Managing rental properties can be lucrative, but this journey comes with certain challenges—one of the most common being tenants who consistently pay rent late.
Late payments can cause stress, disrupt your cash flow, make it difficult to pay property-related expenses, and strain the landlord-tenant relationship. As a landlord, it’s crucial to know how to navigate late payments from tenants.
In this article, we discuss practical strategies for handling late rent payments and preventing them from happening again.
How to Handle Late Rent Payments
Try these strategies to effectively restore tenants’ rent payments and maintain positive landlord-tenant relations:
1. Check Your Payment Records
Before you jump to conclusions, review your payment records. Look for any rent receipts in your files and other proof that a tenant has already made the supposedly “late” payment. A lapse in your organizational system may have caused you to believe their payment is late, but they may have already submitted it.
2. Refer to Your Lease and Local Laws
Review your and your tenant’s lease agreement and local landlord-tenant laws. These documents outline the tenant’s rights and obligations, such as the rent due date and grace period for which they have to submit a late payment. Ensure the rent due date and grace period (if applicable) have already passed before proceeding.
You can also review your lease and local laws for guidance on serving proper notice and charging late fees. You may need to apply this knowledge in later steps.
3. Evaluate Your Current Payment Methods
Evaluate the current payment methods you offer your tenants. If you only offer one or two methods, consider expanding the options so tenants can choose the best way to pay rent. When tenants have more options, you may be able to minimize late payments. Depending on your available resources, you may be able to offer the following payment methods:
- Cash
- Personal or cashier’s checks
- Money orders
- Bank transfers
- Venmo, PayPal, or other online payment platforms
- Credit or debit card payments
For whichever payment methods you implement, ensure that you implement consistent strategies for recording payments tenants make.
4. Provide Informal Reminders
If tenants have a history of paying rent late, provide informal reminders a couple of days before the actual due date. These informal reminders are a courtesy to tenants and can facilitate timely payments. When issuing informal reminders, follow these tips:
- Keep your reminders professional and polite.
- Avoid issuing multiple or excessive reminders.
- Send the message via the tenant’s preferred communication channel.
- Keep the reminder’s content straightforward and factual. A simple message explaining that the rent is due soon and a reminder of the due date is sufficient.
- Be mindful of the timing of your message to respect the tenant’s privacy.
Informal rent reminders won’t start the eviction process. This process only begins in step 6.
5. Discuss the Situation with the Tenant
Discuss the situation calmly with the tenant to learn why their rent is late. Are they struggling financially? Or are they withholding a rent payment because the property is in disrepair? Initiating this conversation can save you a lot of time and legal hassle.
If you learn that the tenant is in a poor financial situation, you may be able to work out an agreement:
- Rent Forgiveness: If your financial situation allows for it, offer to fully or partially reduce the rent, temporarily suspend payments, or defer the payment’s due date to a later date. Use a rent forgiveness lease amendment to document whatever changes you implement.
- Payment Plan: Agree on a temporary payment plan where the tenant still pays the full rent amount but in smaller increments. For example, suppose the rent is normally due in full on the first of each month. You can divide the rent amount by four and let the tenant pay weekly instead of monthly. Document this change using a rent change lease addendum.
- Cash-for-Keys: Offer a cash-for-keys agreement to have the late-paying tenant vacate the property in exchange for a lump sum.
If the tenant withholds payment because of poor property conditions, you may be able to work out an agreement. Technically, the tenant should keep paying rent while asking the landlord for assistance or pursuing legal remedies. However, if they’ve stopped paying, you may be able to get them to resume their payments by addressing a property repair, a mold issue, or another complaint.
6. Issue a Notice to Pay Rent or Quit
If you can’t come to an agreement, you may need to resort to a more formal process. Once the tenant stops paying rent and surpasses the due date and allotted grace period, you can send a notice to pay rent or quit. This correspondence starts the eviction process, demanding tenants pay the overdue amount or leave the premises. Otherwise, they may face eviction.
Specify the date when they must submit the overdue rent payment. Clarify if they owe a late fee in addition to the late payment. Depending on your jurisdiction’s requirements, you may need to provide a certain number of days’ notice. For example, you may have to deliver a 3-day or 5-day notice to quit.
Write the notice in the correct format and deliver it according to your state’s landlord-tenant laws. Document every step of the notice process, from creation to delivery. Keep copies and proof of delivery to have for future legal proceedings.
7. File a Complaint in Court
If the tenant doesn’t comply with your eviction notice, you can file a complaint. Depending on your area, the appropriate court to file in could be a municipal, county, housing, or justice court.
The details of each case will vary, but you will generally complete the following steps:
- Prepare and submit a petition or complaint for eviction.
- Provide evidence of the overdue rent.
- Show that you’ve issued prior notices per state law.
- Attend a court hearing.
- Allow the judge to review your case and make a decision.
If the judge rules in your favor, they’ll issue an eviction order or writ of possession. This order helps you regain possession of your rental property and lets you request assistance from local law enforcement to enforce the eviction.
What If I Accept a Partial Rent Payment?
Late-paying tenants may offer to make partial rent payments. While these payments can provide immediate financial relief for you as the landlord and prove the tenant’s willingness to pay, they may complicate the eviction process. Partial payments can restart the eviction process because they show that a tenant is attempting to comply with the lease.
If you’re willing to start the eviction process over, you can accept partial rent payments. However, do so cautiously and mindfully. Document the payment, noting that it wasn’t the full amount. Communicate with the tenant, ensuring they understand how it affects their obligations and any legal actions you may take if they don’t pay the full amount by the agreed-upon due date.
Can Insurance Protect Me from Late Rent Payments?
Standard landlord insurance won’t typically reimburse landlords for unpaid rent. However, landlords with rent guarantee insurance will receive protection from unpaid rent.
Depending on the policy you get, it may cover between six to 12 months of rent or up to a specific amount. It may also cover the legal expenses involved with eviction proceedings. Before purchasing rent guarantee insurance, shop around to find the best carrier with terms that match your needs.
Actions to Avoid When Dealing with Late Rent Payments
Avoid the following actions when dealing with late rental payments:
- Harassing Tenants or Showing Aggression: Avoid showing aggressive or threatening behavior toward tenants and harassing them for overdue payments. These actions violate tenants’ rights and could cause them to bring a case against you.
- Ignoring Communication Attempts: Don’t ignore tenants’ attempts to reach out to you. Instead of making assumptions about their situation, take the time to talk to them to better understand why they’re paying rent late.
- Resorting to Eviction Immediately: Exhaust your other options first to avoid the time and money associated with the eviction process.
- Attempting a Self-Help Eviction: Self-help evictions in which you attempt to remove the tenant from the property yourself are illegal. Actions such as cutting off the utilities, removing the tenant’s belongings, and changing the locks constitute a self-help eviction.
Summary
Even though tenants paying rent late can be frustrating, it’s essential to handle each situation calmly and consistently. Always refer to local landlord-tenant laws and your lease’s provisions to ensure you respect tenants’ rights.
While showing empathy when communicating with tenants and coming to solutions can be worthwhile, you can also remain firm in your approach. Keep diligent records of each step you take, and always put verbal agreements into writing so you can reference them later.
