The issue of late rent payments tend to be the most common dispute between landlords and tenants. Late payments cause a multitude of problems resulting in headaches and legal trouble, even unpaid bills on the part of the rental income reliant landlord. Sometimes, late payment could be a result of forgetfulness on the part of the renter and other times in could be the product of malicious intent. Regardless of the reason, late rent payments are a breach of contract and an irresponsible practice on the part of someone who is living in YOUR property.
It is important to properly and thoroughly screen any prospective renters, however no landlord has a crystal ball. If you are dealing with a tenant who is often late with monthly rent payments, you need to take action in order to settle futher disputes before they arise.
Ways to Avoid Late Payments
1) Clear Communication
Many lanlords fail to review leases with their tenants, counting on tenants to read through every detail of the lease of their own volition. Don't bank on this. Rather, make sure your tenant understands your expectations and policies up front and clearly understands when the rent is due and that late fees will be applied in the event that timely payment does not occur. Make sure to explain the grace period, late fees, and further legal processes in order to ensure they understand the terms to which they are agreeing.
Teneants are more likely to pay on time when they know they will be charged a late fee. Make sure you cover every detail: how to pay, how much is due, and the monthly date by when payments need to be received. Late payment can sometimes be attributed to poor communication. Effective communication will serve to eliminate payment mistakes. Make every effort to establish a good relationship with your renter(s) and build open, effective communication patterns. This practice will invite questions from your tenant, thus decreasing the occurrences of late payments.
Some landlords go so far as to send monthly reminders notifying their tenants that rent is due in such and such number of days. Unfortunately, the reason rent goes unpaid is not often due to forgetfulness. Sometimes, rent goes purposely unpaid.
2) Require Direct Deposit
Direct deposit is a marvelous tool when it comes to ensuring prompt, monthly rent payment. Landlords may also utilize Rentalutions, an online source for collecting rent payment. Such tools make the payment process easy for tenants and serve to eliminate the hassle of writing checks each month and then risking that those same checks get lost in the mail. Tenants who are allotted the easy process of online payments or direct deposit are less likely to flake out on the rent.
Additional benefits to online rent payment include: easier faciliation of communication, more efficient documentation of rental income, automatic computer generated receipts for the tenant, elimination of tons of paperwork or your computer crashing, AND easy reference in the event that you need to research a tenant's payment history. The internet is a beautiful thing.
3) Tighten Up Your Screening Process
If you have experienced a long line of flaky tenants who are very "relaxed" with their monthly payments, it's time to take a look at your screening process. The best way to avoid non-paying tenants is to thoroughly screen them prior to signing a lease with them. Be sure to ask for references from your rental candidates and don't be hesitant to contact their previous landlords in order to track past payment patterns and verify their employment. If all checks out, you will decrease the likelihood of late payments and avoid future battles down the road.
You may be surprised to learn that the majority of tenants spend a rather high percentage of their income on rent. In fact, expending MORE than 30% of your income on rent is considered inaffordable. It stands to reason that many tenants might fail to make timely rental payments because they simply cannot afford them. Screen tenants, verify their income, and establish a minimum required income in order to avoid late payments.
The number of people who cannot afford to pay their rent has increased by record numbers. Those who spend more than 30% of their income on rent are considered "cost-burdened" tenants. Proper screening ensures that you won't be managing a cost-burdened tenant who will be unlikely to pay rent on time.
Also, make sure your tenant understands the true purpose and meaning of "grace period". Often times, this phrase is completely taken out of context and used as an excuse for late payment. Just because the tenant will not be charged a penalty during the grace period, does not mean they should plan to be late each month. In addition, explain that you cannot provide a good reference should the tenant decide to move if they fail to make timely payments.
Follow Legal Procedures
Your lease should clearly outline how you intend to handle late payments. If your tenant consistenly fails to pay rent, be sure to follow the legal, agreed-upon procedure for resolution. Be sure to note the terms of the grace period and amount of late fees and penalties.
While this would not likely be the case, you might be the one who is unclear as to when the rent payment is due. Be sure to verfiy the due date to learn whether the rent is actually late or if you are simply mistaken about the due date. Upon learning that the rent payment is late, follow the outlined process for addressing this issue and do it promptly and accurately while clearly documenting every step.
By following this detailed procedural plan, you will protect yourself from working outside the boundaries of what you are legally allowed to do. You may refer to the lease should your tenant accuse you of being unfair. Sometimes, tenants will argue that the late fee is exhorbitant. Be sure to review your state's laws regarding how high rental fees can go as this is usually based on a percentage of the rental price.
In the event that your late fee is indeed too high, your tenant still has no basis for disregarding the late fee. The lease was signed and that means they agreed to the ALL the terms. It is unlikely that you will be required to deal with such accusations if you follow the lease to the letter.
Keep a Record of All Payments
Keep a record of each payment receieved, the amount, the date and time, and how much money was rendered. Don't accept partial rent payments. In the event that you are faced with an eviction process, this can significantly derail everything. A judge can view partial payments as a payment, regardless of the fact that it wasn't the full amount due. You still accepted monies and you still allowed the tenant to continue living on your property.
Be sure to document WHEN you received payments and from WHOM you recieved them. If you have two tenants sharing a unit and only one of them is paying, it still does not matter. Everyone who has signed the lease is accountable for the full monthly rent amount unless otherwise outlined in the lease. If there is a guarantor or co-signer on the lease, the same rule applies. It is legal to demand rent from any signee on the lease. Failure to pay the rent is a breach of contract.
Document All Communications
Always, always, always document the manner in which you addressed a given situation with your tenant. In the event you post a late rent notice, document the way in which it was done and how it was posted. Whether you posted this notice on the tenant's door or hand delivered it, all methods must be clearly and specifically documented.
A late rent notice is an official notice outlining the amount of money due, inculding late fees, and the due date. Such notices are considered the first step of an eviction process and serve to illustrate the seriousness of the matter to a tenant who has not paid.
If you wind up in court, these detailed records will save your rear-end. Be sure to document any contact your tenant makes with you as well as any offered excuses on the part of your tenant. Save all your emails and any other correspondences in order to solidify the events leading you to take legal action. This will save you a lot of time and effort if or when the time comes.
You are free to contact your unpaying tenants, however you may not cross the line. You cannot harass them. Turning off utilities and changing the locks is also illegal. Success comes from doing things legally and following outlined, well documented procedures. Your tenant won't have a leg to stand on in making claims of harassment if you take the time to document all interactions with them.
Another reason to keep a record of late paying tenants is to ensure how to move forward when it comes time to renew the lease. You will be unlikely to renew with somone who caused problems. Prior to renewing the lease, review your records in order to verify the tenants responsbility throughout the term of the current lease agreement.
Handling Bounced Checks
In the event that a check bounces, contact the tenant immediately. It is reasonable to expect they will apologize and seek to resolve the situation promptly. If the bounced check goes unaddressed by your tenant, be sure to explain to them that the rent payment is late and fees will be assessed accordingly.
Should even more time pass, post a late rent notice. A bounced check can be grounds for charging an additional fee simply because the check bounced. The lease contract should specifically outline the terms for how you, as the landlord, plan to address a bounced check. As the lease is legally binding, you also are legally bound to follow the mutually agreed upon procedures outlined in the lease contract.
Late rent voids trust in a tenant/landlord relationship. The landlord is left to wonder what else the tenant will allow to go unaddressed and whether or not next month's rent will also go unpaid. If someone isn’t responsible enough to pay rent, they are likely not responsible enough to properly care for your property.
Late rent is inexcusable. Rental payments often contribute to a mortgage, utilities, and other aspects of managing a property. Without the rent payment, your own financial responsibilities may be neglected and, if possible, be prepared to handle this situation should it arise.
If you'd like to learn more, please don't hesitate to message Lang Premier Properties online or call us at 1-855-526-4466.