First off, thanks for any responses to this, I truly appreciate the insight from investors more experienced than me. Of the 9 rentals I own, I currently have 8 of them under property management. The one I manage myself was a tenant I inherited from the previous own. It is my best performing property rent wise. Because the tenant that is currently living there has been nothing short of great when it comes to how he treats the property, he maintains it on his own, and in the 9 months I have never received a phone call about anything, I didn't want to pay for management company when there has been no reason for management. He has lived there for 15 years, (not sure why he has never wanted to own, but thats beside the point) so I want to give him the benefit of the doubt but he is constantly late on rent. Although he has never missed a payment, he is a habitual late payer. One month it is the 8th, the next it's the 12th then the 3rd. I know the correct answer is to begin the eviction process on the 6th if rent is not paid, but like I said, I know I am always going to get rent, so I let it be. Has anyone ever had any experience with a situation like this and if they have some advice on how to approach this, (other than the quick eviction!) it would be much appreciated. Thanks guys! -Nolan Sanburn

When to Pull the Trigger on a Good, but Late Paying Tenant

Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes

9y

It's really up to you. If he is always paying within the current month, that might be okay with you. But it's when it gets to the next month and he still hasn't paid the prior month. You can't let time build up. For example, I'd get nervous if I didn't have all January rents by the 15th without filing paperwork (I typically file before that, but might be easier on someone who has a good track record).

I assume you've spoken with him about this issue? What does he say?

Does it bother you enough to offer him $20 off rent if you *receive* it no later than the 3rd of the month?

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Linda S.

Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes

9y

We have a similar situation where it's an inherited tenant, really nice guy, doesn't complain, but he's always late. If you can, try restructuring your lease, to offer a discount (or current rent) if the money is paid by the first, if it's not, it goes up in the grace period, and if it's past that, put as high as a fee as your state allows.

I personally wouldn't evict, just make the fee structure more aggressively in your favor and help train him to pay earlier.

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Nolan Sanburn

OP

Investor · Birmingham, AL · Member since 2016 · 5 posts · 3 votes

9y

Originally posted by @Nicole A.:

It's really up to you. If he is always paying within the current month, that might be okay with you. But it's when it gets to the next month and he still hasn't paid the prior month. You can't let time build up. For example, I'd get nervous if I didn't have all January rents by the 15th without filing paperwork (I typically file before that, but might be easier on someone who has a good track record).

I assume you've spoken with him about this issue? What does he say?

Does it bother you enough to offer him $20 off rent if you *receive* it no later than the 3rd of the month?

He agrees with me based on the fact that he has to get better, but at the end of the day there is no change. I really like the idea of structuring the lease in tiers that incentive him to pay on time. Thankfully, his lease is getting renewed next month so we will change that part. I also need to be more diligent on reminding him about rent at the beginning of the month. I will get better on my end as well.

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Nicole A.Pro Member

Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes

9y

It's not your job to remind him of the obvious...to babysit him and take time out of your day. So don't go out of your way to remind someone of rent when they know it's coming and won't pay on time anyway. He's already acknowledged he knows about this problem. Offer a simple incentive. I would not recommend increasing the rent by the day. That becomes way too much accounting of details and work for you. Rent is X if received by the 3rd of the month. On the 4th, rent is Y. By the 7th, I will have to start filing eviction proceedings which will result in fees.

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Linda S.

Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes

9y

@Nolan Sanburn,

Be diligent with fees, and enforcing the lease. If you know he is a great tenant, but will likely always pay late, you'll do him and yourself a favor to train him. Look up your state laws regarding maximum late fees (VA is 9% of rent), and structure it to help you. Stress to him you don't want the extra money, but if he's late, at least you can get some money to pay for the stress.

Also, the day he is official late, slap a 5-day pay or quit notice. Just tell him it's a legal notice, and normal procedure. It backs you up if you need to start the eviction process. We did this to a tenant, and they actually paid early the next time! Good luck! Be firm!

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Paul F.

Investor · Charlotte, NC · Member since 2016 · 23 posts · 6 votes

9y

Another vote here for restructuring his lease to incentivize him to pay on time. If he continues to pay late, I would start to look at eviction options only if the headache of having to track down rent every month outweighs the benefit of the late fee he is paying.

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Rick BassettBusiness Member

Property Manager · Greater New Haven, CT · Member since 2010 · 377 posts · 434 votes

9y

We have a similar situation with a long term commercial tenant who has been in for 16 years. For the past 10 years they are 1 month behind with rent and always pay $100 late fee on their $2k rent.

We are diligent with collecting rent on time with all of our other properties (residential) but only put up with this from the commercial tenant as the commercial market for this property has been soft/weak for the past 15 years and we have no appetite to have the property sit vacant for a year or two to prove a point. Also we are consistently earning 5% on our money every month.

Sometimes you have to carefully pick your battles.

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Billy Smith

Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes

9y

Rick has a simple point if they want to pay late then charge late fees i.e. follow the lease language. Banks make a fortune on it fact they like late payer’s fees part of their business model.

1 Reply

Deanna McCormick

Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes

9y

Honestly 15 years he's lived there and your huffy for late rent payments... You've had no turns no lost rents and bascially I bet not much fixing in the house while he's lived there.

YA go ahead and be strict and then file for late or non payment and get another tenant that will pay late and start the whole thing all over again..

Reality is he's paying .. and you have no expenses.. kind of a no brainier to me...

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Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

9y

Dealing with late payments, especially with inherited tenants is extremely simple. The reason he pays late is because you have trained him to believe late payments are OK. That is always the cause of repeated late payments.

Normally with inherited tenants you inform them in writing that late payments will not be tolerated. If you change payment requirements to accommodate the tenant that is the tenant training the landlord. You never want to fall into the trap of being controlled by a tenant. The fact is every tenant has full payment available on the 1st if they want to remain in the unit.

In your case since you can not manage the tenant you should have your PM take over the property. They will correct the issue of late payment in short order.

If you wish to keep the management you have several options. First send written notice that late payments will no longer be tolerated and if it happens they will not have their lease renewed. If you renew put them on a M2M so you can terminate quickly.

Your other option is when you renew raise the rent to the maximum you can under state law. If there is no limit raise it $500. You then provide a discount to your regular rent as long as rent is paid on time in full. First time they are late they pay the full rental amount for 6 months. Provided they have no lates for 6 months the get the discount back. You will not have another late.

If your state regulations do not allow this you either properly manage the property, turn it over to someone who can or live with late payments. All very simple management decisions non of which should lead to a eviction.

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

9y

I am pretty strict with paying on time. That said, other than the fact that he's been trained that paying late is OK, is there a structural reason that could change the scenario? IE, let's say he is on disability or Social Security and gets his check on the 3rd of the month. His poor budgeting skills are not really your problem, but a simple change in due date might solve the problem.

Key: always figure out what your objectives are. If your objectives are a completely hassle-free ownership experience, with a tenant that is always paid, this guy might be ideal. If your objectives are getting payment in full on/before the first of every month for accounting/mortgage/whatever reasons, this guy is screwing that up.

One other thing: Greg is right in that the tenant has trained the owners to accept payment whenever. Once a tenant has been trained one way, especially in a long term manner, they are unlikely to change. On the other hand, having dealt with paying customers for decades, some people are good, honest people, but are a hot mess, and will always be cavalier in when they make payments. The grace period is designed for the hot mess people.

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Joe SplitrockPro Member

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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

9y

@Nolan Sanburn who told you the right answer is to evict him? Long term tenants like that are gold and the fact that he struggles to come up with rent every month, means he will never move. He will never have money to buy a house or even for a down payment on another place. I would just structure the late payments such that he pays a late fee, so you get compensated for the trouble. Another option is to take bi-monthly payments that line up with his pay days. I have done this in the past and it is easier for tenants who have trouble managing money.

1 Reply

Deanna McCormick

Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes

9y

@Joe Splitrock I agree, some people have no idea how good they have it with regular late paying tenants. late or not he still is paying.... You figure if rent was $1000.00 a month x 12 = $12000.00 times 15 years = $180,000.00 so "Pull the trigger" and shoot yourself in the foot so you won't trip over handing him his notice.. or late rent fee notice... honestly I'd love a tenant like this all year long.

Have you figured out potential loss for turns, painting advertising? Usually 5% is what's set aside so what's 5% of $180.000.00 it's $9000.00 so that's a big pot of money.. and you've saved every dime of it so far... basically almost 9 months of rent.. so there's more than one way to look at it. I'm not saying you don't have a right to your money.. or to rent increases,, but in the big picture this guy likes his home and will probably stay till he can't walk up the steps any more.. longest we had a tenant for was 16 years and she'd still be there today if she could have crawled up the steps.. we never made her late rent a issue, which happened occasionally, she hardly never complained kept apt clean, and us informed of other tenant issues... we did work as needed painted occasionally, she loved the apt and we were sorry when her limited mobility made it impossible for her to live there any longer.. Pick bigger battles.. is my 2 cents.

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Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

9y

All my tenants pay on time and all are excellent, mostly long term tenants. I weeded out all the hot mess, late paying unreliable ones and now have what every landlord dreams of having ....good tenants.

If a landlord chooses to cherish long term tenants and ignore the inconvieance of dealing with hot mess, late paying, irresponsible people so be it.

I have better things to do with my time than chase tenants for rent. I find it extremely irritating and disrespectful on their part. I resent tenants that treat me with that level of disrespect and prefer not to have tenants that essentially flip me the finger on the first of every month.

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Penny ClarkPro Member

Sacramento, CA · Member since 2014 · 513 posts · 319 votes

9y

Lots of good input here but what really matters is what works and is acceptable to you as the landlord. We have one rental that has an inherited tenant whom pays the rent on the 15th because that's when she gets her retirement payment. Sure we could have insisted she pay by the 3rd like we do our other rentals but she pays like clockwork on that due date and treats the property well. I have a client with a rollover tenant who has paid late since we took over management. I asked her about serving notice and getting one in who would pay on time. She said she'd rather keep him because he pays the rent and the late fee ( a hefty $65) consistently and so she makes more- go figure. Point is, it really is up to you as long as the late pattern doesn't mess with your bottom line.

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Jack B.

Rental Property Investor · Seattle, WA · Member since 2014 · 1k+ posts · 1k+ votes

9y

Originally posted by @Nicole A.:

It's not your job to remind him of the obvious...to babysit him and take time out of your day. So don't go out of your way to remind someone of rent when they know it's coming and won't pay on time anyway. He's already acknowledged he knows about this problem. Offer a simple incentive. I would not recommend increasing the rent by the day. That becomes way too much accounting of details and work for you. Rent is X if received by the 3rd of the month. On the 4th, rent is Y. By the 7th, I will have to start filing eviction proceedings which will result in fees.

Personally I'd just charge hefty late fees to discourage this behavior. In fact I do. On top of this I also charge $200 to serve the 3 day notice to pay or vacate.

I had a tenant recently who texted me on new years day telling me he was going to be late because he forgot the banks are closed...I told him that wasn't a problem, he should just include the late fees when he pays. He paid me $50 more than he had to since he paid 3 full days late and accrued fees by the day. I bet he won't make the same mistake again, though I consider late fees extra profit for the extra stress. Lot's of businesses make huge profits from late fees. Imagine having thousands of rentals and a $25 late fee just for being one day late, with 10% of the tenants paying late. Heck, as long as they are otherwise good tenants, IMO, it's a small detail.

Of course nothing is perfect when dealing with humans, especially tenants...

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Levi T.Pro Member

Rental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes

9y

Please don't start making deals with tenants to get rents sooner, that is what late fees are about. Make sure your late fee mean something, 10% of rents, maybe more. You know, $95 or $130, make it painful, but not to painful.

As you get larger as a landlord you will find your more like a lender, you lend assets called an apartment. The credit risk of your borrowers (the tenants) is always part of the business.

You can try to stomp out the issue with all the force in the world. Once the last bad tenant is removed, another will pop up in its place. Time passes and you start to see it's about manage this credit risk, there is a percentage that just pay late, but not to late. It's that point that they can still cycle the cash to make rent somewhat on time. If they get to the point that they pay on the 15th or 20th each month, and can't get paid the following month within the first 10 days, them that means they can't cycle the cash to pay the debt.

So what does one do you ask? You stage things out. First you send pay or quit notices on the 5th, 10th certified, 15th file court paperwork. Even if they pay (Remember to accept rents with reservations), go to court the next month if they have not paid the debt in full time the court date, get a UD (Unlawful Detainer) but wave the judgement as you expect them to pay. Now you have 12 months to use the Writ for UD, let the tenant know they are underwater and you have the Writ. They will get things right, or you can file the Writ and remove them and replace that non performing tenant.

Banks do the same thing, each month they have a percentage of tenants that are late, or don't pay, they draw lines in the sand and apply force at each interval till they have to foreclose on the loan. Same idea for you as a landlord. For us the line is $400 in total debt still due, at that point we keep moving forward with the UD or file the Writ.

We have inherited many tenants that lives in units 15-30 years, some tenants we have had moved in when the property was built (crazy to think).. don't mean they pay on time. Landlords sell for one reason, the property become a headache and they decide it was time to move on. Most of the time this is because the tenant does not perform with timely payments, and the unit has falling out of repair, or both.

Not legal advice, blah blah blah, entertainment only*

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Jerry W.Pro Member

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Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes

9y

@Nolan Sanburn, I go by the headache factor. I would probably not mess with a 15 year tenant over rent less than 15 days late. Think of your dollar outlay to update the property, paint, carpeting, etc. If the late rent is really bugging you then get rid of the headache and go on. I have a pretty demanding day job, and no headache tenants are the best tenants.

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Lois Ginter

Rockford, IL · Member since 2016 · 126 posts · 48 votes

9y

I give my tenants five days grace before late fee because my units are C-, working low income. If they can pay half before the 5th, I waive the late fee. They have good jobs for the area, and families, so I try to work with their pay days. Steady good tenant who needs help sometimes. But I screen like crazy, and live onsite.

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Ben H.

Real Estate Investor · Frisco, TX · Member since 2015 · 40 posts · 4 votes

9y

I have a similar situation but I set a threshold in that as long as they don't overlap months, I don't sweat it. This family has been tenants for four years but his job is one which pay is inconsistent. They keep the place better than I ever did when I lived there. They have 2 young children which I can empathize trying to raise. The way I see it is if I had tenants that moved every year or did not keep my property well maintained, it would cost me significantly more. When renewing their Iease, I indicated if they paid on time I would discount their rent $25. Guess what. They still are late and I get another $25 a month to manage it. In the 4 years they have been there, I can count on one hand how many times they have paid on time. In the end, it is a good relationship and we have recently agreed to chip away at them being late by adding another $100 on their rent until they get caught back up. We will see how it goes.

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Al Williamson

Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes

9y

I vote for charging a late fee and being strict about it. If he gets a month behind, then all bets are off. Issue the 3 day pay-quit.

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JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

9y

Originally posted by @Thomas S.:

All my tenants pay on time and all are excellent, mostly long term tenants. I weeded out all the hot mess, late paying unreliable ones and now have what every landlord dreams of having ....good tenants.

If a landlord chooses to cherish long term tenants and ignore the inconvieance of dealing with hot mess, late paying, irresponsible people so be it.

I have better things to do with my time than chase tenants for rent. I find it extremely irritating and disrespectful on their part. I resent tenants that treat me with that level of disrespect and prefer not to have tenants that essentially flip me the finger on the first of every month.

I don't disagree with this, but will point out that everything is scale. I don't know how many units you have, but if you have 100 units I guarantee some of those people are late at times - it's simply not possible to have 100% compliance 100% of the time. The law of averages works against you. Unless your scale is so small as to be statistically insignificant, it's not realistic for any business to expect 100% capture rates. And the other part of that is that, depending on the locale, you may not have any choice but to accept late payments. Even a 3 day "pay or quit" is going to give the tenant 4-5 or more days to pay without further action. There may be some locations that allow you to refuse rent on day two and send them packing without recourse, but I don't know what those locations are (and I doubt Canada is one, though I could be wrong). Where I am, you can't even charge a late fee until they are more than 5 business days late, and I'm in a "landlord friendly" state.

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Joe SplitrockPro Member

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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

9y

Originally posted by @JD Martin:

Originally posted by @Thomas S.:

All my tenants pay on time and all are excellent, mostly long term tenants. I weeded out all the hot mess, late paying unreliable ones and now have what every landlord dreams of having ....good tenants.

If a landlord chooses to cherish long term tenants and ignore the inconvieance of dealing with hot mess, late paying, irresponsible people so be it.

I have better things to do with my time than chase tenants for rent. I find it extremely irritating and disrespectful on their part. I resent tenants that treat me with that level of disrespect and prefer not to have tenants that essentially flip me the finger on the first of every month.

I don't disagree with this, but will point out that everything is scale. I don't know how many units you have, but if you have 100 units I guarantee some of those people are late at times - it's simply not possible to have 100% compliance 100% of the time. The law of averages works against you. Unless your scale is so small as to be statistically insignificant, it's not realistic for any business to expect 100% capture rates. And the other part of that is that, depending on the locale, you may not have any choice but to accept late payments. Even a 3 day "pay or quit" is going to give the tenant 4-5 or more days to pay without further action. There may be some locations that allow you to refuse rent on day two and send them packing without recourse, but I don't know what those locations are (and I doubt Canada is one, though I could be wrong). Where I am, you can't even charge a late fee until they are more than 5 business days late, and I'm in a "landlord friendly" state.

I agree with the point on scale. Also it is good to keep in perspective that a landlord with one property owned and one vacant means 100% loss of income. If you have an apartment building with 100 units and 1 vacant, it is 1% loss. I would also draw a distinction between someone who pays late and someone who is being chased for rent. There is a difference. I have one tenant who occasionally pays late with a late fee. They always notify me before the 1st of the month and tell me what day they will pay on. They pay late, but per their promised late date. That is different than someone who is late, doesn't call and doesn't return messages. If I can trust my tenant, I will work with them, if they avoid my calls or lie to me then then they have to leave. A late payment from a tenant I trust takes no extra time beyond a 30 second text and in return I get $25-50 typically.

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Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

9y

Scale is very important. As a hobby landlord with one or two tenants chasing rent is relatively simple. A few hours of your time each month no big deal. If you have 100 tenants with 10% paying late you have a great deal of work on your hands.

I have a large enough number of tenants that chasing 10% would be far too much work. My system is based on requiring 12 post dated checks for the year. Any other system is dependant on the tenant initiating payment each month with post dated I initiate payment on the 1st. This way a NSF is the only reason I have late payment. First time it happens the tenant cost is for there bank fees, my bank fees and a small $20 admin fee. A second NSF and the next day I file a application with our landlord tenant board. The tenant then pays their bank fees, my bank fees, my $20 admin fee and a $170 landlord tenant board fee. This is costly for my tenants but only happens with new tenants.

I do have cases when something happens with a good tenant causing a NSF and only charge my bank fees and admin fee but this is extremely rare. I also have applicants that decide not to rent from me because of my rent enforcement system. That is a plus for me because they would likely have been bad tenants.

Jan 1 is usually my biggest headache. Some people are just forgetful. This year I was missing 4 of 65 checks the last week in December. I called each last week to remind them and I received the checks on the 4th. due to the holidays. I did not charge any late fee and now have all my checks for the rest of the year.

This system starts when I interview applicants and is all about training. Hobby landlords generally are adverse to training tenants and as a result are always the ones posting about tenant payment issues. Hobby landlords need to either modify their payment requirements or simply accept that training tenants is outside their skill set.

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Charles James

Contractor · Pasadena, CA · Member since 2016 · 9 posts · 3 votes

9y

Hi Nolan All these opinions are great, but you should take your own advice here. You work with this person on personal level, so you should know when to pull the trigger. I did not see anything in your post that stated you have attempted to work this out with the tenant over a certain period of time, but he has failed to respond. I would work with the good paying tenant, and make this problem go away. I wish you all the best.

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When to Pull the Trigger on a Good, but Late Paying Tenant

When to Pull the Trigger on a Good, but Late Paying Tenant

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