Investor · Allen Park, MI · Member since 2015 · 18 posts · 4 votes
One of our rental properties is free and clear, and the tenants have been in the home approximately 3 years. This property is being taken care of through a property management company. This past year, the tenants have ALWAYS been late, sometimes 30 days. Legal paperwork is always filed and they ALWAYS pay. Problem is, their lease expires Feb 1, 2016 and my wife and I are not sure if we should renew their lease or not. Any suggestions or comments would be greatly appreciated. Thank you.
Residential Real Estate Agent · Philadelphia, PA · Member since 2013 · 82 posts · 33 votes
10y
I am in the same boat.
My tenants are good tenants. They take care very good care of the house, treat it like their own and told me that they made it their home and would like to stay for at least 3 more years, if possible. Buttttt.....they are always late. From 1 week to 3 weeks late. But they pay. And they pay their late fee. Their lease is up at the end of the year and I told them that we'll do month to month until the summer and then we'll renew if they've improved on their payments. I personally would have late paying tenants who are decent people, taking care of the house over the next tenant who could be potentially horrific....and I'd rather not deal with the turnover. Just my opinion :)
Developer · New Orleans, LA · Member since 2015 · 1k+ posts · 898 votes
10y
@David Yuhaz Unless your property is in an area where the rental market is difficult to rent, I would not renew the lease. Ain't worth the aggravation of having a tenant that you (or your PM) is always chasing for the money. Plus always having to file for evictions is wasting someone time, likely yours.
Investor · Phoenix, AZ · Member since 2014 · 230 posts · 122 votes
10y
On the face of it, I agree. However, is there a late fee clause in which case you're making more money than if they'd paid on-time? What's their excuse for constantly being late?
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
10y
Can you rent the unit for more money? Is this stressing you out? I would probably not renew or in the alternative, raise the rent quite a bit to compensate. Do you get the late fees or the PM? I no longer have late fees. I raise the monthly rent and then offer a $75 discount if they pay before a certain date. I understand that in some areas courts will not allow late fees so I adopted this new tactic in the event I am forced to file an eviction. Not sure how it would work or look in a court of law....TBD at some time in the future:)
Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
10y
@Stone Teran has a very good point. If you are a good landlord there is always a tenant that will happily rent from you and pay on time and be grateful.
Rental Property Investor · Indianapolis, IN · Member since 2014 · 554 posts · 153 votes
10y
@David Yuhaz question is are you able to find more qualified applicants for the property? Its great the property has been well taken care of. If you do decide to move to another applicant it will be very little renovating for next tenant.
I personally would keep the tenant since they have ALWAYS paid and simply increase the late fee.
Milwaukee, WI · Member since 2014 · 180 posts · 114 votes
10y
I'm in a similar situation with a tenant that consistently pays 15-20 days late. I elected to renew the lease, but went month to month. In hind sight, I shouldn't have renewed the lease this fall as it's an ongoing hassle I should have moved on from. Since I'm month to month now, I'm waiting until Spring then sending notice that I'm not renewing the lease.
Real Estate Broker and Attorney · Durham, NC · Member since 2015 · 74 posts · 73 votes
10y
Hi David,
I personally like to keep a paying tenant as long as possible, but, I would try to modify their behavior. If I was in your shoes, I would do one of two things depending on if you want a contract which would hold them for a definite period of time, or you just want them until you are unable to bear it:
1. Devise a plan whereby you inspect the house, and assuming your inspection reveals they are Ok tenants (normal wear and tear), then I would let them stay on month-to-month on sort of interim plan contingent on paying on-time rent. If they pass this, then you can sign a new, strict contract for a certain term. OR
2. Keep them month-to-month indefinitely.
With the first plan, and this will depend wholly on if they want to sign a renewal lease too, I would start by inspecting the house because, in my own experience, although it is not always true, it usually ends up that the tenants that don't take care of their finances, also don't take care of the things they are financing (lease payments) - meaning, they may not be taking the best care of your house. This way, assuming you have a deposit, you can tell how far it can stretch too. If the house is in great condition - great, you know the deposit can be good for one or more years of wear and tear. If it is in terrible condition though, you know this is where they need to go.
Assuming that the inspection is a pass, tell them that, given their history of payments, you would keep them month-to-month on a sort of interim plan whereby they would have to start paying you on time. A sample plan would be "6-months, month-to-month, of on time payments will get you a renewed year lease." If they can manage to do that during that time frame you set, and believe me, for habitual late payers this is NOT an easy feat, then you would renew their lease. If they can't do it, you simply have to give them a 30 day notice and you are done, no worries about eviction.
If they pass this sort of test, when signing your new lease, clearly spell out that you now have a strict policy of on-time payment with this new lease that would be strictly followed. Make sure your lease dictates when rent is late, what the penalties are, when you would post a three day notice, and that this will be strictly followed. You want this new lease to feel separate from the old lease because courts are weary and are reluctant to evict late paying tenants of landlords who habitually allow late payments from a tenant, even if the Landlord has filed for eviction. The reason why is because you have set your tenant up to rely on you accepting late payments and not following through with evictions. Another thing is, and I am not sure of precedent in Michigan, but, here in Ohio, if you accept ANY portion of the late rent when you are trying to evict your tenant your eviction is likely to be rejected. So, do your best to make this lease somehow "different" than the previous so they know you are serious this time around and that you have somehow changed from the lease period.
With the second plan, you would keep them month-to-month for good instead of all of the above. This will give you leeway to raise rent with only 30 days notice (in Ohio at least), and will also help you avoid the eviction process altogether (assuming they left after you gave them required notice). Eviction will almost always take more than 30 days. Of course, you will not have the peace of mind knowing that they are legally bound to an entire year or more of a lease. You may find yourself having to find a new tenant in the middle of the winter (Michigan winters are worse than Ohio's brrr), because, remember, if they decide to leave - they too only have to give you 30 days notice.
Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes
10y
I would wait and do a short term lease at renewal till spring or summer when you will be able to find a larger pool of applicants.
In this lease you should make sure that you have all your costs and fees covered and increase rents and late fees based off the current market and tenant's past payment history. Make sure that you benefit from the fees that they might get charged.
P.S. I know landlords who charge as much as $200.00 for a late fee.
Cary, NC · Member since 2015 · 99 posts · 38 votes
10y
Many times tenants just decide that the hassle of dealing the the landlord/PM versus the penalty for not paying their credit card on time, for example, is worth not paying the rent on time. You just need to dangle a carrot. Instead of penalizing them for non-payment - yeah try to get that out of them plus the rent. Why not reward early payments.
If the market rent is $900, then raise your rent to $950 due on the 5th of the month. If they pay before the 5th, they receive a $50 discount. They see the incentive of paying on the 1st and if they don't, you reap an extra $50 for the hassle.
I had the same behavior from a former tenant and the issue was that she was allowed to be late by the first PM (she didn't want to do the PM business any longer and decided to quit).
My next PM found out she was late in paying (tenant actually said she wanted the same agreement-not something I knew about), which is when I found out. The 1st PM never said anything and explains why my net proceeds were sporadically deposited as they were.
Anyway, the next PM found the out and immediately put a stop to it by talking to the tenant to find out just why she was late all the time. She was horrible in her finances. Never had a budget and apparently didn't know how to create a budget. My PM worked with her, while still charging the late fee, to get her on track and she was never late again. By taking this action I kept a tenant and the late payments stopped.
Just a thought, there may be some reason the tenants are late and as owners/PMs we never find out if we don't ask.
At some point though there are tenants that can't be helped. In my situation it was a win-win.
Residential Real Estate Agent · Philadelphia, PA · Member since 2013 · 82 posts · 33 votes
10y
I am in the same boat.
My tenants are good tenants. They take care very good care of the house, treat it like their own and told me that they made it their home and would like to stay for at least 3 more years, if possible. Buttttt.....they are always late. From 1 week to 3 weeks late. But they pay. And they pay their late fee. Their lease is up at the end of the year and I told them that we'll do month to month until the summer and then we'll renew if they've improved on their payments. I personally would have late paying tenants who are decent people, taking care of the house over the next tenant who could be potentially horrific....and I'd rather not deal with the turnover. Just my opinion :)
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
10y
While you have lots of good suggestions I am with what Nicole said above. Do a trial month to month until the summer and then renew for a year if they do ok with it, otherwise give notice. You can also try a carrot in any new lease by offering a lower rent if it is paid by the first and higher rent on the date you are allowed by law to charge a late fee in your state. This is since some states consider such things another type of late fee.
Investor · Quincy, MA · Member since 2015 · 30 posts · 14 votes
10y
I was in the exact same situation, and decided to renew the lease (since my property management company would take 1 month's rent as a placement fee to find a new tenant).
In the end it didn't matter, because a few months after the lease was renewed, the tenant stopped paying altogether and was evicted, and I ended up needing to find a new tenant anyway, but this time I missed out on the month's rent that they didn't pay and they left the place trashed. It would've been cheaper to not renew the lease.
One of our rental properties is free and clear, and the tenants have been in the home approximately 3 years. This property is being taken care of through a property management company. This past year, the tenants have ALWAYS been late, sometimes 30 days. Legal paperwork is always filed and they ALWAYS pay. Problem is, their lease expires Feb 1, 2016 and my wife and I are not sure if we should renew their lease or not. Any suggestions or comments would be greatly appreciated. Thank you.
Have them sign a new lease with a NSF penalty of 100$ or more. I bet they will start paying on time if they don't move out.
Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
10y
I faced this same issue with an tenant placed in an out of state property at the beginning of this year. I was leaning toward not renewing after his 2 year lease expired, but the PM who focuses on long term leases and avoiding turnovers, adviseed me to keep the tenant in place if possible. As it is they were waiving collecting the late fees for this tenant (which normally they would keep if paid). They also made it clear to the tenant that he needed to demonstrate that he could pay on time before the renewal came up. He did much better for a few months, so I agreed to the renewal - 3 years. This year he has generally been making his monthly payments in two installments, both of which have come in before the PM pays me on the 25th. So that's worked out OK so far. I credit the very professional PM a lot for making this work thus far. I still track every month on how he is doing. Ironically he just made his December rent payment in full today. Christmas time always seems to be the worse for him.
I think taking your tenant to a short term renewal, making sure that on time payments will be important for a longer term renewal may be your best option to avoid turnover costs. That was not an option open to me, or I probably would have taken it.