How Do I Collect From an Ex-Tenant
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
I have a tenant that left last October after being in the property for 5 years and there was damage in the property. I was very reasonable about assessing damage and made sure to prorate everything based on useful life. Still in the end they owed me around $1000. I sent them a summary within a timely manner asking them to pay. It was sent registered mail and they singed for it. I sent a follow letter asking for payment. No response from the tenant.
Judging by the mail I received after they left, they have a long line of collections people after them. I can take them to small claims court, but there are two considerations:
1. It is unlikely I will be able to collect on a judgement. That means I will use my time and energy for nothing in court.
2. There is the outside risk of retaliation. I have had one crazy tenant that threatened to damage my property. I don't think these people would do that, but they are heavy drinkers, so not sure what they might do when the alcohol is speaking.
I am interested to hear how all the experienced landlords on this forum deal with debt collection. What is your process? How does it change based on dollar amount owed or perceived risk of a crazy tenant? Any tips are appreciated.
Whether or not you end up actually taking the person to small claims court is largely a personal decision and also depends on whether or not you reasonably expect to be able to collect on a judgment.
I wrote about my experience with taking an ex-tenant to small claims court here: https://www.biggerpockets.com/forums/52/topics/252435-taking-a-tenant-to-small-claims-court-part-1
If nothing else, I’d suggest at least reporting the debt on their credit report with a service like one of these: Rent Recovery Service or Debt Reporting Service.
You don’t even need a judgment to report it, and - who knows - maybe some day they’ll need/want to pay it off. At a minimum, it’ll warn other landlords who check they’re credit that their a problem tenant.
Good luck.
I chalk up taking tenants to court as part of the cost of doing business.
Fortunately for me in my jurisdiction it cost very little (less that $200) to file in small claims court. Time wise maybe a couple of hours in total from prep to completion. This makes my decision very simple when combined with my desire to see those I consider to be criminal in nature to face the music.
To ignore the fact that their actions are, in my opinion, criminal does not allow me to turn a blind eye regardless of the time or cost associated with me taking action to "punish".
I know very few landlords are willing to take the moral high ground in dealing with reprehensible bad tenant behaviour but I am one. I further believe that this may protect other landlords in the future. Any tenant that believes they can take from me and walk away scot free will pay and maybe not do it again.
I've had one tenant leave my unit trashed. Here's why I let it go
A week before I got notice she was moving, a payday lender calls to verify some type of into. (this will be the loan she gets for a new deposit) it will be a crazy high interest rate, predatory in most states. She's suddenly single due to a domestic w/ her boyfriend.
She had her abusive boyfriend arrested for hitting her, and asked me to remove him from the lease. I complied, she was in a bad situation. Her move was to hide from him and start over fresh.
This girl was stuck, she knew I'd be upset over the condition of the unit and she just vanished on me. Her money was needed for a new place, I wasn't a priority. After a week of texting we met, she signed off on letting me clear the unit and as promised she was free to go. It cost me $1000 over her deposit to repair the unit, she learned that facing me and her problem was ultimately better than running from it per her friends advice. She expressed she was hopeful to never be in an abusive relationship again and appreciated me working with her and explaining why she could be straight with me and I'd do my best to be understanding.
If I had taken an aggressive route I would have had to store her trash, take her to court and further slow her down on her path to a stable life. For what, $1000 and so I can brag on BP that I'm a tough moral landlord, no thanks
I'm not sure the moral high ground is taking this person to court and getting a judgement. Understanding their situation and acting accordingly feels like the wise and human move.
@Linda S. that is a good suggestion. Even if they only paid a couple installments, it is better than nothing. That is almost what I want to tell them is just give me $200 and let's call it good. I did do a pre-inspection and gave them a list of things to repair. They started fixing things, but I think they ran out of time. She said she cleaned, but the place was dirtier than my house on it's worst day ever. Sad because the guy worked in construction, so could have fixed everything, he just lacked motivation.
@John Underwood I charge one months rent for deposit which was $1050 for them and is $1250 now. It seems going any higher than one months rent isn't typical in my market and can be hard for tenants to come up with. But good point if they appear risky then higher deposit reduces risk.
@Kyle J. I have been to small claims court a couple times and got a default judgement both times. Irresponsible tenants usually don't seem to bother showing up. I am confident I could get the judgement, but it is collecting that I see as the issue. I agree too, that collecting tenant information up front is the key. I get two relatives and two friend name and phone numbers, plus I get SS number with authorization to run credit after they leave if necessary for debt collection. Credit report usually has current address.
@Tim G. I see your point about "blaming yourself" for not catching a bad tenant. I did realize this tenant was being harder on the property and had them fixing some things along the way. As far as just accepting they won't pay, that is kind of like saying you left your door unlocked on your house and thief stole your belongings, so why bother reporting it to the police. Everyone is held to the same standards at move out.
@Lafo Manane I do have their current address. I found it is easier to get their address when you ask for it the right way. I always tell a tenant I need the address to settle their security deposit refund. It leaves the impression they are getting money, which in most every case they are getting money.
@Ola Dantis you are right that a random act of kindness can be a good thing. They are both working class people with two kids in grade school. Part of me thinks what is the sense in pursuing this since it is just a waste of time creating more trouble for these people doesn't help anyone.
"I'm not sure the moral high ground is taking this person to court"
The moral high ground came into play in accepting that what she did, regardless of the reason, was wrong. She stole from someone by not facing up to her financial responsibilities. The right thing for her to do would be to work out a payment schedule. Instead she dumped her personal life issues on someone else expecting they would cave.
Personally I could care less about other peoples personal life issues it does not absolve them of their responsibilities.
A landlords responsibility is to train tenants to be good not reward them when they are bad. Their next landlord now has a bad tenant that believes they can get away without paying.
I dislike the fact that the vast majority of landlords are not responsible in training tenants and as a result the rest of us must deal with their lack of caring. Every bad tenant was created by a irresponsibly bad landlord.
I would never want to come across as bragging about being moral, I am far from it. What I am is pi**ed that there are so many lazy landlords out their making our business so damb difficult.
@Joe Splitrock Most times, I just let people move on. It's a lot of time and effort to bring things to court if the tenants have already vacated the property. And yes, retaliation can be an issue which is something to be aware of. Only thing is if prospective employers and/or landlords call on behalf of the ex-tenant you just tell them your side of the story. ;)
The debt recovery service route is interesting. I have heard different things about what can be reported to the credit bureaus (including rent). If a mortgage can be reported to a credit bureau, why can't rent? I like the idea of a judgement, and either reporting to the bureau or sending the 1099.