Tenant wish to create Promissory note on Late Unpaid Rent

39 Replies

Tenant has extenuating circumstance and unable to pay rent for next 2 months (I already served him with 3 day pay or quit).  He suggested a promissory note which forfeits his security deposit as a short term bridge payment to cover for late rent as well as promise to pay 2 months rent. Note also stipulates if payment isn't paid by next 2 months, tenants will agree to vacate home before Oct 1, 2018. 

Has anyone had any experience with a situation like this? The promissory note sounds rather one sided, since he could just bail on 2 months rent and when it comes to the agreed day to vacate they will just not move out. 

Promissory note, that is funny.  The note stipulates it is not a commitment to pay and he will be leaving at the end of October. "Sorry I have to screw you" note

Never ever use deposit as rent payment. It is illegal in most jurisdictions and will insure you will be taking your tenant to court to cover damage. Can't wait to see which investors advise you take a chance on this tenant.

I vote evict and take him to small claims court to collect.

@Thomas S.   of course my reverse land lord style i have done this a few times NO note just a verbal hey go ahead and skip rent for 3 months since its so cold and you cant afford heat and rent.. then add it to the rent and pay it off over the next year..

they stayed the 3 months and then just left.. I am glad I dont need rental income to survive my style is reverse half the time i find the last few tenants i have are 3 to 6 months behind before i even look to see whats up. I hate tenants and just dont even look at it.. I just sold my second to last one.. one more and i am finally free of this brain drain..

Want to see how serious the tenant is . Ask them to sign over the title to their car and you have a set of keys . And if they dont pay in full by xxxx date you get the car . 

@James Hsia it’s a business. That’s what everyone says over and over again here. It sucks and tenants try to play to your emotions. Follow thru with the eviction and move on. They are already behind. Don’t get more in debt for them to live for free. If you can’t do it, hire a property management team that can. Make less money but sleep easier at night.
@James Hsia Rent is paid in advance. Landlords have a mortgage to pay. Once the rental service is consumed, what is the incentive to pay? Nobody goes to jail for “stealing” housing like they might for walking on a restaurant tab or writing a hot check. Do you like to choose your charities or have them forced on you? Its a business. You have rules you always follow or your business fails...for example, rule #1 is always charge and collect rent when someone lives in your property.
@Marian Smith plus, you are getting close to the holidays if you end having to go through the whole eviction thing in October, not the nest time of year for a vacancy. Hate to preach hard heartedness, but they have friends and family...which you are not.
@James Hsia if he can’t pay for the next two months then he or she will need to move out and find a friend or family member’s couch to sleep on. I would not even consider such a request because in two months when they are still there you will then lose more rent and court costs having to evict them. You will likely not be able to collect the lost money in rent, court costs, and damages. And you will be stuck with a winter vacancy when it is usually harder to find a tenant. I would proceed with the eviction. If the tenant concerned about ruining their record by being evicted you could perhaps let them know that if they move out by Friday and leave the property in good condition you will not charge them any early termination fees and will drop the eviction. Then quickly find someone else to fill the vacancy. That is the most grace I would consider for these tenants.

If a tenant is late on payments there is usually no chance that they can afford double payments later to get caught up. Unless they inherit or something like that - and I guess you would have mentioned that.

You are not a bad person for asking them to move out. Try to pay at the gas station or the grocery store with a note..

I always try to cooperate with the tenant and help them help me. I am prepared to help them cover moving expenses with some cash for keys if needed, but I never had to actually go that far.

But you can't delay - I have never lost more than a couple of weeks in rent. You have to know where you draw the line and stick with it; doesn't mean you have to be a jerk. 

@James Hsia  - Every time the rent isn't paid, it's an extenuating circumstance. I agree with @Thomas S. about never using the deposit toward rent. In Virginia, we can use it after the tenant vacates, but someone in that position doesn't usually take care of the house either. And, they'll blame you for their extenuating circumstances by the time everything drags out. Evict and move on. City courts take vacation too so you could be stuck until early next year.

@James Hsia A plus for creativity by this tenant. I will give props for that and I find t slightly amusing. This has got to be the number one reason why I think it’s a good idea for new landlords to use a PM. Sooner or later you’ll have to be the “bad guy” and evict and it’s hard for a lot of people to do that. Having a good Pm is useful because they will run it like a business. My PM files all their evictions on the same day Of each month. If the tenants are late, they get a late fee, then the 5 day notice and finally the eviction. Once the eviction is started, only way to stop it is to pay the fee I have to pay to evict, back rent and late fee. Assuming they don’t do that they’ll be out in 3-5 weeks (start to finish). Now I’m not so cold hearted that if they’re a day late, eviction is filed immediately. To get to that point they are likely 2 weeks or more late. I think that’s a healthy balance between sympathy and not too much. That’s likely an extra pay cycle and if they can’t pay after that, they either lost the job or can’t handle Money.

No. Either he pays or you should move forward with the eviction process.  I would explain to him how serious an eviction is and how it will impact his ability to rent in the future and suggest that he move before it is required.

My Suggestion is to evict unless this is a long lasting tenant that you have a great relationship with.  I have given tenants more time that has paid me back and tenants that have screwed me.  You really need to trust your instincts.  The times I didn't get paid I inherited the tenants from a purchase and I didn't trust my gut to evict.  

What I've learned that people behind in rent will lie and play with your emotions.  They will try to test you in any way possible to stay in the home.  They are not ethical.  They will tell themselves whatever they need to hear to justify their actions.  They do not think like you or I would and have no honor.

Wow - this is a tough crowd.  LOL.  I have had a lot of success helping tenants who are behind put together a budget and getting them caught up.  I move forward with the judgment but if they are willing will have them submit all their income statements and bills and we come up with a plan - geared around their paychecks - that will get them caught up in 6 months or less.  I only agree to do this if they are willing participants and it realistically looks like they can pay their bills and stick to their payment plan.  Lots of people make enough money but don't have the financial skills to know how to stick to a budget. As long as you have judgment and possession, you are in the drivers seat.  Even if they aren't successful, you can usually get several large payments before they fail.  In most cases when we put a plan together they are able to get all the way caught up.  Remember, the goal is to get you paid AND avoid vacancy. Coming up with a realistic plan isn't being soft - it is being smart.

It's a good idea to have it set in stone what your procedures are on non payment of rent.  That way, you won't get sidelined by emotional thinking.  You want to run a charity, go run a charity.  You've already signed a promissory note with the tenant, it's called a lease and the tenant is in breach.  Proceed with eviction.

Originally posted by @Frank Wong :

My Suggestion is to evict unless this is a long lasting tenant that you have a great relationship with.  I have given tenants more time that has paid me back and tenants that have screwed me.  You really need to trust your instincts.  The times I didn't get paid I inherited the tenants from a purchase and I didn't trust my gut to evict.  

What I've learned that people behind in rent will lie and play with your emotions.  They will try to test you in any way possible to stay in the home.  They are not ethical.  They will tell themselves whatever they need to hear to justify their actions.  They do not think like you or I would and have no honor.

Tenant has been a pain to deal with since day 1, caught them slipping lies several times. I gave them the benefit of doubt and they use it to buy time, been lying about sending payments. I don't trust them one bit, think at this point I will need to swallow my losses and just evict. 

Originally posted by @Patti Robertson :

Wow - this is a tough crowd.  LOL.  I have had a lot of success helping tenants who are behind put together a budget and getting them caught up.  I move forward with the judgment but if they are willing will have them submit all their income statements and bills and we come up with a plan - geared around their paychecks - that will get them caught up in 6 months or less.  I only agree to do this if they are willing participants and it realistically looks like they can pay their bills and stick to their payment plan.  Lots of people make enough money but don't have the financial skills to know how to stick to a budget. As long as you have judgment and possession, you are in the drivers seat.  Even if they aren't successful, you can usually get several large payments before they fail.  In most cases when we put a plan together they are able to get all the way caught up.  Remember, the goal is to get you paid AND avoid vacancy. Coming up with a realistic plan isn't being soft - it is being smart.

The unit is in a A class neighborhood and tenants have high paying jobs, however they have been a pain from day 1. Lying & entitled on everything from rent payment to requesting miscellaneous improvements to the house. Normally I would have worked with individuals, but I just don't trust these tenants. The only reason I am entertaining this idea of the promissory note is due to the legal fees and back rent he owns...guess its time to swallow the loses and move on. 

^^I think you see it properly.

If you have a written lease (or even an oral one, in many locales) you already have a promissory note. The tenant has broken that note and wants to draw up a new note.