How to Handle Late Payments and Past Due Rent
Wouldn’t it be great if tenants paid on time, every time? Unfortunately, that’s not always the case, and handling the issue of late payments and past due rent can be tricky. No one likes confrontation or being the bad guy. However, you have to get paid.
Giving your tenants some leniency has some definite benefits, but it also comes with some consequences. One survey found that payment problems are the number one concern of 84% of landlords.
So, how should you handle these situations? Should you allow a grace period? When do you start the eviction process? What should you do about late payments and past due rent for your property?
The Late Payment Timeline
Most landlords agree there’s a difference between past due rent from a tenant who never pays their rent on time and one who’s never been late before. However, it’s usually best to have a definitive timeline for late payments specified in the lease agreement.
Many landlords offer a grace period, ( a period of time after the due date that the tenant can still pay without accruing a late fee). Grace periods aren’t required, but they help avoid issues resulting from paycheck timing, bounced checks, and holiday weekends.
Generally, grace periods are between 3 to 5 days. Then, after the grace period, there are typically late fees. These penalties can range depending on the state you’re in and how much you’re comfortable charging.
Late fees play a role in incentivizing people to pay on time, but it’s important to take note of people who are falling behind and find a solution as quickly as possible. The day a person passes the grace period without payment is when you should begin to take action to remedy the situation.
The late payment timeline varies by state. Some states allow you to evict as soon as a tenant is late, whereas other states require more action and time to allow the tenant to catch up. Check with your local laws for an exact timeline for your area.
Double Check Records for Payment
The second you realize a tenant is late, the first thing you should do is check your records, especially if you have more than one tenant. It’s best to double-check your memory and look back at the lease agreement to ensure the tenant is actually late before taking any action.
Send Reminders and Notices of Past-Due Rent
Once you’ve verified that their payment is late, you should send a reminder. Life gets busy sometimes, so they may have just forgotten to pay rent. A simple payment reminder could be all you need to remedy the situation.
Typically, past-due rent notices include a list of all the fees the tenant owes, including late fees. There should also be a warning in the notice about legal action if the rent isn’t paid. You can tape these notices right to the door or send them via email.
Call Them or Have an In-Person Meeting
If the reminder doesn’t result in payment, it’s time to connect one-to-one with the tenant. Either give them a call or have an in-person meeting to see if you can resolve the issue.
Usually, it’s much easier to get a plan of action when speaking to the tenant directly. Be sure only to call one time, though, because you don’t want to be accused of harassment. This phone call or face-to-face meeting is only to mitigate legal actions.
Initiate a Three-Day Notice to Pay Rent or Quit
If the reminder and the phone call don’t result in a resolution, it’s time to move on to more official action. Initiate a three-day notice to pay rent or quit. This is the official first step in the eviction process and can be done as soon as the rent is late.
The purpose of this document is to communicate to your tenant that you intend to evict them if they don’t pay the amount due by the deadline. Some local laws dictate how you can deliver this document, but usually, taped to the door, handed in person, or mailed are the best methods.
Once you send the document, you have to wait a specific period of time (usually 3-5 days) to begin the official eviction process. Check your local laws for the exact timeframe.
Pursue Legal Action
If all else fails, you will have to move forward with a formal eviction. Find an eviction lawyer if you don’t have one. Then, as soon as the Pay-or-Quit waiting period ends, go to the court and file a tenant-landlord complaint. You’re required to go through several court proceedings before evicting a tenant, and this process can take months. So, the sooner you get started, the better.
Once the eviction process is started, let the court do its job. It’s going to be a long process that includes fees and paperwork, but it’s illegal for you to take any action, including locking the person out or shutting off utilities, before the eviction process is complete.
Do Not Accept Partial Payments if Eviction is Coming
Be sure not to take any partial rent payments if your case may go to court. In many areas, if you accept a partial payment, it will void any legal actions, and will start the process completely over. It even cancels the Pay-or-Quit notice. So, whatever you do, don’t take anything from the tenants once the process has begun.
Having to evict tenants is never easy, but your willingness to act quickly and consistently will set a precedent for your tenants that you take timely payments seriously.
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