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Late Rent Issues and How to Handle Them as a Property Owner

Posted On Tuesday, 21 June 2022 15:57
Late Rent Issues and How to Handle Them as a Property Owner

Property owners often face the challenge of dealing with their tenants' unpaid rent or late rent payments. For some, dealing with late and missed rent payments is an occasional occurrence that happens once in a blue moon; for others, it is a regular event that happens every month or two. In any case, the goal of any property owner is always to ensure that the tenants are paying their rent on time and keeping in consideration their end of the rental agreement. To achieve this objective, property owners need to opt for a process that helps them handle any issues that may arise with tenants' rent payments. 

This will make it easier for landlords to resolve rent payment-related issues amicably, avoiding unnecessary confrontations or disputes. This article explores the possible common reasons for late rent payments from tenants and the various ways and strategies to help property owners handle these issues effectively.

Common Reasons for late rent payment from Tenants

There are many reasons a tenant might have difficulty paying his/her rent on time, especially in the current COVID-19 Pandemic times. Common causes for rent overdue include:

  1. Financial issues: Due to economic recession and low income, many people are finding it increasingly difficult to make ends meet and cover their monthly bills, including rent payments, on time.
  2. Unforeseen events: Sometimes, unexpected and unavoidable circumstances such as an injury, illness, or unprecedented job loss occur in a tenant's life, which may result in him/her being unable to make timely payments for rent. 
  3. Family matters: Depending on their circumstances, tenants may have to delay their rent payments in the event that they are going through a divorce, a death in the family, or some other stressful event that requires extra attention.
  4. Tenant's choice: Some tenants may choose to clash with their landlords over many different issues, from simple maintenance issues to larger issues concerning the quality of service provided. In most cases, tenants choose to delay rent payments to protest or express unhappiness with the property owner's policies.
  5. Forgetfulness: Some renters simply forget or get carried away by other aspects of their lives and forget to make their rent payments on time.

How to handle late rent issues

Given the aforementioned possible reasons for tenants' late rent payments, it is essential that property owners be proactive in developing a system that enables them to address any late and missed rent payments amicably. This system should be flexible enough to help you, as a property owner, resolve problems arising from late rent-paying tenants without creating any misunderstandings or animosity between you and your tenants. This section discusses the various effective ways to handle late rent issues:

  1. Keep calm and remain respectful

Whenever you are faced with an issue of late or a missed rent payment, it is important that you maintain a calm, respectful and diplomatic attitude in dealing with it. This may be a difficult thing to do considering the frustrating situation but it will serve you well in the future, as it will strengthen your relations with the tenants and also prevent the possibility of severe issues such as the tenants damaging your property out of anger.

Keep in mind that a tenant's rights to your property do not expire when they are late on paying their rent. This means that you need to be diligent and patient in handling any situation that may arise from a tenant's failure to make timely rent payments, failure to do which legal action might be taken against you.

  1. Send rent reminders

One of the best ways to mitigate late rent payments issues coming from tenants is to be proactive and take the lead. This requires you as a property owner to keep a record of when rent is due and the amount owed by each tenant. Make a habit of sending out a rent reminder to your tenants at least one week beforehand. This will help ensure that your tenants are well aware of the date and time their rent payments are due and the exact amount they owe you. This practice also ensures that no late payment issues arise from communication problems between you and your tenants or due to a harmless case of forgetfulness. 

Remember that you do not necessarily have to send out a written reminder for late rent payments to your tenants every month. You can set up a convenient automated reminder service that helps you automatically send out rent reminders in the form of text messages and email notifications. This way, you will be able to get paid on time, and your tenants will not have any excuses for missing the payment notice.

  1. Send late rent notice

If a tenant misses the payment deadline, send him or her a formal late rent notice. This is an official notice that informs them of their non-payment of rent and the amount they need to pay to “cure" their late payment issues. Sending out this notice will also serve as your basis for moving forward with any legal action against the tenants for any damages they may cause to your property due to their rental delinquency issues.

  1. Meet your tenants in person and discuss the issue

If your tenant pays rent late or misses the payment deadline, you need to discuss with them to find out why they have not been able to make their rent payment in time. A face-to-face discussion is usually much more effective in resolving this issue compared to holding an email/phone conversation. You may want to consider inviting the tenant over to your property to explain the issue more personally. This also helps you determine whether or not the tenant is likely to be able to make their future rent payments on time. A face-to-face conversation also lets you know the tenant's position on the matter and helps you decide whether you would be willing to accommodate their situation and create a new payment schedule for the tenant or accept partial rent payment.

  1. Encourage renters to pay on time

In addition to sending rent reminders, you also need to consider setting up a rent payment schedule with your tenants that encourages them to make prompt rent payments when they are due. For starters, you may choose to offer incentives such as a discount on their rent if they pay their next month's rent before the due date. You may also schedule a meeting with your tenant to discuss their situation and devise a solution that works best for both of you. This may include changing the tenant's rent due date to one that aligns better with their paydays, offering to split the tenant's rent into installments that they can easily afford to pay when due, or simply setting up an automated rent payment system that makes it easier for tenants to pay anytime from anywhere.

You may also consider encouraging open communication lines between you and the tenants such that they feel comfortable voicing any concerns or issues that may result in their inability to make rent payments on time or miss a rent due date. As a last resort to dealing with renters who have consistently failed to pay their rent as stipulated in the rental agreement form, you may choose to evict them from your property. However, before taking this step, consider exhausting all other alternative solutions for resolving the issue, such as asking the tenant's co-signer (if any) to step up and pay the rent on behalf of the tenant or asking the renter if they can transfer funds from a different account that they currently hold to remedy the issue and avoid eviction.

  1. Give discounts for prompt payment

To curb future late payment issues and encourage timely rent payments by tenants,  consider offering a discount for prompt payment if your late-paying tenants make their next month's rent by the stipulated due date. It is also recommended that you offer tenants a discount for paying their full rent before the established deadline rather than providing partial discounts for them to be able to pay their rent past the deadline. This will serve as an incentive for your tenants and help them maintain a better record of timely rent payments.

  1. Check state laws about late rent

Check the laws of your state or locality to determine whether you are legally allowed to charge any additional late fees for tenants who fail to pay their rent as agreed upon in the rental lease agreement. If your state allows a property owner to charge late fees, confirm the stipulated amount of additional late charges that you can levy against the tenant. Keep in mind that most communities' late rent fees are regulated by local rent control ordinances and are usually capped at a maximum amount that property owners can charge. Be sure to adhere to your local or state laws when dealing with late rent issues.

  1. Demand late payment penalty fees

If late rent payments become a recurring issue on your property, you may want to consider charging a late payment penalty/late fees on your tenants who cannot make their rent payments on time or who miss the payment deadline. If you decide to impose this penalty on your tenants, make sure that the amount you charge does not exceed the legal maximum allowable amount of late fees allowed by your local and state laws. This way, you can scare your tenants into making timely payments and it will act as a measure of deterrence to other tenants who may be considering missing their payment deadline.

  1. Verify wording in the leases

It is also vital to double-check the wording in any of your lease agreements that pertain to late rent penalties and fees. Review your existing lease agreements for potential errors, inconsistencies, or ambiguous terms that may cause confusion about the establishment of late charges for your tenants. Ensure that the existing lease agreement clauses on late rent charges are legally enforceable, consistent with your state's rules, and not blurred with additional clauses. You should also verify with your tenants if there are additional rental terms added after both parties have signed the lease.

  1. Involve the credit bureau

Involving the credit bureau is an effective strategy for encouraging tenants to make their rent payments promptly. If a tenant has consistently missed the deadline for payment of rent, you may seek to have their bad credit/financial record reported to the credit bureau. This will make it more difficult for them to rent or secure a loan from a financial institution in the future. This helps incentivize prompt rent payment from difficult tenants who want to maintain a good credit score. It will also help create awareness and influence other tenants to comply with your rental terms, or else they risk similar penalties being imposed on them.

  1. Take legal action and evict tenants

If a tenant still fails to make their rent payments on time despite your best efforts to encourage them to make timely rent payments, you may choose to evict them from your property. Evicting a tenant is not easy, and you must follow the necessary eviction procedures as local laws require.

The first step toward evicting a tenant is terminating their tenancy by serving them with a legal notice of termination. If the tenant fails to leave your property by the date stated in the notice, you may file a formal eviction lawsuit in court. You must be certain that every step in your legal proceedings is carried out according to your state's eviction laws, and you must provide appropriate documents that support your case for evicting the tenant.

The additional time and money spent on legal steps and in court will be worth it if it helps curb late rent payments from tenants and if it helps you avoid similar issues with other tenants in the future. It is also recommended that you opt for rental default insurance during the eviction process to ensure you recover lost rental income when any of your renters defaults on their payments. Additionally, refrain from the temptation of accepting partial payment in anticipation of full payment once you have served a difficult tenant a notice to vacate your property. This enables you to avoid issues during the eviction process and unnecessary costly delays.

Conclusion

Property owners and real estate management agents dealing with missed rent payment deadlines from tenants must be proactive in developing and implementing a reliable course of action that will help them handle and mitigate such concerns. The key to success is to minimize the damage of all late rent payment issues with such tenants and to focus on their timely payments constructively and realistically. By employing some or all of the techniques and helpful tips to deal with late rent issues discussed in this article, you can significantly improve your landlord-tenant relationships, facilitate smoother operations of your owned property business, get paid on time, and avoid any legal disputes resulting from late rent payment from tenants.

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