Late Rent: When Should the Owner Be Notified?

Question

Question for both small-portfolio owners who use property managers and PMs themselves.

During a mid-month review of my portfolio, a tenant payment had not been received. It got me thinking about something I’ve never really established a clear expectation around:

At what point should a property manager proactively notify the owner that rent hasn’t been received?

I understand that collecting rent and handling routine late payments is part of property management, and I don’t necessarily need to know the day after rent is late.

But at some point, I would expect communication that includes more than just “rent hasn’t been paid.” For example:

• Has the PM contacted the tenant?
• Has the tenant given a reason or committed to a payment date?
• Has a late fee been assessed?
• Has a formal notice been sent?
• Is this becoming something the owner should be aware of or make a decision about?

I’m curious where others draw that line.

Owners: Does your PM proactively notify you about delinquent rent? If so, when — after the grace period, when a late fee is assessed, when notice is served, or only when the situation escalates?

Property managers: What is your normal practice? At what point do you believe an owner should be notified rather than allowing the PM to continue handling it as routine collection activity?

I’m especially interested in practices for small rental portfolios, where one missing rent payment can be meaningful to monthly cash flow.

Also curious whether AppFolio or other PM software can automate an owner notification when rent remains unpaid after a specified date.

Drew Sygit · Answer

Another example of owners NOT properly screening PMCs and understanding what to expect!

Most PMCs now use some type of PM software - but every quarter we take over a property from a one-man band or mom & pop PMC that don't have PM software or even a website!
- Can't understand why an owner would hire these PMCs!

Most PMC software have MANY auto-alerts to streamline owner communications:- When rent is received- When Late Fees are charged- Past Due Balances- Many, many more...

A lot of PMCs are also using advanced CRMs that can be customized to generate even more auto-alerts to owners.

BTW: there are also auto-alerts to tenants.

Owners should also consistently receive Owner Statements each month that show Rents Collected.

Via all this, owners should know which tenants have paid and which have not - unless they're NOT paying attention to their email inbox and expect a phone call😒

IMPORTANTIt's our opinion, and business practice, to also inform owners of our communication attempts and eviction steps.

We don't ask owners for permission, we inform them of what is going on and our next steps, "unless we hear otherwise" from an owner.

This is where the expectations of many owner are NOT met!

For some naive and ignorant reasons, owners seem to think that ALL PMCs execute their services EXACTLY the same way😤😤😤

NOT REALITY!

We've taken over so many properties with nonpaying tenants where the previous PMC had no plan to force past due tenants to pay or move. They were simply accepting whatever payments the tenants sent and excuses & promises the tenants made.
- Meanwhile, the tenants' past due balances kept increasing every month.

To have any chance of success getting a tenant back on track with rent payments, you MUST "start the clock" by starting the eviction process and moving the process forward unless the tenant cooperates. Otherwise, desperate tenants will say desperate things and try to stay as long as possible for as little as possible.

NOTE: there is no fool-proof system:( We've had tenants on formal Payment Plans that suddenly gave up after making several months of timely payments. No amount of positive encouragement from our team could reverse their decision😞

DM me if you'd like more feedback.

Greg Scott · Answer

Most PMs will also call to talk with the tenant once rent is late.

Based on experience, I would not put stock in anything a tenant says about when they are going to pay.  Either they will or they won't.  A substantial portion will say anything they think will delay eviction filings.  Another group seems to always pay, but always pay after a late fee is assessed. (I have no idea why.)

I see the critical date as eviction filing.  Before that time, there is so much noise, so many promises, or no communication at all.  Once you get to eviction filing, your chance of collecting rent drops to somewhere around 50%.  Before then, you never know.

If you have read-only access to the PM system (e.g. Appfolio) you can log in and see the status of rent at any given time.

Janice Carter · Answer

@Alison Robinson It really depends on the property management agreement and the communication expectations established between the owner and PM. In my opinion, once the grace period has expired and the PM has contacted the tenant, the owner should be notified of the delinquency, the tenant’s response and what action is being taken next.

Divin Kanyama · Answer

As a small-portfolio owner, I’d expect my PM to handle the first few days as routine collection, but I would want proactive notice once the grace period has passed or a late fee/formal notice is triggered. At that point, the update should include whether the tenant has been contacted, any reason given, a promised payment date if there is one, whether fees or notices have been issued, and the next step if payment still doesn’t come in. One missed rent payment can matter for cash flow, so I don’t need to be involved immediately, but I do want a clear escalation point and timeline agreed to in advance. I’d also ask the PM whether AppFolio can send automated owner alerts after rent remains unpaid past a set date.

Drew Sygit · Answer

Hence why I posted, "We don't ask owners for permission, we inform them of what is going on and our next steps, "unless we hear otherwise" from an owner."'

G. Brian Davis · Answer

I’d want the PM handling the day-to-day collection, but I’d also want to know fairly quickly when something is starting to become a problem. If rent is late once and the PM is already dealing with it, I probably don’t need a call. But if the tenant isn’t responding or it’s going past the normal grace period, I’d want to know what’s happening and what they’re doing about it. I’d rather have that conversation early than find out a month later that there was a problem.

Bill B. · Answer

On the 10th I get my statement and money.  It will show who paid, who paid too close to the 10th for me to paid on the 10th, and who hasn’t submitted payment yet.  In Vegas no late fees can be charged until the 3rd, and the 7 day pay or quit only counts judicial work days. So for those who haven’t paid, nothing is concrete by then.

I’ve only had one eviction started, and one “middle of the night move out” which I found out on I think around the 20th. I’ve been pretty happy with the communication. I wouldn’t hate an email saying we’ve received payment from tenant x for payments made after due date. But I could certainly see it being a bigger deal if I had a lower class of tenant that I often had to evict. Slightly late payments made up before the end of the month don’t bother me that much if they are rare.

Ps. I didn’t notice the question about late fee notices to owner but in my case it’s automatically assessed, so there’s no need for that notice. And they will be on the statement and must be paid before rent is accepted.

Alison Robinson · Answer

Bill, this is helpful. It sounds like your statement on the 10th effectively serves as an early notification point, so you already know who hasn't paid without needing separate communication from the PM.

I agree that an occasional late payment that gets resolved isn't necessarily a major concern. I've started doing a mid-month AppFolio review to identify anything still outstanding and then look at the tenant's payment history to determine whether it's an isolated event or part of a pattern.

Your experience is a good reminder that the right process probably depends partly on how and when the PM already provides owners visibility.

Alison Robinson · Answer

Divin, this is very close to the process I’m looking to establish with my PM. I don’t need to be involved in routine collections, but I do want a defined escalation point once the grace period has passed, along with the tenant communication, expected payment date, and next steps.

It’s helpful to hear that other owners have similar expectations. I also like the idea of an automated AppFolio alert, it could make the process consistent without adding much work for the PM.

Richard F. · Answer

Contacting the owner after a late rent, or at/after the point of filing eviction is WAY too late.

First of all, the owner should be made well aware of the late fee/eviction process from the outset of the management relationship. As @Greg Scott stated, the process itself should  be automatic (at least up to actual filing).

A conversation should occur with owner if an established tenant is, or has become, problematic with one or more significant lates (a week, maybe 10 days past due date depending on how the calendar falls; or partial payments with a "promise"). Depending on the actual costs of eviction in your market, an owner might want to consider options sooner rather than later.

I will always work towards a no cost move out when someone is unhappy, or loses a job, or has other major events in their life that will not get fixed in a month or two. Evictions are far too costly here.

If, OTOH, we inherited some undesirable tenants, we would have already had the "eviction" conversation with the owner, and have an established plan to do so.

The key, of course, is to ensure your screening and tenant management keeps the losers out in the first place, while still placing quality tenants within a reasonable time.

Late Rent: When Should the Owner Be Notified?

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