Rent payments

Collecting Rent When Tenants Don’t Pay

Collecting rent should be the simplest and most rewarding part of your month and for a lot of landlords it is. But there are those of you who suffer month after month from difficult, unhelpful tenants that just can’t seem to get themselves straight and make rent on time.

In this article we are going to look at some of the more common issues that you may face and what measures you should put in place to avoid any further problems. Remember most importantly if you are suffering from persistent late payments there are things that you can do and the aid of a good property manager may be crucial in assisting you with getting your rent on time.

So, without further ado, let’s take a look at what you can do to put an end to a landlord’s biggest problem.

Common Issues

Sometimes tenants don’t make rent. It’s a common problem and one that can be a real headache. There are a number of common problems that crop up time and time again and I think it pays for you to be aware of these issues and to remember that you can only be as forgiving as you can afford to be.

This is a business and as cruel as it may seem you have to be hard when it comes to rental payments. Allowing tenants to constantly miss payments can lead to further problems in the future.

Job Loss or Financial Issues

This is a tough one. Any tenant that loses their job or goes through some financial issues during the course of your tenancy can present a real problem for you. It is likely that this issue is valid, but does that mean that you should suffer as a result.

In this scenario I think it pays to be fair, but also you must ensure that they understand that there are commitments involved from your side too. You have loans to pay off (late fees on any mortgage payments can be very high) and possible property management fees that will still need to be covered and it is likely that their rent covers these costs.

Aim to maintain an open and honest relationship with your tenants at all times and let them know that they can approach you with any issues they may have. This good relationship may help the tenants be more honest with you and will also hopefully help them to understand that they have to find a way to pay your rent.

You can offer to defer their rent for a couple of weeks, but ensure that the tenants are aware that this is a one off and will not be tolerated on a monthly basis. If their unemployment is longer term you will need to discuss the option of your tenants vacating and you sourcing replacement tenants.

Constant Late Payment

This is something that should absolutely not be tolerated. Unlike a job loss this often tends to be willful and the tenants are often simple ignoring the issue or don’t care that they are paying late.

Ensure that the tenants are aware of their responsibilities under the contract and that they know when their rent is due. If the late payment is due to their own salary payments offer to move the due date (providing that the tenants pay the difference first).

Make any persistent late payers aware that this will be noted on your reference to they next landlord and that it may affect their ability to rent property again in the future. Offer the ability to pay online or in a way that the tenants find easier to ensure that they don’t have any excuses for being late with their payments.

This is a frustrating issue, but with a little digging and a plan to rectify the issue you should be able to avoid this for too long.

Unwilling to Discuss

Some tenants when faced with issues will simply try to avoid the problem all together. They will ignore calls and emails, skip visits and will not want to meet to discuss the problem.

This is simply unacceptable and is something that should not be tolerated. Renting a property is a two-way street and should be treated as such. If you are prepared to help and sort out any issues their reluctance to do the same should be given short shrift.

If your tenants become unwilling to solve their rent issues then I would look to discuss your options with your broker or property manager and look at potential eviction proceedings if the problems persist.

Relationship Failure

From time to time you will find yourself caught in the middle of a family issue. Couples and families sometimes dissolve, this is a fact of life and should this happen you may find that your tenants are no longer able to pay rent.

A lot of families or couples rely on two salaries to cover their living costs and as such this can present a big problem for you. Similar to the job loss issue, if you maintain a good relationship with your tenants you should be able to discuss this issue openly and perhaps look at allowing your tenants to break their lease (once you have come to a suitable agreement of course).

In my opinion if you were aware that you have a tenant or tenants in the property that are unable to make rent you should look to allow them to leave rather than force them to stick to the contract and potentially damage your ability to collect rent. Get them out and find a new, more suitable tenant for your property.

How to Rectify

In this section we will look over what you can do to rectify any problems you may be having collecting rent and simply discuss some best practice processes you should have in place to ensure that your rent collection process is smooth.

Confront the Issue

Attack any issue you have head on. You need to be the professional in this scenario and be the one who is driving the dialogue between you and the tenants. Rent collection issues rarely go away on their own and are often best approached as soon as an issue arises.

You will often find that discussing the problem with your tenants will show them how much weight you are putting behind the issue and will also in a lot of instances embarrass tenants into organising payment quickly.

Discussing the problem early will also bring to your attention any issues you were not away of, thus making it easier for you to help the tenants. Let them know that you are prepared to be reasonable and that you want to sort out the problem and move on.

Doing this early on will limit your exposure to loss of earnings and will more than likely get the tenancy back on track quickly.

Contract Clauses

Ensure that you are getting off on the right foot by putting in place the correct clauses in relation to collecting rent in your agreement. Have your broker draw this up for you and ensure that both you and the tenants understand your obligations in relation to rent.

The things to look out for are-

  • Date
  • Amount
  • Consequences of late payment
  • What to do if you cannot make rent (contact landlord, etc.)
  • How it is to be paid

Setting out in the contract early the above ensures the tenants are aware of when, how and how much needs to be paid. This offers them little in the way of excuses for late payment.

It also pays to break down exactly what will happen if they are late and how they will be penalised, this should be in the form of interest payments and late fees, plus potential eviction proceedings after a certain point. Having these in the agreement can act as a deterrent to most tenants who will be keen to avoid any problems, especially the possibility of eviction.

Online Payments

My advice would be to avoid collecting rent in any way other than online transfers. They are quicker, easy to set up and can be traced which helps you with keeping track of incomings and can make completing your tax returns easier.

Should you agree to collect rent via cheque or cash, you will be at the tenant’s mercy and they will be able to skip meetings or use excuses; possibly that they are too busy to go to the bank or meet to give you the cash or cheque.

However online transfers take a matter of minutes, can be done from anywhere in the world (including your smartphone) and offer your tenants very little in the way of excuses for missing rent.

They can even set up standing orders so that they don’t have to remember to make the transfer themselves. They just have to confirm the date and amount with their bank and the rest will be taken care of on a monthly basis. Aim to have all of your rental payments collected online, thus making the whole process incredibly simple for you.

Reminders

Set up reminders in your calendar and with your bank so that you remember to check whether rent has come in on the due date or not. Doing this will make you aware of any issues at the earliest possible time and is fairly easy to do.

You can also have your property manager keep track of rental payments for you and inform you if there are any problems. Make sure that if you check your reminder and the rent is not in yet that you chase the tenants immediately. It won’t take tenants long to figure out that you are on top of rental payments and this will then discourage them for being late in the future.

Conclusion

Collecting rent and more specifically dealing with late rent can be a time consuming issue. But if you set out a good contract and put in place a best practice processes for collecting rent early on you should not have too much of an issue.

Make sure your tenants are aware that you are prepared to be strong with them and that you cannot be avoided or ignored. It also pays to ensure they understand that you are fair and would rather problems be discussed and rectified than ignored.

With the help of your broker and property manager lay down a plan for collecting rent on time and you will be in a good place for ensuring that any issues that do arise are taken care of swiftly and professionally.

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