Legal fees for eviction can amount to up to $5,000. That’s not accounting for other expenses. Lost income, property damage, and the costs of finding tenants add up to eye-watering amounts.
These issues are often exacerbated by absentee homeowners, who aren’t physically present to manage their properties and ensure timely rent payments.
But don’t sweat it – you can take steps to ensure you always get paid on time. In this article, we’re discussing what to do about tenants paying rent late.
How Grace Periods and Late Fees Work
Grace periods and late fees are two ways to manage late rent payments.
What’s a grace period?
It’s a set number of days after the due date when a tenant can pay rent without being punished. Grace periods vary depending on local laws (and your rental agreement) – but usually, they range from three to five days.
Late fees are penalties imposed when tenants fail to pay their rent by the end of this time. These fees are often calculated as a percentage of the rent amount (often around 10%) and serve as an incentive for tenants to make timely payments.
They’re also meant to offset some of the potential costs of receiving late payments.
However, be careful to set reasonable late fees. Exorbitant fees can be counterproductive, leading to resentment and even more delayed payments. It’s also crucial to ensure that your late fees comply with local laws and regulations to avoid legal issues in the future.
When They Won’t Pay: Sending Friendly Reminders
Sometimes, tenants may simply forget to pay their rent on time.
In such cases, sending a friendly reminder can prompt them to clear their dues. This reminder can be a casual text, email, or phone call. It’s fairly likely that a late payment now and then is a simple oversight.
So, keep a professional tone when collecting rent.
A professional tone will help you maintain professional boundaries. While it’s important to build good relationships with your tenants, you can never forget that they’re paying you for a service. You’re not there to do your tenants favors.
Remember: As a landlord, your primary goal is to manage your property effectively, not to become best friends with your tenants.
If friendly reminders don’t work, you may need to follow up with a more formal notice (see below). It’s vital that you keep a record of all communications in case you need them for future reference.
When They Can’t Pay: Offering Flexible Payment Plans
Sometimes tenants simply can’t pay rent.
Financial hardship – from a sudden job loss, for instance – can hit even the best of renters. In such cases, offering flexibility through payment plans can be a viable solution. This approach can help maintain a positive landlord-tenant relationship while ensuring that you eventually collect the full rent amount.
A payment plan breaks down the rent amount into more manageable chunks that the tenant can pay over a specified period. The terms of the payment plan should be clearly outlined and agreed upon (and signed) by both parties to avoid misunderstandings in the future.
While offering flexibility can be beneficial, it’s important to assess each situation on its own merits.
As with friendly reminders: Be careful not to set a precedent that encourages tenants to default on their rent payments.
Taking Legal Action: Formal Notices
If friendly reminders and payment plans fail, taking legal action may be your next step. This isn’t about eviction yet. Instead, it involves sending a formal notice to the tenant.
This notice should outline the nonpayment issue and the actions you will take if the rent isn’t paid.
A formal notice serves as a wake-up call to tenants. It will make them aware of the seriousness of the situation and provide a paper trail that can be useful if you need to escalate the issue further.
However, it’s essential to familiarize yourself with the legal requirements for sending such notices in your jurisdiction. A poorly drafted or improperly served notice can lead to legal complications and may even impede your ability to collect the overdue rent.
Eviction: Your Last Resort
The “E” word isn’t something you should toss about lightly.
Evicting a tenant should always be your last resort – the one you turn to when all other avenues of action have failed. Eviction is a lengthy, complicated process. It can be expensive, and it will certainly put a lot of stress on the situation.
Plus, you’ll have to go about finding tenants to replace the ones you evicted.
Before you proceed with an eviction, ensure that you’ve exhausted all other options. Crucially, make sure that you have a solid legal basis for the eviction.
Remember: You cannot evict a tenant without a court order. Doing so can lead to severe legal penalties.
When deciding whether to evict a tenant, consider the potential costs, including legal fees, lost rent during the eviction process, and the cost of finding a new tenant. Sometimes, it may be more economical to work out a payment plan or offer a lease buyout.
Seeking Legal Advice
Whether you’re drafting rental agreements, sending formal notices, or considering eviction because of tenant problems, seeking legal guidance can be invaluable.
A legal professional can help you navigate the legal specifics of tenant management and ensure that your actions are compliant with local laws and regulations. Legal advice will also help you avoid common pitfalls, safeguarding your own interests.
Stop Worrying About Tenants Paying Rent Late
Managing tenants who are paying rent late demands balance and care.
Yes, it’s important to maintain a steady cash flow – but it’s equally crucial to build productive relationships. Friendly reminders, reasonable late fees, and payment plans can help your tenants get back on track.
And when the worst comes to pass, you can always rely on the services of an experienced property management company.
Reed & Company has been a leading property management company in Memphis for 20 years. We manage thousands of properties and handle everything from single-family homes to evictions and accounting.
