent.

Find a rental assistance program near your property.

Credit Reporting

Although uncommon, some tenants have claimed they don’t have the ability to pay rent when they actually can. If this is the case, there will likely be red flags, such as failure to furnish a hardship confirmation or avoiding discussions regarding payment plans. Make sure you’re documenting all attempts to discuss the situation, along with any suggestions you’ve offered to rectify the situation.

You may also want to consider credit reporting if your attempts at outreach go unanswered. Let the tenant know that if there is no resolution or discussion about the matter, you’ll have to report them to the credit bureau. Since the majority of tenants would like to keep their credit in good standing, this could offer very good motivation to put more effort into making their payments.

Conclusion

Whether you’re dealing with nonpayment issues now or you anticipate them in the future, it’s important to assess what’s going on in your situation before deciding on how to proceed. Consider the following questions:

  • How much rent is owed and when was it due?
  • Has the tenant been notified about the late rent? If so, what was their response?
  • Are there any factors that prevent you from pursuing eviction, such as the tenant qualifying for the eviction moratorium?

By answering these questions, you’ll be able to better plan your next moves. In most cases, the first step is to discuss the matter with your tenant and see if you can agree on how to handle the payments. From there, you can determine what to do next based on your legal options.


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