Collect half rent?
Real Estate Agent · Mechanicsburg, PA · Member since 2014 · 529 posts · 217 votes
So I have a tenant who sent me a text message asking if she could pay $300 dollars now, and another $ 300 on the 16th plus the 25$ late fee. I inherited the tenant over a year ago and she has been very good. Hasn't complained, and besides one other late payment (last December) she's been great. However, I am starting to get worried. What should I do? If she gets paid on the 16th, the following pay day will be the 30th. So she will owe another 600 which I'm assuming would be the majority if not all of her paycheck. What does BP recommend? Thanks in advance.
I'm in agreement with @Aly W. , as she made some very good points. Especially since the tenant has been in communication with you and has otherwise been a very good tenant. Even in the best of markets, turnovers takes time, energy and money. If you have the flexibility to work with her, do. But make it a win-win, you both will lose something and gain something in the process.
Make sure it is settled within the month that rent was due. I typically will allow until mid-month to catch up if the late fee is paid and all else is in order. Our tenants must pay the late fee first, regardless. So ask her for $25 + $300 now and the other $300 by the 16th as she proposes. If you are okay with receiving rent in two installments twice a month on an ongoing basis, then make it worthwhile for you by changing the rent to a higher amount, such as $320 on the 1st and $320 on the 15th.
In our current rental environment many tenants are spending 50% or more of their income on rent. In the low-income market it is closer to 75% and most do live paycheck to paycheck. If you work with her on this, and she is not playing you, it will make your relationship stronger and she could become a great long term tenant. If you start posting notices and filing evictions as soon as you can, you will push her into looking for other housing. As soon as you file with the court, it will become part of the legal record and it could affect her ability to find other housing.
One other thing.... whenever a tenant is late with rent, I check to make sure they are paid up on utilities. They tend to go hand in hand. It is part of our rental agreement that tenants remain current with their utilities. I also will do a periodic inspection of the premises to make sure they are not violating any other terms of the rental agreement and all else is in order. Once tenants see that paying rent late will result in me keeping a closer eye on what what they are doing, they have more incentive to pay rent on time.
Evictions in Maryland are fairly easy, is it complicated or does it take an especially long time in PA? I'm 25 minutes from Gettysburg but never find myself in PA. If you don't perceive there being a huge lag time to get her out, I would give her until the 16th, but tell her an eviction will be filed on the 17th if she hasn't paid and make sure you follow through! I'd also advise her this is a one time thing any any future lates in the next 90 days will result in an automatic eviction filing on the 6th.
Not sure how long evictions take up there but in Baltimore I would take the partial payment and still start the eviction today. I can always cancel once the balance is paid. Not the best situation to be in when they're late but at least she's in communication with you and gave you a timeline.
I don't have any comments on the eviction process as they have already been given comments to but I would also remind her when rent is due. You say that she has only done this once since you took over (bought) the property. How long has that been? She may be going through something that has her in a pinch, or, if you recently took over the property she may have been doing this all along with the prior owner. I would still be polite about reminding her when rent is due and through some discussions to see if you can ferret out why she is late and if this has been more than on one occasion. What ever your eviction laws are in PA should also dictate how you follow through with eviction.
Before you consider eviction, is the tenant having a permanently hard time paying all the rent on the 1st, or is this another isolated incident like last December? You say she's been great, so maybe you can work this out with her.
Is the property hard to rent? Will it cost you more to turn it over and have a vacancy for a month or two?
The tenant has communicated with you, and seems to have paid the last time she was late. If the tenant has a good track record, and is asking you if it's ok, what if you tell her it's not ok? Is she able to pay the full amount and just has something else she wants to pay for, or is there some kind of issue? Ask her how she plans to pay the next month's rent in full on time.
I say this because we have a good tenant going on her 4th year with us, and she was starting to struggle to pay the full amount of the rent on the 1st. She paid late on occasion, always with the late fee though, which is higher than yours and also has a per day fee. She's in a Class C area, and the property is hard to rent. We didn't want to lose her, and she was considering moving at the end of the lease. We agreed to let her pay the rent bi-monthly, with a slight increase that's less than the late fees. It's worked out fine.
If you feel she's playing you though, that's a very different scenario.
Pennsylvania utilizes a 3 day pay or quit notice. So I would post and mail that notice on October 13 which will allow you to file the eviction on the 17th. When you tell the tenant you're going to let them do this this one time, you tell them that you're going to post the pay or quit notice and they also owe you whatever the fee you have for that is (if you're not charging one add it to the lease next tenant - your time isn't free).
Rereading your comments about the rent being an entire paycheck - you're probably going to have to work with her for 4-6 months before she fully stabilizes. The trick here is to keep accelerating the eviction (the timetable will accelerate naturally if she's paid bi-weekly anyway) but you want her to see she keeps getting these pay or quits earlier on in the month. Hopefully she'll dig her way out to get out from under the stress of dealing with you. Do not ever alllow any tenant to get more than a month behind. If the first comes and when the new rent posts she owes $601 with the late fee you get that eviction filed and prosecute it until she's either out or 100% caught up.
The law here in Maryland is very unique in that we can take partial payments all the way up until the sheriff is at their door. I'm sure other states are like this, but I've never experienced it. The sheriff even gives them one final opportunity to pay their balance due at the time of the eviction.
@Daria B. So a couple of things. First, I bought this property about 15 months ago. She has been living at the property for 16 months. Her explanation was she got a speeding ticket which needed to be paid today! I will say this was my first tenant, so I did not do a great job setting expectation. For example, rent is due on the first and considered late on the 5th. Well basically I get paid around the 4th or 5th of every month. For my other properties, I have structured things differently.
@Aly W.This tenant pays religiously around the 4th or 5th of every month. However, that is caused by my own doing. Since the lease says rent is late on the 5th, she has only been late once. The property is 3rdfloor apt so it’s more difficult to rent than usual, however it’s in a great neighborhood. I imagine I could get it rented within a month without a problem. I really like your suggestion about asking her how she expects to pay the following month. She is a nice person, and I would like to work with her. However, if things become difficult I want to be prepared to handle the situation as quickly as possible.
@jr Thanks for the response! I was hoping someone would explain in detail what I should do. I agree, I will tell her she can pay on the 16th however I will be posting a pay or quit notice so the eviction can take place on the 17th. I am concerned about future months, but I will speak with her to figure out her plan. I would like to avoid the eviction, however if I have too, this will be my first one and I am sure I will learn a ton
@JR T.undefined
I am responding from my phone so it's a little bit difficult. Apologizes for the errors
The good news is with a $600/mo rental(s) in your portfolio you will not have to wait very long to put what you learn to use again in the future. That is part of the business in this class of rental and is a big part of why the returns are frequently triple what you see on higher rent properties.
In my leases rent is due by close of business on the 1st, late fee is due on the 2nd and it calls for us to file an eviction on the 6th. Evictions cost a whopping $20 to file and serve here in Maryland and the tenant has a right of redemption anyway so we are fine with filing them against anyone we haven't heard from on the 6th day. It took a long time, a little over a year at just harping away at this policy but we have started to receive rents around the 25th and these are low-income tenants. We have other tenants who choose to pay the late fee and inform us in advance to avoid reimbursing us for the eviction too. Paying the rent late after communicating with us and including the late fee is great in our eyes. The late fee represents a 60% APR on the rent (5% monthly late fee). There aren't a lot of things I could do with their rent to earn a 60% annual rate of return for 30 days.
Bottom line on our properties: A sheriff will be at your door within the first full week of the month if you haven't paid your rent.
Good luck with this @Christian Bors, it's never pleasant when the rent is late for any reason, but with future tenants, you can set the expectation that it's due on the 1st. I charge the late fee as early (and as much) as my state law allows, and the leases are written by attorneys in those states - NJ and FL.
For good tenants with a track record of being on time, I'm flexible if something comes up once in a while.
I'm in agreement with @Aly W. , as she made some very good points. Especially since the tenant has been in communication with you and has otherwise been a very good tenant. Even in the best of markets, turnovers takes time, energy and money. If you have the flexibility to work with her, do. But make it a win-win, you both will lose something and gain something in the process.
Make sure it is settled within the month that rent was due. I typically will allow until mid-month to catch up if the late fee is paid and all else is in order. Our tenants must pay the late fee first, regardless. So ask her for $25 + $300 now and the other $300 by the 16th as she proposes. If you are okay with receiving rent in two installments twice a month on an ongoing basis, then make it worthwhile for you by changing the rent to a higher amount, such as $320 on the 1st and $320 on the 15th.
In our current rental environment many tenants are spending 50% or more of their income on rent. In the low-income market it is closer to 75% and most do live paycheck to paycheck. If you work with her on this, and she is not playing you, it will make your relationship stronger and she could become a great long term tenant. If you start posting notices and filing evictions as soon as you can, you will push her into looking for other housing. As soon as you file with the court, it will become part of the legal record and it could affect her ability to find other housing.
One other thing.... whenever a tenant is late with rent, I check to make sure they are paid up on utilities. They tend to go hand in hand. It is part of our rental agreement that tenants remain current with their utilities. I also will do a periodic inspection of the premises to make sure they are not violating any other terms of the rental agreement and all else is in order. Once tenants see that paying rent late will result in me keeping a closer eye on what what they are doing, they have more incentive to pay rent on time.
Thanks @Marcia Maynard, and you make great points too, especially about the utilities and how the filings become part of the court record.
I would go with what @Chris K.has suggested
Take the cash. I will collect anything I can get out of the tenant. You want some engagement/commitment. I don't like doing it but it comes with the territory.
Frank
When you say start the eviction now, do you post the notice to quit or actually do the filing? I haven't been through an eviction so still learning. If you could elaborate that would be great. I'm about to check out a couple of bp blogs on eviction process so I can get caught up.
@Marcia Maynard great tip on checking utilities. The only utility this tenant pays is electric but I'll definitely make a call today.
@Aly W. as far as an update, I told the tenant I appreciate the communication and thanked her for being a good tenant so I am willing to work with her. However, I told her I will be posting a notice to quit and filing an eviction on the 17th if the rent is not paid in full. I asked her how she expects to pay for NOv. rent and if she is anticipating an issue. She responded saying there won't be a problem making novmebers payment. I'm not sure how much she makes since I inherited her, but I suspect it can't be too much. I will have to monitor the situation.
I've been told that if you collect a partial payment of rent, then you can't evict until they are late again in the following month. If partial rent is accepted, then it is deemed that you are ok with it and for that matter it might happen again. I was told to inform the tenant to hold the partial rent and that they would get a notice as per protocol, and to pay the FULL rent before eviction would commence. That way, if she is playing you, it will come out and happen sooner than having to wait until the following month to start eviction because you had accepted a partial payment.
I've been told that if you collect a partial payment of rent, then you can't evict until they are late again in the following month. If partial rent is accepted, then it is deemed that you are ok with it and for that matter it might happen again. I was told to inform the tenant to hold the partial rent and that they would get a notice as per protocol, and to pay the FULL rent before eviction would commence. That way, if she is playing you, it will come out and happen sooner than having to wait until the following month to start eviction because you had accepted a partial payment.
Excellent point! This is something my lawyer had advised me about for a property I have in Michigan. It sets a precedence, and a partial payment CAN in SOME states impede the eviction process. I tell my tenants to pay me in FULL + late fee when they pay late. In addition, I start the eviction proceedings on the 7th day. All of my tenants have seen what these papers look like, and know what they mean, as they are shown the partially completed paperwork at the time that they sign their lease. In addition I advise them to speak with a lawyer about any aspects of the lease that they do not understand. (Lots of free legal advice in a college town)
good luck!
-todd
@Daria B. So a couple of things. First, I bought this property about 15 months ago. She has been living at the property for 16 months. Her explanation was she got a speeding ticket which needed to be paid today! I will say this was my first tenant, so I did not do a great job setting expectation. For example, rent is due on the first and considered late on the 5th. Well basically I get paid around the 4th or 5th of every month. For my other properties, I have structured things differently.
@Aly W.This tenant pays religiously around the 4th or 5th of every month. However, that is caused by my own doing. Since the lease says rent is late on the 5th, she has only been late once. The property is 3rdfloor apt so it’s more difficult to rent than usual, however it’s in a great neighborhood. I imagine I could get it rented within a month without a problem. I really like your suggestion about asking her how she expects to pay the following month. She is a nice person, and I would like to work with her. However, if things become difficult I want to be prepared to handle the situation as quickly as possible.
@jr Thanks for the response! I was hoping someone would explain in detail what I should do. I agree, I will tell her she can pay on the 16th however I will be posting a pay or quit notice so the eviction can take place on the 17th. I am concerned about future months, but I will speak with her to figure out her plan. I would like to avoid the eviction, however if I have too, this will be my first one and I am sure I will learn a ton
@JR T.undefined
I am responding from my phone so it's a little bit difficult. Apologizes for the errors
If you want to keep her, if you can reconcile this with her understanding that this can't continue then I would try and work with her. You state she pays around the 4th or 5th? That is certainly an owners decision, but personally I allow rent payments to be postmarked by the 5th. I don't want to be so difficult that they want to leave. I have had good success in tenant retention and that is one key to keeping your cash flow at its highest. No advice on evictions but one observation: they are stressfull.
In my leases rent is due by close of business on the 1st, late fee is due on the 2nd and it calls for us to file an eviction on the 6th. Evictions cost a whopping $20 to file and serve here in Maryland and the tenant has a right of redemption anyway so we are fine with filing them against anyone we haven't heard from on the 6th day. It took a long time, a little over a year at just harping away at this policy but we have started to receive rents around the 25th and these are low-income tenants. We have other tenants who choose to pay the late fee and inform us in advance to avoid reimbursing us for the eviction too. Paying the rent late after communicating with us and including the late fee is great in our eyes. The late fee represents a 60% APR on the rent (5% monthly late fee). There aren't a lot of things I could do with their rent to earn a 60% annual rate of return for 30 days.
Bottom line on our properties: A sheriff will be at your door within the first full week of the month if you haven't paid your rent.
In the 15 years I've been in RE I've met very few LLs and PMs with lease terms like yours. I've never understood the idea of a payment being "late" after the 1st if you couldn't collect late fee or file a notice. Even so, I let my PM use a lease that gave a 5 day "grace" period.
That being said, my youngest daughter recently rented an apartment in a 9 unit complex near UCLA. The lease terms are like yours. On the 3rd of the month she ran into the PM at a the property. The PM said she was there serving 3-day quit or pays. She said, "I'm aware that people manage their money in ways where their paycheck isn't always cleared on the 1st. Just know you'll ALWAYS get a quit or pay on your door if we don't have your rent on the 1st." Everyone in the building is paying $1600-2200/mo. Pretty sure no one has been evicted in the last few years, but the PM is ready when the time comes. Gotta say I was impressed. Great training for the daughter too.
Yes, these lease terms are essential to making tenants better stewards of my money. The fact is rent is due on the first. Landlording is the business of time. Every day I give up to "be nice" or understand why a tenant cannot predict their rent payment obligations when they receive a paycheck in the middle of a month is a day of rent I will never get back. Getting tenants to break their bad habits and accelerate their rent payments is always the end result. Nobody moves to get a 5 day grace period on their rent.
Yes, these lease terms are essential to making tenants better stewards of my money. The fact is rent is due on the first. Landlording is the business of time. Every day I give up to "be nice" or understand why a tenant cannot predict their rent payment obligations when they receive a paycheck in the middle of a month is a day of rent I will never get back. Getting tenants to break their bad habits and accelerate their rent payments is always the end result. Nobody moves to get a 5 day grace period on their rent.
There have been several recent threads here on BP that make a mighty big deal about rent being late after the 1st, but where the grace period is 5 days. I just can't wrap my head around a "grace period" these days. If no late fee can be charged, and no notice can be filed, what's the point of calling it late? Who wants to be right on principal but with no rent check in hand on Day 4.
I always take the partial payment but I also do a partial payment form protecting my rights. (This may not protect the landlord as much as it makes the tenant think they can't get away with some scheme) Get everything in writing.
Your late fee seems low to me I figure the late fee should be 7% to 8% of the rent. I am not sure what benchmark other landlords use.
In my experience, If they are unable to pay all of the rent until the middle of the month. They will probably be unable to pay the next month's rent on time as well, no matter how much they assure you they have it all figured out.
Unless it is a problem tenant I would rather be patient and collect the late fee than have the tenant do a payday loan.
In Maryland late fees are capped at 5% of the current rent amount, but we can accept partial payments without it meaning a thing with respect to the tenant's obligations. I've had courts both agree and disagree with me about the grace period being the "landlord's option" because the lease I inherited would say the rent was both due on the first and there was a grace period until the 5th.
I tell tenants your grace period starts on the 25th of the preceding month whenever they ask about it.
Put the notice to pay or quit on their door, email, cert mail, hand it to them, whatever.
If they don't pay by the date you set then start eviction.
That is pretty much what the pay or quit notice says.
Check with your attorney though
Yes, these lease terms are essential to making tenants better stewards of my money. The fact is rent is due on the first. Landlording is the business of time. Every day I give up to "be nice" or understand why a tenant cannot predict their rent payment obligations when they receive a paycheck in the middle of a month is a day of rent I will never get back. Getting tenants to break their bad habits and accelerate their rent payments is always the end result. Nobody moves to get a 5 day grace period on their rent.
There have been several recent threads here on BP that make a mighty big deal about rent being late after the 1st, but where the grace period is 5 days. I just can't wrap my head around a "grace period" these days. If no late fee can be charged, and no notice can be filed, what's the point of calling it late? Who wants to be right on principal but with no rent check in hand on Day 4.
I completely agree with you. This tenant habitually pays on the 4th or 5th of the month. At this point, I am pretty sure the tenant believes the rent is due on 5th. Needless to say I learned to make sure my lease states rent is due on the first late on the second, waiver of notice to quit and I have to option to file the eviction on the 2nd. I also give other units a "discount" usually 50$ if the rent is paid on the first or earlier. This has dramatically improved the timing my other tenants pay their rent.