Tenants who pay late are very common. If you are lucky, they call you and explain why they are paying late. Other tenants don’t bother to let you know and just randomly pay.
These late paying tenants are a serious problem if you count on the rent money to pay your mortgage. Even if you don’t depend on the rent money to pay any bills, it is very annoying when your tenant continually pays rent late.
Procedure For Handling Late Paying Tenants
Unfortunately, you cannot force anyone to pay. You need to fall back on your procedures for ensuring that the tenant knows what happens next.
Always send out the appropriate late notice. Know the laws in your area. Be sure and consult with an eviction attorney so that you can give the proper notice to your tenant. I live in Louisville, KY and we send a 7 day notice that basically says pay or get out.
Once notice arrives, the tenant will usually touch base with me. If this tenant has already called, this person was warned that they would be receiving the 7 day notice. I do occasionally run across a tenant who is offended that I won’t just “trust” them to pay the rent as soon as they can. I explain that company policy require me to send a 7 day notice to every tenant who has not paid on or before the 5th day. We have a 5 day grace period.
The late notice should list the past due rent and any late fees. I have a $50 charge on the 6th and $5 per day after that. So, if the tenant pays on the 10th and their rent is $1,000, the tenant would owe $1,065. I don’t charge for the actual day they pay. It is in your best interests to insist that the late fees are paid along with the rent. There are times that I will allow a payment plan, especially if the late fees are high. For example, if the tenant paid rent on the 25th day of the month, late fees would be $140. Many tenants won’t have that much extra money. But, I only allow it to be split in half.
The main issue is that when a tenant pays this late in the month, the chances that they will pay late the following month increase dramatically. Then you are on the path of a tenant who pays chronically late and can’t afford the late fees. At some point, this has to stop and the tenant needs to move. I usually sit down with the tenant and try to get them to move out but I will evict them if I have to. It is much easier and cheaper to get them to willingly move. Not every tenant will be agreeable to just moving but it is what I try first.
Always Pays Late But Pays Balance In Full
I have a couple of tenants who pay late roughly 5 or 6 months out of 12. For one of them, I moved the rent due date because she went on disability and SSI and her payment often didn’t arrive until the 10th or the 11th of the month. She was never going to get caught up and it was just easier to move her due date.
For the other tenants, they randomly just pay late and they always pay the late fees. While this is annoying because I still send the 7 day letters every single month, they always pay the late fees and they never complain about paying them. The company makes more money every month and for now, it seems to be working.
Improved Screening Of Applicants
This issue drives me crazy. I did a review of these tenants to see if I could have spotted these issues during the application process. There were no red flags during the application process that I could find. I always send over a questionnaire for the previous landlord to fill out and none of them flagged these tenants as late payers. It is possible that the landlords just wanted to get rid of these tenants and didn’t say anything.
One thing that stood out on two of them is that while they met the income requirement of 3x the rent, they had no extra money. One tenant ended up losing their job and the new job didn’t pay as much. There was no way to predict that this would happen.
Another tenant had a lot of student loans that they started paying on which reduced their spendable income. Very few landlords count student loans or medical bills but I have started to see some issues with this. Remember, at some point they will have to start making payments on their student loans and those payments can be quite high. In many cases, those monthly payments will cause the tenant to not meet the debt to income ratio. You need to have a process for considering student loans because it can significantly reduce your tenants monthly income.
3 Strikes Rule
Many landlords I know have what I call a 3 strikes rule. Typically, they only allow 2 late pays or 2 eviction filings per year before they move to evict. Once the tenant pays late the third time or has an eviction filed against them for the third time, the landlord will no longer accept the rent. The landlord will move to evict these problem tenants.
I personally don’t have this rule because it is very costly to turn a house and get it ready to rent again. I work with the tenant within reason. I follow the process but if the tenant comes up with the money for the past due rent, the late fees and the court fees, I will accept the money. This is strictly a business decision on my part.
Neither way is wrong and you will need to decide what works for you.
Follow Your Procedures
Late paying tenants seems to be one of the top problems that landlords have. When you have this issue, have procedures in place and follow them.
Spell out in the lease what happens when a tenant pays late and follow through.
Send the late pay letter and charge late fees.
Be prepared to file an eviction against them.
Decide at what point you will no longer accept payments.
How many late pays or eviction filings will you allow?
Following Your Procedures Makes For Better Tenants
The most important thing to always remember is that you are setting expectations for your tenants. When you follow your procedures every single time, they know what to expect. If you don’t follow your procedures every time, you are teaching your tenants that it is ok to pay late. Why should your tenant pay on time every month if you don’t charge late fees or you never start the eviction process by sending out a late notice?
It is your job to make sure this tenant stays on track. It is my belief that bad paying tenants are created in part by landlords who don’t enforce their rules. These tenants never learn that they have to follow the rules.
When you have rental properties, there are certain rules that your tenants are expected to follow. Rules are great but they only work if you enforce them. For me, this process actually starts in the pre-screening phase. I look for a prospect who can follow directions and provide the information that I ask for. Prospects who cannot follow simple rules do not make it past the pre-screening stage.
Once you convert an applicant to a tenant, it becomes even more important to have tenant rules. Tenants have the right to know exactly what to expect and what they can and cannot do. Your lease should outline their rights and responsibilities as well as what happens when the rules are broken. Treat them like employees. When you start a new job, there is typically an onboarding process. You should give your tenant the same experience.
Common Tenant Rules
There are some common tenant rules that you need to explain and enforce. A good lease will save you a lot of trouble. Just be sure that you go over the lease with your new tenant. Anytime the rules are broken, refer your tenant back to the lease.
Rent due date.
Date late fees start to accrue.
Date the eviction process starts.
No smoking.
Pet policy.
Move out policy
Conditions that will cause the security deposit to be forfeited.
Keep the grass cut.
Take care of the property.
These are just a few of the common rules you need to address in the lease. For example, if you give a grace period on the rent due date, be sure that you always send the appropriate notice when the rent is not received on time. Here, it is a 7 day letter that starts the eviction process. The tenants receive a certified letter and are told that they have 7 days to pay the rent. When they don’t pay the rent within that time frame, I can send this to the eviction attorney to start the process of removing this tenant. Your tenants must know that there are repercussions when they don’t do what they are supposed to do.
Enforcing Tenant Rules
This is a business and when your tenant doesn’t follow the rules you, as the landlord, need to be prepared to follow through. If you are not consistent and fair with every tenant, you will start to run into problems. Have procedures and follow them every time. Once you start making exceptions, your tenants will notice immediately and your problems will only multiply.
When you start feeling sorry for a tenant, remember that your rental property is an asset and this is your business.
Your tenants have been given rules and you need to demonstrate that you expect them to be followed every single time. Tenants who will not or cannot follow the rules need to understand what will happen. For example, when rent is paid late, there is a late fee and it must be paid. One of the biggest mistakes you can make is to continually waive late fees. They learn that it is ok to pay late.
Start off the way you intend to continue. Failing to enforce your rules sets a bad example and will they will never learn to be great tenants.
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Tenant Parking Issues – Parking Where They Are Not Allowed
This is a fairly common problem that landlords have to deal with. But, it can be difficult to stop your tenants from parking where they shouldn’t.
I don’t know about the area where you live, but most areas do not allow parking in the grass. To make matters worse, some areas do not allow parking on the street for very long or at all. Don’t ever assume that just because you see cars parked on the street where your rental is located that it is allowed.
Tenant parking issues are something that I deal with from the start of the lease term. All of my tenants are told when they sign the lease to only park in designated areas, which does not include the yard. I usually find out that a tenant is parking somewhere other than the driveway when I get an official notice from Metro Housing. It is usually a warning at first and a fine will follow.
Tenant Behaving Badly
I had a tenant who would not stop parking in the grass and the fines totaled $600. I went by the property and spoke to them in person and that didn’t work so I sent a cease and desist. That didn’t work either. The tenant ended up having to move because he and his family would not stop parking in the grass.
Parking in the front yard caused a lot of damage. There were deep tire ruts all over the yard and the grass was mostly dead.
A truck load of dirt had to be brought in and along with a bob cat to spread the dirt out and level the yard again. Then, grass seed and straw were put down and the yard had to be watered. It was expensive and a huge hassle. A collections case has been filed against the tenant but who knows if the money will ever be collected.
How To Protect Yourself
Be sure and address tenant parking issue sin the lease.
Clearly state where the tenant is allowed to park.
Clearly state that any and all fines issued will be billed to the tenant.
I would further state that rent will not be accepted until the fines are paid.
State that the tenant will be responsible for paying to repair the yard if necessary.
When this issue crops up, immediately send out a 14 Day Cease and Desist letter or whatever notice is appropriate in your area. Consult your attorney to find out what you have to do.
It is very irritating to send out the notice only to either talk to your attorney or get to court and find out that you did not do this correctly. It takes to send out the proper notice and will end up costing more money.
Know The Rules In Your Area
Know the rules about parking for each of your rental properties.
Is parking allowed on the street?
Does your property have a short driveway?
No garage?
Is the garage likely to be just used for storage?
Do not assume that even when you cover the rules with the tenants that they will listen. Many of them will just ignore you. Many tenants can’t figure out why this is such a big deal! They are completely blown away that this is such a big issue. Do not assume that just because there is a garage your tenant will use it to park vehicles.
Start With The Application
Tenant parking issues usually do not crop up over night. When you starting having issues with a tenant, you may find that when you go back and look at the application, you could have identified this problem before this tenant ever moved in.
When you are reviewing an application, one thing you should always do is have the applicant list how many occupants and how many vehicles will be kept on the property.
If your applicant has 4 or 5 cars, and the rental property has a short driveway and/or no garage parking and street parking is not allowed, I can guarantee that parking is going to be an issue.
Here, you are only allowed to have 3 cars on the property. Police and Metro Housing are loose about enforcing this rule unless it becomes an issue. Once this has popped up on their radar, it is not going to go away.
You may have to disqualify the applicants if there are too many vehicles. This may sound extreme but I have had that happen once.
Common Tenant Issues
This problem will come up from time to time and is not at all uncommon. When this problem does occur, deal with your tenant quickly and firmly.
Have policies in place and enforce them.
Be sure that your applicant / tenant knows what the rules are and that they will be enforced.
Be prepared to evict the tenant if the issue is not resolved.
Your tenants need to understand that you will enforce the rules and that you will bill them both for the fines and any resulting damage. This is a big deal and you need to make sure your tenant understand this. Once your property has been called out for this violation, or any violation, it will be on the radar of the local housing department and they will continue to check on it.
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I was talking to someone who was interested in renting a unit the other day. She asked what our policy was on entering an apartment that someone lived in. I explained our policy (which is detailed below) and she then said that the reason she was moving out was because her landlord has used the key to enter her unit twice after knocking. The tenant was home both times and was startled and a little scared. No advance notice was given and she said there was no emergency. The landlord stated that the reason for entry was to make sure the tenant was OK. This obviously made the tenant feel very uncomfortable. Her lease is up and she is now looking for a new place to live.
Know The Laws
Responsible landlords in Kentucky know that they are required to give at least 2 days of advance notice before they can enter an occupied rental. This is for situations that are not an emergency and entry of the unit must be at a “reasonable” hour. This includes instances where a landlord intends to make a requested repair or show the unit to a prospective renter. It is up to the landlords and tenants in Kentucky to work out what constitutes “reasonable” hours in the lease agreement.
Emergency Situation
However, if there is an emergency situation, landlords in Kentucky are usually allowed to enter an occupied unit without prior notice when the situation threatens the unit’s inhabitants. The lease does not need to specifically state this. An example of this would be a water leak in an upstairs unit that is flooding the lower units. You would be able to enter the unit to stop the water leak and then schedule the repair.
Notify The Tenant
Tenants have rights even though they don’t own the property. You can notify the tenant by calling them, emailing or texting them. But, if the tenant objects, you will need to give them 48 hours notice by sending them a certified letter stating the date and time you are going to enter the unit.
Landlord Rights
If the tenant still refuses to allow you to enter the unit on the date and time stated in the certified letter, in Kentucky, you would then send a Cease & Desist. I am not an attorney, so if you are faced with this type of situation, please be sure and get advice from an attorney familiar with real estate laws in your area so that you know how to proceed.
All landlords want great tenants. How do you find a great tenant for your vacant rental property though?
Searching for a great tenant can seem like an impossible task. I have found that you have to talk to a lot people to find one or two who will fit your description of what a great tenant is.
The first step is to list your rental requirements on your listing so that you discourage those who don’t qualify not to contact you. The second step is to conduct a thorough pre-screening of every interested party before you show the property. Why bother to allow people to see your vacant rental property if you on’t know if they would even qualify to rent from you? The third step is meet interested parties in person.
Pre Screening Potential Tenants
We are going to talk about Step Two of this process which is the pre-screening step.
Advantages of Pre-Screening:
Find out more about anyone interested in your property
Eliminate a lot of people because they don’t qualify
Only show your property to people who meet your qualifications
Keep in mind that at this point, you will only have verbal answers to your questions. Hopefully, no one lies to you but you will find that out when someone actually submits an applications. That would be grounds for immediate denial.
What Questions Should You Ask?
For Fair Housing reasons, always ask the same questions of every person that calls. Going through this process will help you identify people who can potentially be a great tenant for you.
The longer you do this, the more rhythm you will have. If you notice that you are getting mostly through the list of questions and keep reaching one that is disqualifying, change the order of questions.
For example, if you do not allow pets, ask that question close to the beginning. There is no reason to ask a lot of other questions if this person has a pet.
It is amazing how much information someone will tell you when you ask open ended questions! Depending on how much information you want to know, you can add to these questions or change them however you want.
Some basic questions that I start with are listed below. Be sure to customize them or rearrange the order to suite you. If you don’t accept pets, move the pets question up closer to the top. I can’t tell you how many times I asked that towards the end and had to tell them I was sorry.
Examples of Pre Screening Questions:
How many people will be living in the home?
Where do you live now?
How much is your rent?
Why are you moving?
If you’ve been at your current residence for less than two years, why do you move so frequently?
What type of pets do you have?
Where do you work?
How long have you been in your current job?
How much is your gross monthly income?
Do you have any credit issues that we need to know about?
If you have Section 8:
How long have you been on section 8?
Have you met with your caseworker yet?
Do you have a voucher and how much is it for?
How many bedrooms are you approved for?
How soon do you want to move in?
Again, customize the questions to meet your needs. Your questions should always be open ended in order to encourage everyone to tell you more. Be prepared to ask more questions as needed and ask for more details.
This process is easy to implement and allows you to easily see who doesn’t meet your basic guidelines. A qualified list of pre-screened people will start you on the path to finding a great tenant!
As of the date of this post, courts are beginning to open back up in many areas. So, this answer will fit what is going on right now.
Times are tough right now for landlords and tenants. Everyone has a different idea on how to proceed. There is a lot of debate about what is “right”. To say the least, this is a very hot topic. Most tenants do not understand that landlords are not wealthy and there is a mortgage on the property that the tenant is living in. So, when the tenant can’t pay, the landlord can’t pay the mortgage. Many landlords are struggling just like tenants.
The bad news is that, unfortunately, there is not a lot you can do right now about non paying tenants. This is going to be disastrous for many landlords who depend on the rent to pay the bills. It can be very frustrating to watch the news and hear so many people insisting on rent forgiveness. It seems like a lot of people are painting the landlord as the bad guy. The bottom line is that no landlord decided to have rental property just so it could be rented for free. Owning rental property is a business. The income is counted on by most landlords just to be able to keep the property.
I am lucky. Most of my tenants are paying. The majority of my tenants who couldn’t pay contacted me and explained their situation. Most were waiting on their unemployment and/or their stimulus check. It is much easier mentally and emotionally to help these tenants out as they were proactive.
When reviewing the non paying accounts, I realized early on that many tenants who were not paying were the same ones who either paid very late every month or were tenants I had to send 7 day letters on to actually get paid.
Dealing With A Non Paying Tenant
Communication is key with non paying tenants. When this first started, I made sure that I spoke with every tenant not paying rent. If you have not done this yet, then I recommend you do it today! The good paying tenants were very embarrassed and there were a lot of tears. But, they are at least making an attempt to pay something.
As for the few tenants that are not paying at all, they literally have no money to pay their rent with. Some are not eligible for unemployment and used their stimulus money to pay utilities and buy groceries. Others, especially my commercial tenants, have tried to get business loans but have either been denied or have not received the money yet. I have both residential and commercial tenants so their ability to pay the rent depends on a number of things. The commercial tenants who have restaurants or other businesses are hurting the most. There is nothing I can do until evictions can be filed. I am staying in touch with them though.
I have one tenant who has indicated that he doesn’t intend to pay until I make him. I have reminded him that the rent will have to be paid eventually. I told him that if he doesn’t, once I can file an eviction, I will be filing on him. He told me to go for it.
Two of my tenants had heard on the news that they didn’t have to pay rent. They really thought that the moratorium on rent meant that they didn’t have to pay at all! Once I informed them that what they heard wasn’t reality and that they would owe all of the rent eventually or be evicted, they paid. One laughed and said he thought that was too good to be true!
For the tenants who are chronic problems, you either have to figure out how to get them back on track or evict them them once you can. That is something you will have to decide. Sometimes it is cheaper to work with these tenants than to evict them but if they are four to six months behind on the rent, there is really no way they will be able to get caught up.
Can I Evict For Issues Other Than Non Payment?
The answer is that yes, you can. If you have other issues that are related to tenant not paying rent, find out what the rules are in your area first. In my area, I can send them a Cease and Desist and then file an eviction if the situation has not been rectified. I am in the process of doing this with tenants in an apartment building. They have been disturbing all of the neighbors with their cussing and fighting at all hours of the day and night. I sent the Cease and Desist notice and they were shocked that they received it. After talking with them, I was able to get them to agree to move out. I got lucky. Stay tuned though because they aren’t out yet!
The biggest issue is that the courts are backed up. A real estate attorney attended our local Real Estate Investor group meeting (online) at the end of May and said that while the courts are opening back up, there is a 6 to 8 week back log of existing court cases. But, at least you can do something and put them on notice to straighten up or they will be evicted.
Also, make sure your lease has a “peaceful enjoyment” clause in it. This makes it easier to evict tenants who are loud and are disturbing the neighbors.
Action Steps
Keep in mind that most tenants are not bad people. Many have been blindsided by the furlough or loss of a job. Some are literally frozen in place and have no idea how to move forward. Sometimes you can help them by talking with them and being empathetic. That doesn’t mean you turn a blind eye to your business!
Review all non paying tenant accounts and those with balances
If you have not done so already, contact all of them
Keep detailed notes about what each one said
Set up payment plans when possible
Follow up monthly to see what is going on
When you know the date courts open back up, notify your tenants that eviction filings are resuming
Schedule your 7 day letters to go out when appropriate
File your evictions as soon as you are allowed to
Resources
Did you know that Covid 19 relief funds are available to tenants? If you haven’t already done so, find out what resources are available in your area. Compile a list of resources with phone numbers and either email or physically mail them to your tenants. When I talk to tenants on the phone, I give them the resources I have and instruct them to also go online and see what they could fine.
I found out about some programs when representatives from local organizations called me to verify information for a tenant. I then got the information I needed from that person to pass onto my other tenants. In my area, local churches offer rent and utility assistance year round. Many of my tenants were able to pay their rent with these resources.
Trust me when I tell you that it is well worth your time and effort! The last time I checked, I had received over $7,000 in rent!
Finally . . .
Hang in there. This won’t last forever. Work with the tenants you can and evict the ones who cannot get caught up. Keep in mind that unless the tenant has kept the property in great shape, you are going to have to make repairs at the very least. If the tenant has been there a long time, you may have to completely redo the unit. Can you afford to do that? I don’t know the answer to that, only you do. You need to weigh the cost of working with a tenant with the cost of evicting this person and having a vacant unit needing repairs.
Tenant Parking Issues – Parking Where They Are Not Allowed
