Tenant failed to change service into his name - now delinquent

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Tenant failed to change service into his name - now delinquent

Paul D.
Real Estate Investor · San Francisco, CA · Member since 2016 · 16 posts · 1 vote

This is in Idaho.

My tenant moved in a few months ago and has been paying rent on time. Our rental agreement specifies that he is responsible for trash/sewer utility bills. When I noticed I was still receiving bills for the trash and sewer service in my name (the service is provided by the city), I kindly reminded him to change the service into his name and take care of the bill. He said he "thought that he took care of it" and that he would fix it as soon as he had a moment.

A few weeks later, when I received another bill, I emailed him again to remind him to change the service into his name.

Fast-forward about a month and I have received a notice from the city that the account has a delinquent balance that has been referred to a collection agency. I talked to my tenant about this and he says that he lost his job a while back and is working on catching up.

I know, I should have verified that service was in tenant's name before signing off on the lease, and I will be more careful about that next time. But what should I do now? Pay the delinquent balance as well as the current bill (both of which are in my name) and ask him to repay me once he has the funds? The city needs to hear it form the tenant before it switches service into the tenant's name.

Thanks in advance!

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Matt B.
Investor · Bethlehem, PA · Member since 2016 · 229 posts · 122 votes
10y

@Christian Bors, the OP said the tenant lost their job. Statistically speaking, the chances of any tenant catching up are slim to none. In order for the tenant to catch up, they would have to make well more then what they were making before they lost their job in order to pay what was past due and what is currently due. Not to mention the negligence on the tenants behalf for A) not actually switching the utilities like they were supposed to originally B) lying to the OP by claiming they thought they did it already but will do it again and C) not informing the OP that they lost their job in a timely manner. In my rental agreement, the tenant is required to notify me for any changes in their life that may result in them no longer being qualified to rent my property (i.e. loss of income). This situation is something that would result in me losing trust with my tenant and I would no longer want to work with them. A tenant is a business partner in the RE world, your business would be no where if you didn’t have them. I chose to not have people who lie to me and show no responsibility like that be my business partners. Think about it, would you rent to someone who lied to you on the application? I assume no, so then why would you want them in your property if they lie to you after they are already there?

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  • Matt B.
    Investor · Bethlehem, PA · Member since 2016 · 229 posts · 122 votes
    10y

    Evict...pay the bill since in your name and sue to recover.

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  • Christian Bors
    Real Estate Agent · Mechanicsburg, PA · Member since 2014 · 529 posts · 217 votes
    10y
    Matt Bacenet it is not that simple. Paul D. You have to look at the hole picture. If you evict, you will lose rent for 1-2 months plus the cost to get the place rent ready. Do you want to evict over something small like $50 bucks? That's your decision, but make sure you understand what you are doing. Second and more importantly, YOU need to pay the bill. If the sewer bill is coming from the city, congradulations! Keep ignoring it and the city will file a lien. Government provided utilities are lienable. It surprises me when people don't understand this. I never let the tenant put utilities in the tenants name if it's lienable. Simply pay the bill monthly, and send a paid receipt to the tenant saying please include this additional amount in next months rent. As far what to do with the tenant. You have a tough decision to make. I would send him the bill and tell him to pay you the cost within 10 days or you will serve the notice to quit. He ignores you, send a letter. If he still ignores to pay and if he's a good tenant maybe I would let him stay or maybe I would start the eviction. Depends on the tenant, type of rental and time of year. Remeber winter is coming and it makes renting apartments more difficult. Good luck
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  • James Mc Ree
    Rental Property Investor · Malvern, PA · Member since 2016 · 1k+ posts · 934 votes
    10y

    I recommend paying the bills immediately to preserve utility service to your property.  You will only incur additional costs by not paying it.

    You may be able to charge your tenant's security deposit for the amount owed.  That will make you whole, at least for now.  You should send your tenant a letter containing the bills and a reference to the lease terms to document the charges.

    A conversation with your tenant is certainly in order.  It is great the tenant is properly paying the rent.  It looks like your tenant agreed to convert utilities maybe a couple of times and didn't.  I would demand the tenant convert the utilities today or explain why that can't be done.  The explanation may highlight that you have upcoming rent problems which may give you a chance to avoid a rent lapse.

    If a money shortfall is the general problem, you could ask your tenant how he/she intends to pay the next rent and utility bill?  Suggestions of borrowing from friends and family might be in order with eviction as the alternative.  I would mention the possibility of eviction but not threaten it as imminent if the tenant seems willing to comply.

    Jim.

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  • Matt B.
    Investor · Bethlehem, PA · Member since 2016 · 229 posts · 122 votes
    10y

    @Christian Bors, the OP said the tenant lost their job. Statistically speaking, the chances of any tenant catching up are slim to none. In order for the tenant to catch up, they would have to make well more then what they were making before they lost their job in order to pay what was past due and what is currently due. Not to mention the negligence on the tenants behalf for A) not actually switching the utilities like they were supposed to originally B) lying to the OP by claiming they thought they did it already but will do it again and C) not informing the OP that they lost their job in a timely manner. In my rental agreement, the tenant is required to notify me for any changes in their life that may result in them no longer being qualified to rent my property (i.e. loss of income). This situation is something that would result in me losing trust with my tenant and I would no longer want to work with them. A tenant is a business partner in the RE world, your business would be no where if you didn’t have them. I chose to not have people who lie to me and show no responsibility like that be my business partners. Think about it, would you rent to someone who lied to you on the application? I assume no, so then why would you want them in your property if they lie to you after they are already there?

    1Reply
  • Kathleen Leary
    Princeton, KS · Member since 2014 · 357 posts · 169 votes
    10y

    Moving forward: the day following "switchover" of utilities to the tenant (whatever date they've told me they were going to open their own utility accounts), I ALWAYS call the utility & double-check. Do not let this go any further. If the utility has not been transferred, you end up where you are now. A phone call can save that trouble. My lease has provisions that spell out penalties, etc. for failure to transfer, which then gives me the option of eviction. I would certainly consider it for the above-mentioned reasons.

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  • Douglass Benson
    Investor · Mason, MI · Member since 2014 · 151 posts · 152 votes
    10y

    Evict due to a lack of adherence to the lease. Go for a money judgment as well that includes the utilities he owes you. This isn't a good tenant and an empty unit is more valuable than one with a bad tenant in it and it doesn't matter what time of year it is. Tenants don't improve with the seasons.

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  • Jeff Rabinowitz
    Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
    10y

    Tenants are like diapers--sometimes they must be changed for similar reasons.

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    LOL @Jeff Rabinowitz

    Good one and so true.

    OP...EVICT. It MAY be illegal to shut off utilities..and since they are in your name, it could cause problems down the road if you need their services. 

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  • Paul D.
    OP
    Real Estate Investor · San Francisco, CA · Member since 2016 · 16 posts · 1 vote
    10y

    Thank you very much to everyone who replied. I appreciate all of the input.

    0Reply
  • Christian Bors
    Real Estate Agent · Mechanicsburg, PA · Member since 2014 · 529 posts · 217 votes
    10y

    @Matt B. While I agree it is very unlikely a tenant would catch up on monies owed, it didn't sound like the tenant was behind on rent.  It sounded like the only issue was 1 utility bill.  The OP did not say the tenant has been behind on rent.  If he was behind on rent, I would immediately start the eviction process.  I would not listen to the sob stories about how my life is so difficult and the world is out to get me.  To your point, this is a business but if the tenant has been paying rent on time except for 1 bill I might reconsider.  I had a discussion with a fellow investor a couple of minutes ago discussing the BIGGEST impact to cash flow.  We concluded the answer is turnover.  Whether its cash for keys, evictions, or simply a tenant leaving; the cost for turnover is very expensive.  Hence, I would not necessarily start the eviction process right away if only 1 bill hasn't been paid.  Also, as I mentioned earlier, @Paul D. should NOT make the tenant put the sewer bill in the tenants name.  That is a lienable utility since its provided by the city.  He should keep the service in his name and bill the tenant each month.  This would solve the problem.  Its more difficult for a tenant to say they "forgot" or "I thought I took care of it," if the payment has to be made to the landlord.  In essences, all I am saying is the answer is not simply black and white w/ the information provided by the OP.

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  • Paul D.
    OP
    Real Estate Investor · San Francisco, CA · Member since 2016 · 16 posts · 1 vote
    10y

    Yes, to reiterate, the tenant has made 3/3 rent payments on time.

    The utility in question has not bee paid by the tenant sine the time he moved in about 3.5 months ago (I think it may have been two bills by now). I paid the balance on that account in full today.

    Thanks also to those of you who have pointed out how to properly handle the city-provided utilities in the future. 

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