As a landlord, you do your best to keep your good tenants happy and satisfied. Unfortunately, there are times that, no matter what you do, you end up with bad tenants.
It’s one of the risks that come with investing in residential real estate properties. When it comes to a tenant not paying rent, you have to have a plan of action for dealing with the situation. Here are the steps to take when confronted with a tenant not paying rent:
Review the Lease and Keep Records
Owning and managing rental properties means you probably have a lot to keep track of, especially if you have multiple tenants or multiple rental properties. Keep records of payments that are due and when they are due. This will make it easier to double check if a tenant owes rent and exactly how late he/she is.
Review the lease or tenant agreement. Make sure that if there is a grace period for the rent, it has actually ended before taking any action. Check to see if a late fee was specified in the agreement as well, because reminding a tenant of late fees may encourage him/her to pay the rent and not be late again.
Once you’ve made sure that the tenant has missed the payments, it’s time to start keeping records of every step you take from here on out. Whether you’re sending notices or talking to the tenant, notes with dates will help you out more than relying on your memory if you end up in court. Keep copies of anything written that you pass along to the tenant not paying rent.
Know the Laws
As a real estate investor, you should understand how important it is to know any and all laws that relate to investing in real estate. Before taking any action at all, you need to review the laws of your state surrounding a tenant not paying rent. You should be familiar with landlord rights as well as tenant rights. This is important in order to avoid having your case thrown out because of illegal actions you took, or even worse, being punished for such actions.
For one thing, it is illegal to lock a tenant not paying rent out of the rental property. You are also not allowed to cut off any utilities for the rental property to get the tenant to leave. Any threats or harassment (a barrage of phone calls, for example) is also not allowed when dealing with a tenant not paying rent. There is a proper way to go about things and you need to follow it exactly.
Be aware of any laws that allow a tenant to withhold rent. If certain services are not provided by the landlord, a tenant has the right to not pay. Make sure that this is not the case, or that if your tenant not paying rent is using this as an excuse, that it actually does fall under the local laws.
Related: 6 Landlord Laws and Concerns You Should Be Aware Of
Send a Notice of Late Rent
This is the first step to contacting the tenant not paying rent. This letter or email should include the following information: the rent due in detail including which months are owed, any late fees that the tenant has incurred, and a statement saying that you will take legal action if the payments are not made very soon.
While this step is not one of the notices required from the landlord by law to start the eviction process, it can very well solve the problem. If a good tenant has somehow genuinely forgotten about a payment and needed a reminder, this will be it. If a bad tenant is intentionally not paying, the warning for legal action may be the push he/she needs to pay.
If there was a cosigner on the lease or a guarantor, sending him/her a copy of the Late Rent Notice is a good idea as well.
Talk to the Tenant Not Paying Rent
If you didn’t get any kind of response to the Late Rent Notice, you could talk to your tenant in person or over the phone. Find out why he/she is not paying; be understanding but clear and firm in the fact that he/she has to pay the rent.
At this point, you could offer the tenant an early release from the lease without repercussions if the tenant agrees to leave by the end of the week. The tenant not paying rent may agree to this as an easy way out of the situation. If he/she refuses, then remind him/her firmly that you will have to pursue the matter legally and start the eviction process. Sometimes, a talk face-to-face with the landlord can wake a tenant up and make him/her realize the reality of the situation he/she is in.
Remember to protect yourself from any future accusations of harassment. Think of what you plan to tell the tenant not paying rent.
Related: 8 Types of Tenants to Beware of When You Rent Out Your Property
Send a Pay or Quit Notice
The Pay or Quit Notice is usually required by law in most states as the first formal step in the eviction of a tenant not paying rent. Similar to the Late Rent Notice, it will state that the tenant has failed to pay the rent (along with the total amount due) and has a certain amount of days to pay in full. If he/she doesn’t pay, the notice will inform the tenant that the lease will be officially terminated and he/she will have to move out.
According to the laws in most states, the time period set in the Pay or Quit Notice is pretty short (3 to 5 days). If the tenant still refuses to move out by this time, that is when you will be forced to file an eviction action.
File for Eviction
If all the previous steps have failed with your tenant not paying rent, then you will have to go down to the courthouse and fill out the paperwork for an eviction hearing. Bring your copy of the Pay or Quit Notice, as you might have to prove that you have already taken this initial step before filing for eviction. There will be fees to pay as well, so be prepared for that.
When the paperwork is complete, an eviction hearing will be scheduled anywhere from 2 to 6 weeks away. Then, you’ll have to show up to the court hearing. Be sure to have any evidence and records with you to prove your case. Look presentable and stay calm. Follow all the directions from before, and, hopefully, you will have no problem getting a judgment in your favor.
You may have to hire someone from the local law enforcement to remove the tenant by force from the rental property if the tenant is still refusing to leave. After the hearing, however, the law is on your side and you have the right to force your tenant out.
Alternative to Eviction: Pay Your Tenant to Leave
As a real estate investor, you know all about the cash flow and rental income of your rental properties. You can easily get this kind of information from Mashvisor when looking at residential real estate properties. From this information, you also know the costs that pile up when you are not receiving your rental income. The eviction process can take long and will only add on to those costs. If you don’t have landlord insurance, which can cover some of the costs in the case of a tenant not paying rent, you can consider making a deal with the tenant.
Proceed with caution, of course. Offering a small sum to a good tenant who may be having financial troubles might solve the issue quickly and quietly. However, if you feel like you’re dealing with a bad tenant, don’t let him/her take advantage of the situation by getting money out of it. Weigh your options and decide which one makes more sense financially for you.
Dealing with bad tenants can be difficult for a landlord. Some real estate investors that come across these issues might even be discouraged from investing in real estate properties in the future because of bad experiences with a tenant not paying rent. This is why you should arm yourself with guides like this one to ensure the process goes as smoothly as possible. If you are having too much trouble, you always have the option to hire a rental property manager who may have better strategies and more experience dealing with a tenant not paying rent.
Related: Five Things You May Not Know About Becoming a Landlord