Rent Collections

Rent Collections

We are not in the business of evicting people from their homes; we are in the business of filling sites and collecting rent!

It’s true! Yet more often than not we have to file an eviction. Are evictions preventable?  Should we work with tenants until we have exhausted every possibility of collecting rent?

There is a balance between preventing evictions and working with tenants and it starts before the tenant moves in, it starts with the screening process!

1.       We need to set up a criterion for our prospects to meet and we must stick by that criterion no matter how difficult it is to have a vacant unit collecting no revenue.  The criteria may vary from property to property and from owner to owner. I often recommend the following criterion for the approval of prospects

a.       Two years of verifiable rental history with no more than two late payments during that two year period and no NSF checks. That means that I need to be able to call your past landlord(s) and verify that you lived there and whether you paid the rent on time or not.

b.      Two years of verifiable employment and income. If self-employed last two years of taxes must be provided.

c.       Depending on the type of property your income must be at least twice the rental amount; for a class “A” property it’s at least three times the rental amount.

d.      Occupancy is not to exceed the HUD guidelines of two plus one; on a two bedroom unit no more than five people may occupy the home. This may vary but the key here is consistency.

2.       The process then continues with the signing of the lease and setting up expectations. This means explaining thoroughly when the rent is due, when is late and the grace period before late fees apply and the late fees.

a.       The rent is due on the first of the month every month

b.      The rent is late on the second

c.       There is a grace period of five days before late fee(s) begin to accrue

d.      Rents received after the five day grace period are subject to a late fee of $____

e.      There are no exception to the late fees and all rents must be mailed with enough time to arrive on or before the 1^st of the month and no later than the 6^th of every month or a late fee applies

f.        Any monies received after the 6^th of the month is first applied towards late fees and other charges and then to rent

3.       Proper and timely service of non-payment of rent notices.

a.       Always serve the statutory required notices by the end of the grace period. If the grace period ends on the 6^th by the 7^th we knock on doors and provide personal service or post and mail the notices as required by law.

b.      If the tenant has “reasons” as to why they are late, we listen to them and serve the notice anyway. Evictions are a lengthy and complicated process and there is no sense in delaying it over not serving the notices on a timely fashion.

c.       After notice is served partial payments should not be accepted. If you do you are required to re-serve the notice. Besides you do not want to create the precedence of accepting partial payments

d.      Make sure your leases include a requirement for past due rents to be paid with a cashier’s check or money order not personal check.

I have been told that this approach to rent collection is harsh; HARSH YES, EFFECTIVE YES!

Here is a few examples that prove both points:

I took over a property in which rent s were below market and two of the three tenants where use to paying late. Immediately during the first month the rent was due I started serving the notices and demanding that the rent and late fees were paid. One tenant moved out three years later and paid the rent on time every month while living there and the other is still there ten years later and always pays the rent on time.

I also took a slightly softer approach with a different tenant at a different property. She had never been late in three years. When I did not received the rent after the grace period I called her to and let her know that I had not received the rent and she assured me she had mailed it. She even got offended because I called and if the mail did not deliver it on time that was my problem. I check the mail the next day and still no rent; so I called again and was as nice as I could be. At this time she told me that she had given it to her boss to mail and that I could call her boss directly to verify this. Of course after explaining to her that her boss did not rent form me and that she needed to follow up with her boss directly; she became more offended and hung up after waiting another three days I served the proper notice and receive the rent within three days post marked after the end of the grace period. Lesson learned, serve proper notice if you want to be paid your rent on time.

As property managers; We are not in the business of evicting people from their homes; we are in the business of filling sites and collecting rent! We owe it to ourselves and our property owners to collect the rent on time. A vacant unit is better than an occupied unit in which the tenant does not pay the rent.

Yes we need to train our tenants to pay on time! But that does not mean that we should tolerate non-payment of rent or habitually late rent payers.

“Pay us, so we can pay them, so they can pay you.” – Unknown

Getting stubbed: Collecting rent when tenant claims bankruptcy.: An article from: Real Estate Weekly

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