Tenants Who Pay Late

Tenants who pay late

What Do You Do With Tenants Who Pay Late?

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.

Evicting A Tenant In The Winter

Evicting A Tenant In The Winter

Can You Evict A Tenant In The Winter?  Evicting a tenant in the winter should not be any different than evicting at any other time of the year. Theoretically speaking, as long as you follow the law and send the proper notice required in your area, you can evict a tenant at any time of the year.

I personally hate to evict anyone at the holidays. Doing this makes me feel terrible. At the end of the day, evicting a tenant in the winter a business decision and is not personal. I have to remind myself the tenant signed an agreement stating how much the rent was and agreed to pay it within a specific time frame.

That being said, go online and google “Evicting A Tenant In The Winter”. You will find many people saying that, in their area, they can’t schedule an eviction during November and December.  This seems to be a real problem in many areas of the country.

I live in Kentucky and the courts will allow you to file the eviction but they will not schedule any set outs during the month of December. This means that set outs get pushed out into January and even February every year.  This is annoying and also very costly.  It seems that many tenants in this area know that as well.

Goal Is For Every Property To Be Occupied

No one wants to have a vacant home at any time of year. It is always costly and unpleasant to have a home without a tenant in it. Not only are you losing money, you run the real risk of it being vandalized.

What If You Can Evict A Tenant During Winter

Let’s skip ahead and assume that evicting a tenant in the winter has not been a problem for you. You now have an empty house that is not generating income or paying for itself. Now you are faced with finding a new tenant at the single worst time of the year.  Very few people want to rent a home in November and December.

Why is that?

  • Holidays are in November and December
  • Everyone is too busy
  • It is cold
  • Everyone is short on money

Most people have holiday plans and are frantically trying to get their shopping done.  There is also the fact that it is much colder in much areas. Fewer people are willing to go out in the cold and look at homes.

The biggest factor though is that most people are short of money. They are busy buying gifts and don’t have money to spare to move. 

When you evict a tenant during this time of the year, be prepared for it to possibly sit empty until at least January and possibly February. Hopefully you have a rainy day fund for just this possibility.

Consider Working With The Existing Tenant

I agree completely that you need to stay on top of the eviction process with anyone who doesn’t pay. I have a few tenants right now who are paying their rent but are paying late.  One tenant has contacted me and said she can’t pay the full amount this month. Another tenant actually owes almost $1,000 in water bills because the account keeps reverting back into the company name. That is another whole issue with our local water company! 

If possible, make sure your lease is written so that it specifically lists how any money paid by the tenant is allotted.  You want late fees, tenant charged maintenance bills and past due utility bills to be paid before the rent. This makes any balance due rent that is due which allows you to evict the tenant.

At any rate, I want to evict these tenants eventually because their inability to pay rent on time and in the full amount. Not being able to pay utility bills is another issue as well.  

 

How Can You Work With The Tenant

Sometimes I make a business decision to work with these tenants as much as possible until we get through December. I talk to the tenant and find out what their situation is. Once I know that, I can make a decision about what to do in this situation.  It is not always possible to work with all of them. Communication is key. Listen to what the tenant says and then read between the lines!

Why would I do this?

  1. There are times when I will agree to lower the rent for a month or two. Some money is better than nothing. If the house is vacant, it isn’t generating any money.  The tenant is told this is a short term solution. I explain that I will proceed with the eviction filing if they cannot start paying as agreed in the lease. At this time, I also give them the option of agreeing to move out voluntarily at a future agreed upon date.
  2. A vacant home is also more likely to be vandalized. A vandalized home costs money to repair and it will sit vacant longer. It may be possible to allow the tenant to stay in the house but show it to prospective tenants.  This is only a viable option if the tenant has kept the home in good shape.  I write up a promissory note stating what they owe in back rent and allow them to make payments.  I am not an attorney so find out what the laws are in your area.

 

Sometimes Eviction Is The Only Solution

Obviously, if the tenant will not or cannot make any payments, you cannot work with them.  It may be better to have the home sit vacant for a month or two just to get the non-paying tenant out.  

If you are unlucky enough to live in an area where evictions are not allowed during certain months, be sure and plan ahead.  File immediately on every tenant who is not paying. This puts you ahead of anyone else who didn’t file as soon as they were allowed.  

Do Not Assume A Non Paying Tenant Will Not Move Out

Be pro-active with your non-paying tenants.  I have had good luck getting non-paying tenants to agree to voluntarily move out.  Most people know that having an eviction filing on their credit is a bad thing! Talk to them and see what they need to get out.  Get them a pod if needed. Maybe offer to get a dumpster delivered so they can clean out the house.

These options will cost you some money. However, when you are faced with getting no rent for a few months plus eviction costs, it may be cheaper. This is especially true if you don’t have to pay anyone to clean out the house!

Evicting a tenant in the winter should be the same as evicting a tenant at any other time of the year. Be sure and know the laws in your area. Always consult with an attorney who specializes in evictions.  There is nothing worse than skipping a step and having to start the process over again.