{"id":3708,"date":"2009-01-25T04:51:12","date_gmt":"2009-01-25T11:51:12","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=3708"},"modified":"2021-03-16T09:38:24","modified_gmt":"2021-03-16T15:38:24","slug":"2009-01-25-pay-rent","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2009-01-25-pay-rent","title":{"rendered":"\u201cI Can\u2019t Pay The Rent\u201d &#8211;  A Landlords Take on What to Do"},"content":{"rendered":"<p>I am in a very fortunate position right now.\u00a0 All of my 13 units are rented, and all the tenants are paying on time.\u00a0 It\u2019s great!\u00a0 And it\u2019s not going to last.<\/p>\n<p><img decoding=\"async\" src=\"http:\/\/farm4.static.flickr.com\/3483\/3224558502_16f904bdf8.jpg?v=0\" align=\"right\" hspace=\"7\" alt=\"\" title=\"\">I know that because even in good economic times, I\u2019ve had a couple of tenants every year who found that at some point, they just couldn\u2019t pay their rent.\u00a0 And these are not good economic times.\u00a0 In fact, I am really amazed that my one retail tenant, selling antiques and other non-essential items in a very blue collar town, is still paying on time.\u00a0 And I have no idea how many of my residential tenants are dealing with impending layoffs, loss of overtime, or other issues.\u00a0 I certainly know that most of them don\u2019t have financial cushions they\u2019ll be able to use if they lose some of their work income.<\/p>\n<p>I can handle the \u201ccan\u2019t pay the rent\u201d call in many different ways, but they boil down to three options.\u00a0 First, I can be hard, telling the tenant the rent is the rent \u2013 pay in full on time, or be evicted.\u00a0 Second, I can be soft \u2013 but that may mean that the tenant never pays, and I\u2019m out of pocket forever.\u00a0\u00a0 Third, I can find some middle ground \u2013 which is probably what I will do.\u00a0 There are a million variations on that \u201cmiddle ground.\u201d<\/p>\n<p><strong>Make your plan before the call comes<\/strong><\/p>\n<p>I\u2019m a big believer in rules to manage my behavior and guide my decision-making process.\u00a0 In this case, rules will overcome an emotional reaction that might lead to a bad decision.\u00a0 They\u2019ll also keep me from making a snap call that could turn out to be wrong.\u00a0 Remember, as landlords, our bad decisions have long-term consequences.<\/p>\n<p>The emotional reaction can be anger (\u201cHow dare Carol not pay me when I depend on her money to pay my bills!\u201d) or sympathy (\u201cPoor John &#8211; $4,000 in medical bills!\u201d)\u00a0 Which reaction will I have?\u00a0 That depends on the tenant\u2019s story, and probably also on how the rest of my day is going.\u00a0 In other words, I should ignore it and concentrate on making the best business decision.<\/p>\n<p>Finally, why the middle ground reaction \u2013 why am I probably going to make a temporary deal?\u00a0 Well, I already know I\u2019m not going to go soft and let the tenant take advantage of me forever.\u00a0 And I probably won\u2019t boot the tenant right away, either, simply because that leaves me with a vacant unit \u2013 which in a snowy, bitterly cold winter, along with a bad economy, is likely to stay vacant for some time.<\/p>\n<h3>Here are the hard and fast rules I\u2019ll establish up front.<\/h3>\n<ul>\n<li>I will never give a tenant an answer right away (upon the first phone call).\u00a0 Even though I may know what I want to do, I will sit on the decision for a day.\u00a0 Why?\u00a0 First, coming back with an answer right away, especially if I\u2019m offering the tenant a generous deal, may mark me as a soft touch.\u00a0 Second, waiting gives me a chance to really think through my decision.<\/li>\n<li>I will insist on a written agreement.\u00a0 This is essentially a temporary change to the lease, signed by me and the tenant, which means if the tenant violates it, he can be evicted.<\/li>\n<li>I will not let the tenant get more than one month behind in rent.\u00a0 This way, if the tenant defaults on the special agreement, I\u2019m only out one month.<\/li>\n<li>I will have a face-to-face meeting with the tenant to discuss any alternative ways he can get the money.\u00a0 The point of this is obviously to get the money.\u00a0 But the secondary point is to impress on the tenant just how serious a matter this is.\u00a0 \u201cYou can\u2019t pay me $600 in rent, but you just bought a $800 TV?\u00a0 Sell the TV or return it.\u201d\u00a0 This meeting should be at the tenant\u2019s unit.<\/li>\n<li>I won\u2019t offer a temporary agreement until the end of our face-to-face meeting.  That meeting is my last chance to consider the tenant before I offer an agreement &#8211; and if I get a strong ssense that he&#8217;s not being serious, out he goes.<\/li>\n<p>If the tenant violates the agreement, I will evict him \u2013 hard and fast.\u00a0 I will make this very clear at our face-to-face meeting and follow up if he violates the agreement.<\/p>\n<p>The written agreement will have a confidentiality clause.\u00a0 My tenant talk to each other, and I simply can\u2019t afford to have John tell Carol, \u201cThe landlord gave me a break.\u201d\n<\/ul>\n<p><strong>Do I have to treat everybody the same?<\/strong><\/p>\n<p>No, thank goodness.\u00a0 I can treat people differently, within reason.\u00a0 I can, for example, come down much harder on a tenant who has behaved badly in the past, or who has a history of late payments.\u00a0 Searching the Internet, I was unable to find a successful lawsuit in a case where a landlord made a special deal for one tenant, but not for another.\u00a0 That doesn\u2019t mean such lawsuits don\u2019t happen, but they are rare enough to not be a major concern.<\/p>\n<p>Next week I\u2019ll dig more into this, looking into some different \u201ccan\u2019t-pay\u201d situations and how they should be handled.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>I am in a very fortunate position right now.\u00a0 All of my 13 units are rented, and all the tenants are paying on time.\u00a0 It\u2019s great!\u00a0 And it\u2019s not going [&hellip;]<\/p>\n","protected":false},"author":168,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5183],"tags":[29,58,3073],"class_list":["post-3708","post","type-post","status-publish","format-standard","hentry","category-landlording","tag-economy","tag-real-estate","tag-rental-properties"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/3708","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/168"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=3708"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/3708\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=3708"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=3708"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=3708"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}