I have a guest post today from someone that is definitely an expert when it comes to property management, my daughter Debbie Vornholt. I hope you enjoy this article. Be sure to leave your comments below or on her site Common Sense Landlording.
Tenants that Never Pay On Time
I get asked all the time how to deal with tenants that never pay on time. Some landlords have tenants that used to be great paying tenants but then something happened; a lost job, a death in the family, the car broke down, etc. and the tenants don’t pay on time anymore.
Other landlords have tenants that signed the lease, paid the first month’s rent and the never paid on time ever again.
Don’t Let Your Tenant Dictate Your Policy
Tenants that never pay on time are a huge problem. How you handle the first late payment will dictate how your tenant behaves in the future. If you are lucky, the tenant will call you and say “Hey, I am paying late because . . . “. It doesn’t really matter what the reason is because the bottom line is you aren’t getting your money on time.
I want you to erase the following phrases from your vocabulary when dealing with a late paying tenant:
- That’s OK.
- Pay when you can.
- Catch up when you can.
- Not a problem.
- I understand.
- Any other phrases that indicate “no worries”.
I used to say “That’s OK.. When can you pay?” in a very friendly, it’s no big deal kind of tone. It hit me one day that NO, it’s not OK for the tenant to pay late. It’s great that he is calling me but I had to pinch myself every time I started to make it sound like it was acceptable for the tenant to not pay on time.
If you make it OK for a tenant to pay late, why should they pay on time?
Say this Instead…
Instead say something like “I’m sorry to hear that. What date will you be paying?” When they tell you the date, say “Give me a second and I will tell you how much your late fees will be so that you can include them in the rent.” I am not mean or rude but I don’t want to sound happy that they will be paying late. This is the first step to showing tenants that never pay on time that you intend to enforce your policy.
Assuming the tenant has explained why he is paying late, I ask the tenant if he will be able to pay on time next month. That is a valid concern, especially if he can’t pay this month’s rent until the middle or end of the month. If he says yes, I let it go and say great!
If he says no or isn’t sure, I ask what his plan is in the future for paying on time next month. For example, if he has lost his job, I ask if he has any family members or friends that can help him out. I also always recommend contacting locate agencies to help him pay his rent. I keep a list of agencies that have helped out our tenants before and pass those on to anyone that needs them.
You want to break this cycle early. There are tenants that are used to doing it “their way”. They never pay on time, ad it's up to you to quickly make them understand that's unacceptable to you.
Remember… You Are Running a Business
I used to be too timid to ask these kinds of questions. It was easier to say “Ok” and not ask any questions. Unfortunately, I run across many landlords who just don’t want to “confront” the tenant or make him mad or don’t feel right asking those questions.
Remember, this is YOUR house! By not asking questions and making your tenant answer to you, allows the tenant to run your business instead of the other way around. Do not change the way you do business just because your tenant can’t or won’t follow your rules! Get rid of that tenant and find another one who will follow your rules. There is just no reason to keep a tenant that never pays on time. It's bad for your bottom line.
Charging Late Fees
I chuckle sometimes because you do run across the occasional tenant who apparently fell asleep while I was going over the lease, and he acts completely shocked and insulted that you are going to charge late fees. If you are asked why you are charging late fees, remind your tenant that the lease he signed explains the late fees and the eviction policy. Sometimes they even get angry and say that’s not fair! I’m sorry but not paying your rent on time isn’t fair to me.
Many times they will ask if you can waive the late fees this time. You will have to decide what your policy is on this and I have heard lots of different opinions on this subject. Once a tenant has been with us for a year, we will waive late fees once a year but we note it in Quick Books so that we can keep track.
We do not waive late fees during the first year, because if you don’t train them from the start, you will have tenants that never pay on time.
Handling Tenants that Never Pay on Time
I was talking to a landlord the other day with a problem tenant. The woman moved into the rental house in November and has paid late every single month. This tenant is not very nice and has a new excuse every single time. The landlord felt bad for the tenant at first but that changed as time went on. The landlord didn’t charge late fees until the March rent was late and when she added them to the bill the tenant threw a fit! She asked me what I thought I should do.
I asked her if she wanted to try and work with the tenant and keep her or if she just wanted to get her out and start over. She was sick of dealing with her and just wanted to get her out. My advice to her was to follow her lease which spelled out how to deal with this situation.
Refer Back to the Lease
The lease stated:
“The monthly rent payment is due on the 1st day of each month. If the rent payment has not been received by the rental office on or before the 5th day of the month, a late charge of $50.00 plus $5.00 per day will be charged to the tenant’s account until total rent owed is paid. The landlord will use the post mark to determine if late charge is owed. The owner or owner's agent has the right, but not the obligation, to accept partial payments. If tenant’s check is returned as NSF, no more personal checks will be accepted. Future rent payments must be made by certified cashier check or money order. There is a $40.00 charge for all DISHONORED BANK CHECKS. “
“A 7 day letter will be mailed by regular and certified mail to the Tenant on the 6th day of the month if the rental payment has not been received. The Tenant will have 8 days after the postmark on the 7 day letter to make payment in full. If payment is not made on or before the 8th day determined by the post mark on the 7 day letter, the Landlord will be forced to file an Eviction against the Tenant. Tenant hereby promises to pay the owner or owner's agent any and all court costs and reasonable Attorney fees incurred by reason of the enforcement of this Rental Agreement, damage to the Rental Property and any unpaid rent and late fees. The minimum charge for an Eviction is $250.00 and this fee will be added to any and all unpaid fees owed by the Tenant.”
8 Steps for Getting Rid of Problem Tenants that Never Pay On Time
- The first step in this instance is to send the 7 day letter using regular mail and certified mail.
- Then on the 8th day, the eviction can be called in and a court date will be given.
- At the court date, a judgement will be entered.
- Tenant will then have 8 days to pay or move out.
- After 8 days have passed, you can have the paperwork sent over to the sheriff.
- Once the sheriff has the paperwork, a set out date can be scheduled.
- If tenant doesn’t move out, schedule the set out.
- Arrive for the set out and remove the tenant’s belongings.
Keep in mind that if you accept any money from the tenant during this process, you have to start over! If you want the tenant gone, do not accept any money.
Many times a tenant that has been difficult will see that you mean business, that you are willing to get them out of the house and they will straighten up. This has happened to me and the tenant ended up paying on time and being a good tenant. Other times, the tenant doesn’t have any intention of paying on time and needs to go. Only you can decide if you want to work with this tenant or not. If you don’t just follow the process and the tenant will either move out or you can set him out.
Know the laws in your area or you will end up in trouble and with a tenant still living in your house that is not paying rent.
Dealing with problem tenants is part of my job. It is never fun but if you have a policy in place for dealing with them, it does make your job easier. I have learned the hard way over the years how important consistency is when dealing with tenants especially those tenants that never pay on time.
Let me help you avoid the mistakes I and many others, have made over the years.
Thanks again to Debbie for this awesome guest post.
Debbie has worked in real estate related fields for over 25 years. She is currently a property manager for a company that has a portfolio of hundreds of residential and commercial properties. Debbie believes that you need to have systems and policies for running your business (and keeping your sanity).
She has some great landlord stories over on her site so be sure to stop by her blog Common Sense Landlording when you have a chance. While you're there be sure to pick up her free tenant screening form for landlords.
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