Help! First late rent

26 Replies

Hello everyone!

My wife and I closed our first deal on the 7th on our new four unit property which is fully occupied. One of the tenants is a co-worker, which was not something I was terribly excited about initially, but the deal was good so now he is my tenant. His rent was the first due, and it was supposed to be in yesterday (May 15th). I checked the p.o. box at midnight (I know, excited new investor right!) and there was no rent check. 

My questions is, what would you all do? Should I call him first thing this morning and just talk to him, or should I serve a five day notice right away? I was obviously hoping this wouldn't come up immediately! The building is located in cook county, Illinois by the way, so it is not a terribly land lord friendly area. 

I would call and let him know you need the rent paid on time. He might be used to paying late with prior owners. Tell him you need the rent paid on time every month so you can pay your mortgage payment.
If he doesn't pay right away then serve him with notice.

Tack on a late fee and give him/her a heads up that you need it right away. Give them 5 days and then let him know you will start eviction process. Sure makes work fun?!

Rent for me is due on the 1st of the month, and my lease states if I don't have it by the 5th, then a late fee applies.  I typically remind tenants on the 2nd or 3rd of the month that if I don't have the rent check by the 5th, a late fee will be due.  You really have to take a hard line IMO.  Tenants will no doubt take advantage if they can get away with paying late.  If you draw that line in the sand early on, it will help to mitigate problems in the future.    

@John Warren This situation is certainly unique because you work with the tenant.  Being that is the case I would call him and politely ask where the rent for this month is, and then just let him talk.  Letting him talk will tell you a ton.

If what he says involves him putting off paying the rent, just inform him that you will not be doing things like the previous landlord and will be enforcing the rent due dates.  You never know he could have had an arrangement with the previous landlord.  You just have to let him know that there is a new sheriff in town now and this is the way things will be done.

If he ignores your call then I would serve a notice to quit early next week.

Originally posted by @John Warren :

Hello everyone!

My wife and I closed our first deal on the 7th on our new four unit property which is fully occupied. One of the tenants is a co-worker...

Hopefully you were planning on going full time REI...

@John Warren

Will do something similar to @Rob Gribben , late fee applies automatically after 5th. (ie. always "charge" it now, you can always decide to forgive it afterwards on a one-off basis).  Just the fact you charge it doesn't mean the tenant will have to pay for it.  But do it for expectation management mostly.

Then attempt to collect rent first.  You should be in a better than normal situation since you both are co-workers and he will definitely have more to think about for not paying rent (unless he is your boss~).

Good luck.

as a general rule I never rent to friends, familk or Co workers as it Can complicate the landlord renter relationship and strains the work relationship. Be careful, your Co worker may spread rumor about you at work being a slum lord to get out of paying rent And your gonna look like the bad guy if you evict your Co worker but it may have to be done Regardless. 

Everyone's given great advice re: the late rent already. Just a suggestion for future rents: have you considered electronic payments? We've had great experiences with that, and our tenants like the convenience/flexibility. We either give them deposit slips that they can take to the bank and make deposits with or depending on what banks they're with, they can do an electronic transfer. Almost all choose the latter option.

@John Warren keep in mind landlord/tenant law is state specific. 

@Kyle Penland is in TN. @Rob Gribben is in MD. @Che Chiu Wong is in NJ. They have good advice according to their states laws but it doesn't pertain to you. As an example in MA you can't charge a late fee until they are 30 days late. You need to research landlord/tenant law for Illinois especially if you are going to be growing your business. Best of luck. 

@Rob Beland is right.  Pretty much everything in real estate is state-, or even city-specific.

Make sure to research the info/requirement that is the relevant to your area.

Of course, the concept is still the same.  MA, TN, MD, NJ all have different rules, but we all observe "landlord/tenant law" per se.

Google "Nolo".

Originally posted by @John Warren :

Hello everyone!

My wife and I closed our first deal on the 7th on our new four unit property which is fully occupied. One of the tenants is a co-worker, which was not something I was terribly excited about initially, but the deal was good so now he is my tenant. His rent was the first due, and it was supposed to be in yesterday (May 15th). I checked the p.o. box at midnight (I know, excited new investor right!) and there was no rent check. 

My questions is, what would you all do? Should I call him first thing this morning and just talk to him, or should I serve a five day notice right away? I was obviously hoping this wouldn't come up immediately! The building is located in cook county, Illinois by the way, so it is not a terribly land lord friendly area. 

Read your contract and see if rent must be received or postmarked by a specific date; it makes a difference. Also, check if there is a grace period allowed for receiving the rent before assessing a late fee.

Contact your tenant and let him know you did not receive the rent on the 15th as expected. Pause, and listen to what he says. Let the tenant know what your expectation is for payment of rent... how much to pay, when to pay, how to pay. Don't serve a notice to Pay Rent or Quit unless you are prepared to begin the eviction process. That would be premature from what you tell us.

It wouldn't matter to me if the tenant was a co-worker, family, or friend. We treat all tenants the same and show no favoritism as regards the tenant-landlord relationship.

I agree with @Marcia Maynard .  I'd call him up and if no response within a reasonable time (a few hours or same day anyway), I'd follow up with an email.  No need to start out hard ***.  You can get your point across and still sound amicable, in my experience.

"Hi, Joe, I haven't received your rent check yet, so I wanted to see if there's a misunderstanding."  And if he starts making an unacceptable excuse..."Well, Joe, I will have to treat all tenants the same way to stay out of hot water with fair housing and my lawyer, LOL, so I'll need that check by ____________.  I've been advised that any rent not received on time will have to mean a pay or quit notice.   Would it be more convenient for you to set up automatic payments, etc., so you can pay on time?"

Something like that.  It helps to be able to blame your policies on someone else, I learned.  Tenants are more likely to accept you saying your lawyer won't let you do something, etc.  It takes the wind out of their sails when they want to view you as Simon Legree.

My experience is that they will then comply.  It's rare for them not to, honestly.

I also made the mistake of befriending a couple of tenants in the building I managed as a resident manager.  They all ended up expecting favors or to be treated differently than others.  It's just human nature.  So, you'll have to set the boundaries right off the bat.  But, like I said, you can come across amicable, but firm on the rules your "lawyer" said you have to follow.  For me, I blamed everything on the owner ha ha.

I would have a quick word with him and let him know exactly what your expectations are. Let him know because you work together doesn't give him any special privileges and it's a business and the rent is due on the first. Never give anyone extra time ever to pay the rent.

One thing we did after we bought our apartment was read all the leases we inherited.  Then we gave each of the tenants a letter introducing ourselves and "reminding" them of what their current leases said about rent.  We then explained in detail what would happen when and if rent was late etc. 

Everyone seemed to appreciate the clarity and knowing what was expected from the new landlords in regards to paying promptly.

But I agree with the others, just give them a call and remind them. 

Although not possible in the current situation, you might want to set up an LLC as the owner of the property, and work through that and possibly even a property management firm to collect your rents. You can be a fair, honest owner/landlord, but maintain a wall of separation and anonymity. If you use a property management firm, let them follow their proper business practices, which you've already reviewed with them. Run it as a business and protect yourself from being manipulated by personal relationships. If the tenant consistently is late, and you apply late fees that he pays, remember that that's additional revenue. I had multitudes of good relationships with soldiers throughout my military career, and they were always predicated on clear rules, regulations, lines of authority, and discipline. There were expectations of responsible behavior, and consequences for breaches of discipline, and there was always an audience awaiting the outcome. "Good fences make good neighbors"--within Cook County law and your contract, set the boundaries immediately and clearly, and don't budge, or you'll regret it. One other tactic might be to offer the guy help in moving somewhere else, especially if things start going south. $2000 to defray moving costs might save you a lot of hassle within your rental business and your job.

ok I haven't got that far yet coz I aren't a landlord yet! but...I heard from real estate owners that u take it seriously and notify them straight away with a late fee penalty, let them know ur serious coz ur not a bank otherwise u will be last on the list if ur soft and lenient, they will prioritise u down the list during hardship...this is the stance I wud take also when I come to that part...

Originally posted by @Account Closed :

ok I haven't got that far yet coz I aren't a landlord yet! but...I heard from real estate owners that u take it seriously and notify them straight away with a late fee penalty, let them know ur serious coz ur not a bank otherwise u will be last on the list if ur soft and lenient, they will prioritise u down the list during hardship...this is the stance I wud take also when I come to that part...

 Seriously? 

Thanks everyone for all of the great advice, and sorry that I am just now responding! I received the rent on the 15th, and my tenant had mailed the envelope on the 14th. I greatly appreciate all the advice, and this incident prompted me to get my lease ready for when I have to renew leases in August! 

i would not personally rent to people i know, it becomes a big mess if rent is late or overdue. It becomes harder for me, as a landlord to just let it go and then before you know the relationship is gone. I think the first thing you should always considered in mind is rent to someone is a business even if you know that person.

Do you have contracts from the previous owner that you have to honor? If so, follow them to the letter and make sure your renewal contracts are detailed with any fees and all expectations.  You might also look at options so the tenants can pay online so you won't be waiting for a check in the mail.

@John Warren

We manage rentals in Cook County (not in Chicago)...a lot of good advice given here already.

I am not giving legal advice here; I am not a lawyer.

How the local realtor board rental lease contracts are written that I have seen, rent is due and payable on the 1st, considered late if not paid by the 1st, late charges kick in on the 6th. Limit late charge to 5%; I don't believe IL has a limit but I think some other states do limit to 5% so that is what we use because if you're ever in front of a judge they won't go along with something crazy. We start it at a certain dollar amount I think $25 and increase it $5/day up to the 5% so there is some albeit small incentive to get the rent paid sooner than later.

Read through the existing lease contracts that are in place with your current tenants, however, and make sure you are abiding by the terms set there with regards to late payments. You may want to start developing different leases for lease renewal; the realtor board leases are so short they don’t cover the myriad of issues you can have with tenants; the previous landlord written ones may have illegal non-enforcable paragraphs in them.

If you're interested in a couple other somewhat off-thread-topic Cook County pointers running around in my head let me know.

I would love to hear anything it out know about cook county! I know it's not the most land lord friendly place in the world...

@John Warren

I am not giving legal advice here; I am not a lawyer.

A rental payment option we make available for tenants is to give us a years’ worth of post-dated checks and this is the most popular of the options we offer. To date (knock on wood) we haven't had any issues with checks bouncing. Tenants like it so they don't have to worry about getting a check mailed. We do offer an electronic payment method through erentpayment dot com but they opt for this instead. Of the ones that prefer to mail it, they get an email first thing on the 2nd reminding them the rent was due on the first.

If your rental is in the city of Chicago, they have their own very specific even-tenant-friendlier-than-Cook-County rules which you should get familiar with real quick if your rental is there. Like for example, there are huge penalties in the city with regards to security deposits that have led to landlords taking non-refundable move-in fees instead of security deposits.

Lastly, since it appears that this is your first rental property, please know that as of fairly recently, in Cook County landlords can no longer discriminate against Section 8 aka housing voucher tenants. There is a ton of great help on this website, but keep in mind that tenant-landlord law is state, county, and city specific.

Good luck!

@John Warren Some good responses throughout here, but am I missing something? Sounds like rent was due on the 15th and you received it on the 15th, correct?

In regards to the late fee penalty, there is a max in the city, but not sure if it's a state rule. I typically give tenants a couple days as a grace period and then send an email on the 3rd day. Most of the times people forgot or it arrives the day in the mail. I've tried to get all tenants on electronic payments to help expedite this as well. 

Before you renew leases, you should review the existing tenant applications and ensure they fit your criteria, especially if you're planning any rent increases.

Congrats on the first rental and good luck. 

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