Rental Property Investor · Royal Oak, MI · Member since 2017 · 8 posts · 0 votes
Hello Investors,
I would appreciate some advice on my situation below. I would like to know if it makes financial sense to take my ex-tenants to court for late rent payments or just cut my losses and move on.
Here is my situation:
I gave tenants a 30 day notice that I would not be renewing their lease due to late rent payments. Besides the late rent, they have taken great care of the property.
I’ve been promised on several occasions that all let rent and late fees will be paid in full. The tenants moved all of their personal belongings out yesterday October 31st.
They still owe rent for August ($180), September and October and three months worth of Late Fees ($35/month) for a grand total of $3,085.
I currently have their security deposit of $1,000. The place is en good condition and rental ready as I have been in the unit to show it to new potential tenants.
Should I hire a lawyer and take the ex tenants to court to try and collect the late rent or just keep trying to pursue the rent on my own?
You're running a business. If they had leased a car, kept the car in great condition but failed to pay $3000 in payments, would the bank just let the unpaid amount go? No.
Again, you're running a business. Sue for unpaid rent in small claims court. You won't need a lawyer and neither will they. But one thing is for certain: you'll never be paid what you are owed if you do nothing.
Hi @Andrew Marsh I'm not a landlord and I don't play one on TV. Yet. So I'm curious. What would a lawsuit and judgement get you? It seems to me that if the tenants were responsible enough to take good care of the property, that they would have paid to stay put. (Maybe I'm just being terribly naive here.) It just seems to me that having a judgement against someone without them having any way to pay it is throwing more good money after bad. Yeah, they might have the ability at pay at some time in the future but what's the cost of of the lawsuit as measured against the chances of actually collecting on it? Did you communicate with them before they moved out? What was their situation? I'm also curious as to whether other landlords have other ideas such as going through a collection agency.
You're running a business. If they had leased a car, kept the car in great condition but failed to pay $3000 in payments, would the bank just let the unpaid amount go? No.
Again, you're running a business. Sue for unpaid rent in small claims court. You won't need a lawyer and neither will they. But one thing is for certain: you'll never be paid what you are owed if you do nothing.
@Patricia Steiner thank you for your reply! I agree with you, they should be responsible for paying their rent. Any idea as to what cost might be to sue in small claims court?
@Chip Marce I appreciate your response. There is more to the story than what I described in my post. The rental in question is a duplex and the ex-tenant was pretty close to the tenant living in the other unit and she would always tell me about the new stuff they would buy. This is more a case of bad money management and priorities, rather than being able to actually afford the place. The reason behind my potential lawsuit is to “hopefully scare” them into paying the unpaid rent. Since having multiple conversations and trying to offer incentives (discounts on rent) has done nothing thus far.
Patricia is right. Take them to small claims court, but even if you get a ruling in your favour, I wouldn't expect to see the money. Definitely keep the deposit and apply it to the outstanding rent and late fees. Be thankful they left the place in good condition.
@Andrew Marsh I would try to collect it. Even after you apply the money from the security deposit, they’re still going to owe you over $2,000. That’s a fair amount of money. If it’s rightfully owed to you, why wouldn’t you try to collect it?
It’d only cost about $70 to file a small claims case for that amount of money in your state, and you won’t need a lawyer. Should be an easy case to win.
Granted, it’s not just about winning, but about collecting too. Lucky for you, your state has lots of options there, including wage garnishment, which is very effective if your ex-tenants are working. (I actually used it to collect on a judgment against one of my ex-tenants, which you can read about here if you’re interested: Finally collected on a small claims judgment against an ex-tenant).
And if they’re not working, there’s still a number of other options you can use to collect on a judgment, which you can read about here:
@Andrew Marsh Do it for the rest of us. It's great to hear they took care of the house (definitely not always the case). We've been taken for a ride by tenants more than once only to find out that their previous (unmentioned landlord) had issues with them. I'd have loved the warning on the credit report to be able to make an informed decision for myself.
And, the nice thing about getting a judgement is that those tenants won't be able to buy the next car, get the next apartment, a credit card - while that unpaid collection/judgement is reported on their credit bureau report.
If you have a lot of time on your hands and would not be emotionally drained...then go for it. If you don’t have a ton of time on your hands and you know your own personality that this could be emotionally draining and a distraction then I would suggest passing.
The last person I evicted owed me for six months!! I was happy to have the superstars gone and I hope I never see them again unless we can meet up in heaven. :-)
@Kyle J. Thank you for your response. This makes me hopeful. I know both tenants have a steady job and should be able to afford paying back the rent.
Your article was great and thoroughly explained the process, very helpful! I might have to spend some time figuring out where the tenants work, so I can file the garnishment form with the correct sheriffs department (in the event I win in small claims).
Persistency pays off! Well done. Hoping to share a similar success story in the near future!
In this situation no. I generally only take them to court as an F U for bad behavior and garnish and its more on principle versus return on time or dollar to make sure they don’t do it again. If they left it in good condition I chalk it up to they simply could not pay but if they trashed place or tried to milk not paying when they could have then I definitely would. Right around this time of year it’s easiest to garnish.
I think the filing fee of 70 is worth the potential payback of 2k you are owed. It seems they have money they just chose not to give it to you so you have a decent chance of collecting. The fact that they didn't destroy the place is great, but also expected so I wouldn't use that as the basis to not file. Did they give you a forwarding address as that would help as well as checking their application to see if they still work where they listed. The other tenant could also possibly let you know where they worked which should help as well. If nothing else this is at least warning future landlords so they know the type of tenant they are dealing with and there is always the chance you may get it later down the line when they are trying to clean their credit. For me the cutoff is if it is under 1k I let it slide anymore and it becomes worth my time and even then I may collect for less if it becomes a matter of principal.
@Patricia Steiner we recently did an eviction and got the judgement but the judge himself told us that it is not worth going after them to collect any damages less that $2000 as we will end up spending more to get back the money. Also, we don’t have their current address now.
Marita, I'm sorry you were put in the position of having to sue but you did the right thing. As a former banker, I can tell you that a judgement in any amount gets reported to the credit bureau and that's the fastest and best way to recover what is due you. It ensures that your former tenants aren't getting a new car, another credit card, or maybe even the next rental - with an unpaid collection on their report. There are also collection agencies that will work for a percentage - or even a flat fee. That Judge obviously wasn't a real estate investor/landlord.
And, you don't need their current address. Send to the last known address with Address Service Requested which "provides forwarding and address correction services when possible." You can also serve at their place of employment.
It will always be easier to "just let it go" but running a business isn't about "easier" - it's all about ROI.
@Patricia Steiner Thanks ! We inherited these tenants and unfortunately the seller didn’t provide us the application so we have no information where they work. What we found out is that they are evicted almost every other year when we did our due diligence so some landlords who skimp on the background checks end up renting units to them. They are professionals didn’t even bother to come to eviction hearing and waited till last day when sheriff was going to throw the stuff out to leave. I really want to do something to save others from them.