What To Do When Tenants Stop Paying Rent?
Sometimes life happens. Despite our best screening efforts, we sometimes end up with a tenant that can no longer pay. Perhaps it is not even the tenant’s fault. The tenant may have lost their job, been in a car accident or divorced. While I can sympathize with the tenant, as a business person and landlord, I need to get someone in my unit who can pay as quickly as possible and as easily as possible.
Notice I said “as easily as possible.” That almost always does not involve the eviction process. Here in Memphis, TN an eviction can cost over $1,000 once all is said and done. There are easier and less expensive ways.
Talking With The Tenant About Their Late Rent
Many times all it takes is a heart to heart talk with the tenant. Letting them know that you understand their situation can go a long way. But also explaining and helping them to understand your position as well. That the mortgage payment is still due and the bank does not care if the tenant is not paying, thus if the can’t pay they can’t stay. Say something like:
I understand your position, but please understand mine. If you can be out by this week end and sweep the place clean we can call it even. I will not file for eviction and I will not sue for back rent.
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This works surprisingly well. Plus it is simple and easy.
Cash for Keys: A Controversial but Effective Technique
Sometimes however the tenant may be really down on their luck and out of money. In these circumstances I may actually pay the tenant to leave. In the heart to heart discussion mentioned above, I usually can find out what is holding the tenant from moving on. Many times they simply can’t afford to move. So spending $250 to allow them to get a truck and get their belongings out is much easier than spending $1,000 and going through the courts. This “cash for keys” technique may rub some the wrong way, especially when the tenant owes you back rent, but I can either pay the tenant or pay the attorneys a lot more.
I have only had to file for eviction a few times. Most were on tenants that we inherited when we bought a property that did not go through our screening process. And despite your best efforts, sometimes it does take that notice being posted on their door to motivate people. Even here I will still try to make things easier. I will let the tenant know if they leave by a certain date, remove their belongings and sweep the place clean I will withdraw the case. It works! I have actually withdrawn cases because tenants have left as agreed.
Remember I said “as easy as possible.” I want to spend the least amount of money, but I also want the least amount of stress and confrontation. And honestly, I do not want to beat someone with the courts when they are down. I just want them to move on so I can get my property re-rented. Screening is your first answer to avoid non-paying tenants, but nothing is 100% full proof.
The Key To Success When Rent Isn’t Paid
The key when a tenant stops paying is communication. You have to be the “squeaky wheel” with your tenant to get things moving. Do not let them get into denial mode, keep on them until they make a decision. Usually, they will see the writing on the wall and move on. Yes the courts can force them to move on, but it is the least easy way to do it. So I try my best to avoid it. For me they are a last resort.
Finally, if you do use any of the techniques discussed above, save yourself some trouble and get a signed “Release to the Rights of Possession” form as a part of any deal you make. You will be glad you did.
Photo: Steven Depolo