Late paying tenant, what should I do?

25 Replies

Hello BP team!

I wanted to pick everyone's brain on an issue that I'm having.....I have a tenant that is paying rent, but it is late every month. She pays the late fee, and actually breaks up the rent payment into two different amounts, half at the beginning of the month, and half later on, but is always paid in full by the end of the month. The property manager just recently brought this to my attention as it has been going on for several months. I told the property manager that it needs to stop. She communicated this to the tenant, and now the tenant (conveniently) has said the house needs several repairs. The property manager then instructed her to send over pictures. I have not seen any pictures of supposed repairs as of yet. 


My concern is that this is a slippery slope. If I don't "put my foot down" I'm worried she will continue to pay late and might end up missing payments. However, on the other hand, I don't want to move to evict and have the heartburn around that process. The other idea I had was to just not renew her lease. Oh and BTW the property is located in Memphis, TN. Any thoughts team?  

but by the end of the month.

Best thing I've learned in past 12 years - M2M rental agreements.  You can deal with misbehaving tenants quickly, and they know it.  I do my own PM for 19 SFHs and have made a few bad tenant selections along the way.  M2M allows a me a relatively quick and low overheard fix. Nor have I ever had a good prospective tenant walk away because of the M2M requirement. 

Originally posted by @Terrell Garren :

Best thing I've learned in past 12 years - M2M rental agreements.  You can deal with misbehaving tenants quickly, and they know it.  I do my own PM for 19 SFHs and have made a few bad tenant selections along the way.  M2M allows a me a relatively quick and low overheard fix. Nor have I ever had a good prospective tenant walk away because of the M2M requirement. 

Thanks Terrell! What exactly is an M2M rental agreements? I'm not too familiar....

 

Month to Month. Agreement allows me or tenant to walk with 30 days notice.  My rental application asks how long they would like to reside on the property.  You can guess who I prefer. 

Originally posted by @Terrell Garren :

Month to Month. Agreement allows me or tenant to walk with 30 days notice.  My rental application asks how long they would like to reside on the property.  You can guess who I prefer. 

 Ah! Gotcha! OK, that might be an option next time around, but this one is for a full year currently. Any thoughts? 

Say, "Thank you" if you get to collect the late fees.  You are getting your rent before the end of the month and; hopefully, a little more with the late fee if the PM doesn't keep it.  I see late fees as a covert rent increase for consistently tardy, but paying tenants.  I am happy when my tenants pay late.  Ka-ching!

I can see how you are concerned about the risk of non-payment.  You might want to talk more with her about why she is late and be empathetic and supportive. The tenant may need to better prioritize payments that you can help her realize.  You want your tenant thinking she needs to pay her rent first, not last.  It can also help you assess how much non-payment risk you are really facing.  You might want to encourage your tenant to find another place to live if the risk is unacceptable once you understand it.

Originally posted by @James Mc Ree :

Say, "Thank you" if you get to collect the late fees.  You are getting your rent before the end of the month and; hopefully, a little more with the late fee if the PM doesn't keep it.  I see late fees as a covert rent increase for consistently tardy, but paying tenants.  I am happy when my tenants pay late.  Ka-ching!

I can see how you are concerned about the risk of non-payment.  You might want to talk more with her about why she is late and be empathetic and supportive. The tenant may need to better prioritize payments that you can help her realize.  You want your tenant thinking she needs to pay her rent first, not last.  It can also help you assess how much non-payment risk you are really facing.  You might want to encourage your tenant to find another place to live if the risk is unacceptable once you understand it.

Thanks James. All communication has gone through my PM and I'd like to keep it that way. And yes, unfortuantely the PM keeps the late fees. According to the PM she "lives paycheck to paycheck" but has been in communication with them the whole time. I've also run into a situation like this before, and as soon as I whispered the word eviction the tenant magically paid rent on time every month moving forward....pretty frustrating to say the least....

 

If she's suddenly complaining about needed repairs when late rent becomes an issue, you may want to do an inspection on the unit.

Originally posted by @Russ B. :

If she's suddenly complaining about needed repairs when late rent becomes an issue, you may want to do an inspection on the unit.

Not a bad idea Russ. Maybe claim preventive maitenance?

 

Looking at the items she says need fixed is as good a reason as any to get in there. It's something you'd do for a great tenant as well. 

While you're already headed there, it's a good time to do preventive maintenance (smoke detector batteries / tests, furnace filters, checking for leaks under sinks, etc), as well as a general check of the condition. 

That's a tough one. I had a tenant pay late this month and immediately threatened her with eviction the day after her grace period. But I pay my mortgage and larger monthly bills in halves whether the companies like it or not because that's what's convenient for me. Late charges aren't applied, and credit bureaus are not notified, until so many days after the end of the month, so it doesn't affect me even though I'm technically paying late. 

Do you have mortgage on the property? If not, I don't see why it matters that she accrues a monthly late fee. You make more money, and she's paid in full by the end of the month. 

Originally posted by @Nicole Heasley :

That's a tough one. I had a tenant pay late this month and immediately threatened her with eviction the day after her grace period. But I pay my mortgage and larger monthly bills in halves whether the companies like it or not because that's what's convenient for me. Late charges aren't applied, and credit bureaus are not notified, until so many days after the end of the month, so it doesn't affect me even though I'm technically paying late. 

Do you have mortgage on the property? If not, I don't see why it matters that she accrues a monthly late fee. You make more money, and she's paid in full by the end of the month. 


Ironically no, I don't have a mortgage on it. But I'm not getting the late fee, the property management company is. It's just frustrating out of principal frankly. Not sure why she thinks she is the exceptional to the rule on paying on time....and I'm worried it will get worse if I don't put a stop to it. 

 

Account Closed

Regular late payments shouldn't be your problem at all unless you have no cash buffer to pay the mortgage on time. Dealing with late payments is a reason why you have a PM. It is the PM's job to chase the money. Most PMs keep the late fee for the added work.

Also, evicting because of late payments can be difficult. Your state statutes , which are often online, or a local RE lawyer can consult you in that matter.

@Andreas W.

As mentioned in the first post, I’m concerned that it is a slippery slope and she’ll end up not paying the rent at all, so it is my concern even though the PM is indeed chasing the money.

Tennessee is a landlord friendly state so evictions aren’t that difficult.

if she lives paycheck to paycheck then collect your money from paycheck to paycheck

I mean you should be getting weekly or biweekly rent payments . (Charge a little more for this )Tenants don’t do the math to realize 52 weeks are In a year not 48 and so you’ll get the late payments to stop and another grand or two in your pocket if you play your cards right .

Ned Flanders: do nothing

Tony Soprano: punt them ASAP

Middle ground: “perhaps it is easier for you if we amend the lease agreement to state you may pay on the 1st & 15th of the month? You seem to be paying in full but you’re paying penalties each month. You should know, that while I can save it a few bucks each month by doing this, here will be absolutely zero leeway if you are late after we make this official change. The legislation allows ____ days notice to vacate on my part if you are late, and that’s what would be happening.”

Every situation can be escalated or de-escalated based off your actions. You can often choose between building an ally or building an enemy. Choose wisely young grasshopper.

Account Closed That is an interesting quagmire you have there. 

Look, I see that you mentioned you don't have a mortgage on the house, so no financial strain caused to you, personally, a good situation to be in.  

So, what I'd suggest to you is more "emotionally" than a tactical approach.

First, plan not to renew this tenant if you think that the tenant might be a handful in the nearest future such as requesting bogus repairs. 

More importantly, the best thing to do here is to tell your PM to always send a letter (not email) every time she is late reminding her of the lease term and mention the word eviction or potential eviction

Essentially, what you are trying to do is make (or train) this tenant the importance of paying on time because you best believe if her company didn't pay her wages on payday Friday, I bet she will be right at the HR office acting up. 

To be a super successful landlord, you have to be street smart and appreciate the role psychology plays in everyday life. Sounds out there, but so true!

@Account Closed stop trying to be their parents and telling them what to do? If you get your money and late fee every month they ain't breaking a law. Would I live like that? Absolutely not, but it's not my place to tell a tenant when to pay their bills. If you don't like it when the lease is up make them get out, but imo as long as your getting your money, and even more, I wouldn't stress it to much. You being like this is causing them to push back with the repair crap when there is no reason for it, they are basically saying "fine if he's going to mess with my life I will mess with his!" And you have no reason at all to be like that imo.

@Account Closed i deal with this all the time. i think we all hear how bravado it is to “put your foot down” and exert your power in these types of situations.

in my experience, as long as the tenant and i have a concrete plan for payment, i let them stay. if they need another week or two until their next paycheck to pay the remainder of the rent, i surely think that is better than evicting them. evictions cost money, time, you probably won’t get rent during the course of the proceedings and, of course, you’re faced with the fact that they may create damage on their way out. if they must go, i much prefer cash for keys.

I would let the tenant stay as long as there is clear communication between the property manager and the tenant. @Ryan Deasy is correct. The amount you will lose just paying an attorney for an eviction process and the 3-4 months lost rent is not worth it. $1000 for an eviction + 3-4 months of lost rent or deal with the rent being a little late. If you do decide to do the cash for keys idea, I’d do it later in spring or summer (Warmer outside/ more tenants are looking for a new place. People don’t like moving when it’s cold out). Pick your poison! Good luck!

If the only problem you have with her are the late payments for which only the PM is benefiting, I would have her pay the rent in two installments.  Half due on the 1st and the rest on the 15th of the month, but tell her she has to start paying on time.  

Do an inspection of the property.  Don't disguise it as a preventative inspection.  Be honest and say that she mentioned some repairs are needed and you will be coming by to determine what needs to be done.  this will also give you an idea of what needs to be done and if there is anything you can do when the unit becomes vacant to rent it out faster or for more money.

Originally posted by @Ryan Deasy :

@Alec Weissgerber i deal with this all the time. i think we all hear how bravado it is to “put your foot down” and exert your power in these types of situations.

in my experience, as long as the tenant and i have a concrete plan for payment, i let them stay. if they need another week or two until their next paycheck to pay the remainder of the rent, i surely think that is better than evicting them. evictions cost money, time, you probably won’t get rent during the course of the proceedings and, of course, you’re faced with the fact that they may create damage on their way out. if they must go, i much prefer cash for keys.

 I like it, thanks for the advice Ryan. I'll probably end up going this route. 

Originally posted by @Zack Howard :

@Alec Weissgerber stop trying to be their parents and telling them what to do? If you get your money and late fee every month they ain't breaking a law. Would I live like that? Absolutely not, but it's not my place to tell a tenant when to pay their bills. If you don't like it when the lease is up make them get out, but imo as long as your getting your money, and even more, I wouldn't stress it to much. You being like this is causing them to push back with the repair crap when there is no reason for it, they are basically saying "fine if he's going to mess with my life I will mess with his!" And you have no reason at all to be like that imo.


First off, it's not "trying to be their parents" it's following the letter of the lease. 

Secondly, in the context you're using the word, it should "too" not "to"

Originally posted by @Dennis M. :

if she lives paycheck to paycheck then collect your money from paycheck to paycheck

I mean you should be getting weekly or biweekly rent payments . (Charge a little more for this )Tenants don’t do the math to realize 52 weeks are In a year not 48 and so you’ll get the late payments to stop and another grand or two in your pocket if you play your cards right . 

that's how they do it in Australia.. and probably other countries rent is paid weekly through ACH..  that's how you handle pay check to pay check.

also one year leases are the norm for life long tenants and PM's  these tenants move every 18 months on average.. and that's what kills landlords turn over and vacancy some of the bigger shops now try for 3 year leases.. this precludes one from renting to Section 8  as they only allow 1 year leases.