Rent payments

What to do when a tenant stops paying rent

With evictions costing landlords an average of $3500 per incident and non-payments causing more than 75% of these evictions, it is essential that landlords know what to do when a tenant stops paying, and how to avoid this issue in the first place. More often than expected, landlords may find themselves with a tenant who cannot keep up with the rent, especially if they did not start the arrangement with a legally sound tenancy agreement. So, what can you do if this happens, and, just as important, what does the law say?

You have rights as a landlord, but so does your tenant

Rental and housing laws can vary from state-to-state, but there are some rights that almost all states guarantee. As a landlord, you have the right to charge your tenants rent and the right to receive your rental payments when due. You also have the right to receive proper notice from your tenant to end the tenancy. Depending on your tenancy agreement, you may be able to secure additional rights as a landlord. If possible, it’s advisable that you investigate landlord-tenant lawyers who can further help you navigate the process.

What does the law say about tenants who don’t pay?

If your tenant does fail to pay their rent, or repeatedly pays rent late, there are certain legal steps you must take to get them out of your property as soon as possible. First and foremost, you musty legally terminate the tenancy. In the case that your tenant is not paying, state laws allow you to serve either a Pay or Quit Notice, or an Unconditional Quit Notice. A Pay or Quit Notice is used when a tenant has not paid their rent and gives the tenant 3-5 days (depending on your state) to either move out or pay their rent. However, in the case that your tenant has repeatedly paid their rent late, you can serve your tenant with an Unconditional Quit Notice. This Notice is used when a tenant has violated the same lease cause multiple times in a certain period of time and does not give the tenant a chance to fix the problem. An Unconditional Quit Notice gives your tenant a short amount of time (usually 5-10 days) to move out. The law allows you to file an eviction lawsuit if your tenant fails to quit the property.

Eviction notices must be filed with the court and then served to the tenant. After being served, the tenant will have a set amount of time to move, comply with the notice, or file an answer with the court. If tenant choses to file an answer, the eviction case will then move to the court room; in this case, the court will set a time and date for a trial that will take place either before a jury or a judge. Once in court, the judge/jury will listen to evidence presented by you (the landlord) and the tenant and make a decision. If (and hopefully when) you win the case, the judge will issue an order that will authorize an officer of the law to evict the tenant.

Remember that these laws will vary from state to state, and that you must ensure that you are following all applicable laws in order to win a potential lawsuit. If you do, when your tenant fails to pay the rent and to follow state eviction rules and procedures, you will most likely win in court.

Follow these steps if your tenant fails to pay the rent

  1. First and foremost, double check your own records to ensure that the tenant is late on paying their rent; you don’t want to begin this process unless you absolutely need to. Stay on top of your own accounts to make sure that you aware of which tenants are paying and which are not.
  2.  Once you have verified that the tenant has, in fact, missed their payment, begin to gather evidence. From the first moment that you make note that your tenant has missed a payment, conduct all correspondence through writing. This will be essential should legal proceedings follow. Should you allow a tenant to “catch up” on their rent, you should absolutely create an agreement in writing. A paper trail will make it obvious to a potential judge or jury that you have followed the proper procedures if your tenant breaks the agreement.
  3. Contact your tenant (preferably through writing) to identify why they’ve stopped paying rent. It may be as simple as forgetfulness, or something more serious, like unemployment. During this point, make sure to follow the law and be as respectful as possible. Although it’s your money at stake, you can’t afford to get emotional because it may come back to bite you if you do end up in an eviction lawsuit.
  4. After initial contact, you can also contact your tenant’s co-signer or guarantor (if applicable) and inform him/her that the tenant has not paid. If your tenant has a co-signer who pays for the missing rent, you may save yourself from a world of legal trouble.
  5. If both the co-signer and the tenant do not pay, you can serve your tenant with a Pay or Quit Notice. The legal document will hopefully motivate them to pay their rent, so that they are not evicted.
  6. When all else fails and if this is the second or more time that the tenant has missed a payment, you can serve them with an Unconditional Quit notice that will either lead to the tenant moving or filing a lawsuit.

Motivate your tenants to pay (on time) to avoid an issue

This whole ordeal can be avoided if your tenant simply pays their rent on time, and there are many things you can do to motivate your tenants to do so. From the beginning of the tenancy, make sure to communicate clearly with your tenants. This includes clearly informing them in writing what their rental due dates are each month, how their rent can be received (check, online app, etc.), how much is due each month, and potential fees and consequences they will face for paying late. This will minimize confusion and make it as easy as possible for your renters to know when, how, and how much they will pay you each month.

Maintain a respectful relationship with your tenants, so that you can discuss potential rent problems with them before any issues occur. By doing so, you can set up payment schedule alternatives, if needed, before they actually miss a payment. However, if you decide to help your renters out with catch-up time or alternative payment schedules, make sure you document all decisions and arrangements in writing with your renter’s written acknowledgement.

Negative and positive incentives can also be used to motivate renters to pay on time. It’s easy to charge your tenants a late fee if they pay their rent late and doing so will motivate them to never miss a payment. On the other hand, you can positively incentivize your tenants to pay on time by offering small discounts for regular, prompt rent payments. It’s also important to report the status of your tenants’ payments to a credit check bureau. This will incentivize tenants to pay on time to keep their credit score clean and will reward those who pay on time.

Properly investigate all potential new tenants to avoid bad apples

You can avoid all problems simply by properly investigating potential new renters before they’ve even signed a lease or a rental agreement. Collect proper background information on a potential tenant and pay the money to conduct serious credit and background checks. Avoid tenants with debts more than one-third of their income and with a background of serious criminal behavior. The small cost of these reports may save you thousands of dollars and hours of anguish. You can and should conduct your own background research by carrying out a Google search on the potential renters and investigating their social media (you’ll be surprised with how much you can find).

You should also require all potential renters to provide contact information from previous landlords and you should actually follow up on this information. Verify that these references are really landlords and not just family/friends through simple online searches. Call the potential renter’s previous 2 or 3 landlords and verify that they were upstanding residents and have never been evicted.

Lastly, you can easily investigate the specifics about a potential tenant’s job and income. In addition, when it comes to income, you should not count any under-the-table earnings towards their income numbers, but only money that can be verified in a pay stub or W2. Based on the information the applicant provides, research the company they have indicated they work for and contact the company directly. Use the company’s phone number that is listed online, not the one that is listed on the application; just like previous landlords, applicants can easily list friends and family as contacts. The employer will verify if the applicant is truly employed where they say they are, and minimize the risk of renting to a tenant without a stable income.

Ultimately, despite the potential pitfalls you must navigate as a landlord, you can work through all potential tenant issues by relying on the law and being proactive.

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