Dealing with Late Payments

Here are some property management tips when your tenants decide to not pay on time or your tenants are paying rent late:

  1. Stay calm – most tenants do not intentionally decide, “I am not going to pay my rent today.”  Most tenants have a budgeting issue and are just not very good with managing their money.
  2. Know your lease agreement – Review your contract with the tenant to see if you have a grace period and to understand your late penalties.  If you don’t have a late penalty, I suggest you put one in.  I usually have a $50 late fee and no grace period.  So if they don’t pay on the 1st when it is due, then on the 2nd, they own an additional $50 on top of the rent.
  3. Contact them immediately – Once your tenant is late.  Call and email them the day they are late.  I usually start with, “Hi.  I noticed that we didn’t receive your rent today based on our agreement.  When will you be dropping (or depositing, depending on your procedure) off the rent with the manager?  Depending on the situation, I will follow-up with, “I know your home is very important to you and this should not happen again.  But we have to be on-time paying the mortgage, so we need you to pay on-time also.”  If you are unable to contact them, try to reach their emergency contacts on your agreement.
  4. Give a Notice to Pay or Quit – Even if the tenant has promised to pay the rent tomorrow after speaking with them, I will create and give a “Notice to Pay or Quit.” Depending on where you are located, this notice may be different for you.  We are in California, where it is required that we give notice before starting the eviction process.  This should be part of your policy.  This lets the tenant know you are serious, consistent with your words and have a process in place.  The Notice will have the occupants names, how much is owed, where and how to pay the late rent and any penalties that are included, i.e $50 plus any daily fees stated in the agreement.
  5. Contact your Attorney – Eviction laws change and you depending on how frequently you do this, it would be good contact an attorney.  They should give let you know what additional procedures are needed to start the eviction process and provide the timing on when you can expect them to be out of the property.
  6. Document and Make Notes –  It is important to make detailed notes of everything that has happened.  Every conversation with the time and date it happened should be noted.  This will also let you know if you have a habitually late tenant.  This can also provide insight on qualifying future tenants.
  7. Prepare for the Future –  If they pay, plan on how you can prevent this from happening with them again and other tenants.  If they do not pay, start getting things ready during the eviction process: including scheduling your contractor to prepare the unit, start advertising, etc.
  8. Hire a Property Management Company – If after reading this, you just don’t want to deal with them any longer and are still frustrated with them.  Then, it may be time to contact a property manager to handle all this for you and take away your stress.

Dealing with tenants is not always a happen event.  Remember to stay calm and do not get angry.  It is important that you remain in control of yourself and property management.

For more information on Appreciating Real Estate (ARE)’s services regarding selling and marketing properties, acquiring assets, property management, help onrenovations or real estate investments, call us at (714) 657-3853 or visit us on the website.