When property managers implement a streamlined rent collection process and expectations are outlined in the lease agreement, rent payments are typically made on time. Those payments that are delayed or remain unpaid can be especially trying for a landlord or property manager. Fortunately, a past due or unpaid rent bill doesn’t have to be the end of the process. Property managers do have options. Pursuing the collection of bad debt is a tricky business so these tactics and tips might make that task easier.
Previous Tenant’s Past Due Rent
Locating previous renters owing back rent or for damages may prove difficult. They usually will not leave a forwarding address. One suggestion is to mail a demand letter to the person even if the last known address is the rental address. Mark the envelope “Address Service Requested” or “Address Correction Requested”. Check with the USPS for the cost of postage for this service. When requested and purchased the USPS will research their database for the new address and forward the letter. In addition, the USPS will send you a postcard with the correct address.
Reporting the Debt
Report this tenant’s outstanding balance to the three major credit bureaus as unpaid rent. The outstanding debt will stay on their credit report until the previous tenant pays the balance before the credit bureaus will remove that file from their credit report.
Small Claims Court or Collection Agency
If the personal contact and credit bureau reporting is unsuccessful, you can file a small claims case or hire a collection agency to pursue the claim
- Small Claims Court – If you file a small claims case against your tenant, following local court rules and your lease terms, you may also be able to collect money for additional damages, late fees, and legal fees. For certain situations, property managers or landlords may file a claim in small claims court. This procedure requires an investment of time and effort throughout the process. Depending on how much your tenant owes you, small claims court may or may not be worth the investment you have to make.
- Collection Agency – A collection agency is a specialized company that landlords and property managers can hire to recover funds that are due. A collection agency is typically only hired after multiple failed attempts have been made to collect the rent payments. Individuals working for the collection agency then get in contact with the debtor and attempt to track down the money owed.“If the borrower pays his debt as a result of the collection agency’s efforts, then the creditor pays the collection agency a percentage of the funds, or assets, that it recovers.
Delinquent Rent Payment From Current Tenants
After a payment becomes overdue, check the lease agreement. Check if the lease agreement includes specific information, such as the rent amount and days for due payment. If this agreement is signed by both parties, the tenant has a legal obligation to pay on time. When your tenant pays late or less than the agreed amount, they have violated the lease agreement and you have options on how to proceed. keep informed with regard to your local and state regulation regarding tenant payment and ur options to pursue and be sure to document and navigate those choices.
- Allowing a Fresh Start – Talk to your tenant and see if they would like to pay their next rent amount in full plus an installment amount to put towards the past debt. Create a lease agreement addendum outlining the payment arrangement to pay current plus partial back rent.
- Payment Discounts – You might want to offer a rental discount to on-time, full or partial payment. Regardless of how you get the tenants to bring their account current, it is important to be aware of what you can not do. Document everything in writing. If you and the tenant reach an agreement, have them sign a document specifying the compromise and give them a copy.
- Remember Passive-Aggressive Behavior Is Illegal – You cannot take matters into your own hands such as changing the locks or turning off the utilities. Tenants have the right regardless of their payment status to their home. That includes freedom from harassment. Do not cross the line, follow all regulations regarding written notices as well as verbal and electronic communication. Notices such as late rent notices, notice to quit, notice to vacate, and demand letters are legal documents. Your state and local areas have specific laws on how to serve them. Do not call outside normal business hours and do not abuse electronic communication. Do not show up at the tenant’s home unannounced.
Setting expectations and clear communications to avoid collection issues in advance by tenant screening, rent collection policy, and offering an online payment option would all be options to consider.
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