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Houston Property Management Tips

Rent Collection: What to Do If Your Tenants Won't Pay

Rent Collection: What to Do If Your Tenants Won't Pay

Everyone has had trouble paying rent at least once in their life. Maybe they had a medical emergency or miscalculated their budget.

But what's the best path to take as a landlord when dealing with tenants who haven't paid their rent? While some people work with their landlords when facing financial difficulty, some prefer to avoid the subject. That kind of evasion opens them up to legal trouble for both the landlord and the tenant.

Here's how to deal with rent collection and what you can do about missed payments.

Rent Collection Due Dates

First of all, it's important to know when rent collection is actually due. As a landlord, you want to give your tenant ample time to make payment in case there are emergency situations that pop up.

Tenant payments are most often due on the first of each month. However, that may get pushed back if the date falls on a weekend or holiday. Transfers may take longer to process during those times.

You also have to take into account if a payment was sent through the mail. Letters can get delayed, which is why it's important to look at the postmarked date. One way to avoid this is by explicitly using electronic payments, though that would have to be included in the lease agreement.

Landlords can collect late fees if the rent owed is left unpaid for more than two full days past the due date. The exact amount must be included in the written lease and cannot be changed.

What to Do When There Are Missed Payments

Adding late rent fees on top of missing payments doesn't always insure that you'll receive them. A tenant may try to avoid communicating with their landlord if they don't have a way to make a payment. So what is your next step in collecting rent?

1. Review the Lease Agreement and Local Laws

Before you jump to any conclusions, always make sure to review your lease agreement as well as the local landlord and tenant laws.

Pertaining to your lease agreement, you may have forgotten some kind of agreement you made with your tenant in advance. It could be that they have an extended time to pay their rent because of how they get paid by their workplace.

Your lease has also likely granted them a grace period of a few days. Local or state laws may also require this grace period regardless of what's in the lease.

2. Send a Notice

Once you know for sure that there's late or missing rent, it's time to notify the tenant. A late-rent notice is an official written document that should include the amount due, any additional late fees, and when the next payment must be received.

More importantly, the notice should encourage the tenant to reach out and organize some kind of repayment plan if needed.

Technically speaking, this notice isn't a legal requirement. However, it can help protect a landlord during an eviction proceeding. It shows that they made a good-faith effort to collect rent before anything else.

3. Call Your Tenant

Another way to help your case or avoid eviction is to contact your tenant yourself. Take the time to call them during the hours you know they'll be home.

Avoid making any accusatory statements or threats. Simply let them know that there there is a missing payment and if there are any late rent fees they should know about. Leave them a message on their voicemail if they don't pick up.

You can also send an email if you know their email address.

4. Send a Pay-Or-Quit Notice

After your initial attempts to reach out to your tenant, you must deliver a pay-or-quit notice to them. This is a written demand that they pay their rent and any late fees. The only alternative is for them to vacate the premises.

This notice counts as your first action in the overall eviction process. It's one of the last chances for a tenant to avoid a lawsuit and potentially lose much more money than is currently owed.

5. Offer a Cash Payment to Vacate

One way to avoid the eviction process is to pay the tenant to leave.

A property that isn't earning money is a cash drain for a landlord. Even if a tenant refuses to pay rent, you'd have to go through the entire eviction process to retake the property. In a worst-case scenario, this can take as long as three months.

Instead of losing three months of rent on top of legal fees, it may be best to simply offer a small amount of cash as an incentive for them to leave.

6. Begin the Eviction

The final resort when dealing with missing rent is to begin the eviction proceedings.

Once the pay-or-quit waiting period ends, you'll want to get an eviction lawyer and file a tenant-landlord complaint in court. There's a fee and paperwork you'll need to fill out. You should also have all your evidence documented and ready.

Unfortunately, the process can take months. That's why it should always be a last resort when dealing with a tenant.

What to Avoid

There are some things to avoid with late rent collection.

First, don't accept partial rent payments. This can void any legal actions on your part and may force you to restart the eviction process from the very beginning.

Make no action to physically evict the tenant until the process is complete. They can sue you for your actual damages if they are illegally evicted.

Finally, make sure to know the local and state laws regarding evictions and repayment. Tenants may make use of special programs to help pay rent, especially during these tumultuous times.

Get Help Collecting Rent

Rent collection should be an easy process every month. However, late payments and unresponsive tenants can make things difficult. Luckily, property management services can help you approach and solve the issue.

Terra Residential Services is one such company that can help investors, agents, and tenants with these problems. Based out of Houston, Texas, we specialize in single-family homes, condos, and townhome property management.

Contact us to learn more or if you have any questions.