As a landlord, you probably rely on getting your monthly rent payments on time in order to make ends meet. But what should you do if your rent collection day has come and gone, and you still haven’t been paid? This is a scenario that worries new landlords and industry veterans alike, and it can be especially hard to know how to move forward when the tenant wants to pay rent, but can’t.
To help you navigate this tricky situation, here are five steps you can take—without compromising your business. Please note this is for informational purposes only and is not intended as legal advice. Laws may vary based on your location.
Steps to Take Before the Rent is Late
Whenever possible, the best time to determine what to do about late rent is to figure out an action plan before the lease is signed. Consider taking the following steps:
- Evaluate how much you have in your emergency fund, factoring in the monthly expenses you plan to pay using your rental income. It’s generally recommended you save approximately 3-6 months’ worth of living expenses to account for any unexpected lost income.
- Add an addendum to your rental agreement outlining everything your tenant should know about when you expect rent to be paid, what’s considered a late payment, and the consequences of paying rent late.
- Let your prospective tenants know you’d like to form a transparent, compassionate relationship where they can discuss any issues that might come up, such as losing their job or breaking the lease. This will allow you to handle the situation as quickly as possible, should such situations arise.
If you’re able to take these steps before your tenant is late on the rent, you’ll save yourself a lot of stress and hassle.
Steps to Take After the Rent is Late
If the rent is already late, it’s important to stay calm and make sure you document everything.
- Evaluate your tenant’s history.
When determining your course of action, it’s important to consider the tenant’s history. For example, is this the first time they’ve missed a payment, or do they have a habit of being late? Did they give you a heads-up that they might be late on the rent—or did it come as a surprise? This will help you determine the best strategy for handling the issue.
- Send the tenant an informal notice.
If your tenant usually pays rent on time, send them an informal notice reminding them that they’re late on the rent payment. Be sure to include the following:
- The original due date
- How much rent you’re owed
- How long they have to pay rent without penalty
- Your late fee policy
- The best way to contact you if they have any questions or concerns
It’s typically best to contact your tenant in person, via email, or by posting the notice on their front door. Keep in mind that it’s important to be compassionate about their situation, and try to learn more about the reason behind being late on the rent before you ask them for money. It’s possible they’ve lost their job, have a sick family member, or other sensitive situations. If they simply forgot, the notice should be a good reminder.
If your tenant is struggling due to some unfortunate circumstance, ask them if there’s any way to help. Some ways you might be able to help include:
- A repayment plan
- Accept a partial payment
- Allow them to skip a month of rent
- Adjust the due date to align better with their payday
- Waive the late fee
- Agree to accept lower rent payments
Whatever you decide, make sure to document the agreement in writing and have your renter sign it.
- Give the tenant resources for rental relief.
Evictions are costly and time-consuming, so in some cases, it might be in your best interest to offer rent relief resources to your tenant. There are a number of organizations that help tenants pay their rent, including:
- The Salvation Army
- Catholic Charities USA
- The U.S. Department of Housing and Urban Development’s Housing Choice Voucher Program (Section 8)
- Modest Needs
- The USDA Rural Development Program
- Find Alternatives to Eviction.
If the tenant is unable to get rental assistance (or chooses not to apply), it’s best to discuss your legal options with a real estate attorney. Although eviction is always an option, there may be more viable alternatives, such as:
- Pay-and-stay plan, which is a formalized repayment plan that allows you to evict the tenant if they are late on rent in the future.
- Cash-for-keys, which allows you to pay the tenant a lump sum in exchange for them moving from your property.
Although you probably want to avoid paying money to resolve the situation, the cash-for-keys lump sum will be less than what you’d pay the court for an eviction hearing.
If the above solutions haven’t resolved the issue, you may need to send the tenant a notice to pay or quit, which is the first step in the eviction process.
Eviction is a lengthy process and one that most landlords want to avoid at all costs. Unfortunately, there are times when it’s the only solution. To prevent issues with late rent payments, make sure you’re conducting thorough tenant screening on all applicants. Although it can’t account for every situation you’ll encounter, tenant screening helps you find responsible tenants who have a history of paying rent in full and on time. Order your tenant screening reports online today or contact Tenant Screening Center at 1-800-523-2381.
Landlords Property Managers Contact TSCI