Since there have been quite a number of questions lately on the BiggerPockets Forums asking about evicting tenants…
Handling tenants can be quite simple (not necessarily easy) if you set up procedures and always follow them. Tenants need to know that you’re in charge and that what you say goes. Like children, they will sometimes push back to see if you mean what you say. If you do, life will be easier for everyone.
We have a process for handling evictions and everyone, our office staff as well as all of our tenants, knows what it is. How do they all know? It’s in writing, and we go over it in detail with each new tenant as we’re signing their contract. It’s spelled out in the rental contract and in a tenant manual that we give to each responsible party as they sign with us.
Make Sure Your Eviction Policy is in Writing.
Why is it in writing and initialed by each tenant? So they know what our policy is, and we know that they know, and they know that we know that they know.
If they have a question later, we refer them to the proper spot in their rental agreement as well as in their Tenant Manual, and we have a printed form that we can mail to them as a “reminder” should they forget and not know where their paperwork is… All in writing, well laid out, simple for everyone to understand.
When I started real estate investing, this was not the case. I worked pretty much on a case by case basis and tried to make each unique situation work for each individual tenant:
- My paycheck didn’t arrive on time.
- I had a flat tire.
- I will be able to pay in full by the middle of next week.
- Can you change my due date?
- etc., etc.
You’ve heard the stories.
If you have more than one tenant, and you’ve had them for very long at all, you know that making a special case for each tenant for each situation is time consuming and emotionally draining. Then, after all your efforts, it’s really upsetting when the tenant still doesn’t hold up their end of the bargain.
One For All – All for One!
So, after much pain and suffering on my part as the landlord, I decided to make it easy for everyone. Now we have a policy. Spelled out. Same for everyone. Same every time. Interestingly, this works much better and is much easier for everyone. Those who need an exception from you this month are the ones who are probably going to need an exception every month, so why not nip it in the bud right away by making them follow the same rules everyone else follows?
When a tenant wants an exception I tell them that, if I do it for one, I have to do it for all or else I’m guilty of discrimination. Tenants understand this and actually feel better knowing that everyone is held to the same standard.
Evicting Tenants: How We Do It
To give you an idea of how and where my process evolved, and because some of you have asked, I’m going to lay it out here. I hope this is helpful. I promise, it will save tons of time and aggravation.
**Note: Laws vary in every state – some vary dramatically. Check the laws in your state to see which items you need to tweak in your paperwork. For example, North Carolina allows five (5) days for a tenant to pay, so we can’t call them “late” until the sixth (6) day of the month. Many states give the tenant longer before allowing fees.
- Late rent fee – All paperworks states that the tenant has until 5pm on the due date (we use the first) to pay without penalty. After 5pm on the due date, they will be accessed a five percent (5%) late fee, the maximum allowed in our state. These late fees are entered into our system automatically at 5pm. If a tenant goes into our online system at 5:01pm and attempts to enter their standard payment, the system will not accept it.
- NO CHECKS are accepted for late payments. ALL payments and late fees made after 5pm the 5th (fifth) day of ANY month MUST be paid in certified funds ONLY. Any checks received after the 5th (fifth) of the month are returned and eviction proceedings continue. (You DO NOT want to find out, 10 days later, that their late payment check bounced.)
- Court Filing Fee – If we have not received payment by the seventh (7th), eviction proceedings commence. At that time, an additional five percent (5%) court filing fee is also added to their outstanding balance as allowed by law. And, they are charged what we pay to the courts for filing – $96 for the clerk of court and $30 per person to the sheriff for serving the eviction papers.
- Stopping the eviction – Once eviction proceedings have commenced, they may be stopped any where in the process with payment in-full including past due rent, late fees, court costs, and all unpaid balances on their account. Again, all such monies must be presented to us in CERTIFIED FUNDS ONLY. No checks or cash are accepted.
- Court appearance fee – Once we show up in court, an additional five percent (5%) is added to their balance by the courts for the court appearance fee.
- In court, we are awarded possession of the property (they are in breach of contract for non-payment).
- We send a letter telling them we have court awarded possession of the property and they have ten (10) days to vacate the property.
- Writ – If they are not out of the property in ten (10) days, we go back to the court for a writ and they are charged $30 for the sheriff to serve their writ as well as $25 to the clerk of court.
- Within 5-7 days, the sheriff shows up at their house and the locks are changed. They are no longer allowed access to the property.
The Process is Worth It.
As you can see, this can be quite an involved process for everyone. And, quite expensive for the tenant!
Typically, tenants who have grown up thinking late payments are no big deal are SHOCKED the first time they are served eviction papers after only a week! The second time they pay late, they are not shocked. Twice is usually all it takes to make them realize they will be penalized for paying late.
For most tenants, this is enough to train on-time payments. We have one who has lived in a property for 6 years and has paid on-time no more than 10 times. Yup, they pay the late fees every single month. Sometimes court costs. Once they made it all the way to being notified that the sheriff was going to change the locks. Yup, they paid up including all the fees.
Surprisingly, most pay up, including all the fees. We are quick to let them know that we don’t want to collect late fees, it takes productive time away from the office. We want every tenant to pay on-time and avoid ALL fees. We take every from of payment – online and offline, except cash. We make it as easy as possible for every tenant.
Some just pay late. And seem ok with that. I don’t get it, but so it goes. The latest anyone paid was after the sheriff had locked them out. The tenant showed up at our office with a money order for all monies owed and said he didn’t want to move.
It appears to actually give the tenants some piece of mind knowing the rules are the same for everyone. We let them know that our system is what it is in an effort to keep our costs down, which keeps rent as low as possible, plus on-time payments help train them to one day be homeowners.
When you have enough tenants and you’ve been a landlord long enough, I think you’ll find that a same-for-all approach is easiest for everyone. Because our system is so streamlined, we rarely miss more than one month’s rent before we have a non-pay out, and the place cleaned and back on the market. If they’re not going to pay, better to know quickly.
Find out what your state allows and set up your system. Better to train your tenants than to have them train you.