What to Do if Your Tenant Doesn't Pay Rent
Communication with your tenant can help you determine the best course of action if you're not receiving rent on time.
Communication from a tenant is key when navigating this difficult situation.(Getty Images)
The first of the month has passed, and your tenant hasn’t submitted a rent payment. You’re hoping it’s an oversight on your tenant’s part, and you’re worried about making your own bill payments without the monthly rent in hand. What’s your next step?
In a strong economy, nonpayment of rent isn’t necessarily common, but it is often cited by attorneys as the most common landlord-tenant issue that goes to court. By April 5, 2019, 82.1% of professionally managed apartment households made a partial or full rental payment for that month, with 95.6% of households having made a payment by April 26, 2019, according to the National Multifamily Housing Council.
In a time of economic uncertainty, April 2020 showed making rent to be a bit harder: By April 5, 69.2% of households made a partial or full rent payment, and by April 26, 91.5% of households had paid at least some rent, according to NMHC.
The inability to pay rent is a major source of anxiety and stress for renters who have lost a job or have been hit with unexpected expenses. But it isn't always possible for landlords to offer payment plans or accept late rent.
“The reality, though, is landlords, either large or small, don’t have the capacity to have some sort of break in (payment),” says David Howard, executive director of the National Rental Home Council, which represents the single-family rental home industry and is currently lobbying federal legislators to provide relief for both tenants and landlords as unemployment rises.
Here are five common scenarios landlords may face when a tenant hasn’t paid rent, along with some next steps for landlords.
- Your tenant has warned you that he can’t afford upcoming rent.
- Your tenant has asked for an extension to pay rent.
- Your tenant still hasn’t paid last month’s rent in full.
- Your tenant is consistently late with rent.
- Your tenant is refusing to pay rent.
Your Tenant Has Warned You That He Can’t Afford Upcoming Rent
You may receive an email, phone call or letter from a tenant letting you know that due to some hardship, making rent isn’t possible. Often, this is caused by job loss.
This communication from a tenant is key to working out a solution. “The worst thing (a tenant) can do is just miss rent without saying anything,” says Ruth Shin, founder and CEO of PropertyNest, a real estate startup in New York City. In times of high unemployment, it can be a good idea to proactively reach out to all your tenants to touch base and establish communication before any rent is technically late.
If you receive notification from a tenant that upcoming rent won't be paid, evaluate your expenses, ask your tenant about his or her expectations for future income and determine the best solution. Howard breaks down a few scenarios that could help maintain a positive relationship between you and your tenant:
- Establish a flexible payment plan. The full amount of rent will be broken into payments spread over a period of time, depending on the tenant’s income, and late fees may be waived or limited.
- Accept partial payments. Some rent is better than no rent, and like a flexible plan, this option is temporary and keeps the tenant in the rental without stacking up late fees.
- Allow the tenant to use the security deposit. In times of financial crisis, landlords may opt to let the tenant use the security deposit to help make a full rent payment. The downside is that landlords no longer have the security deposit to cover potential damages following move-out.
- Let the tenant out of the lease. With no job prospects, your tenant may need to slash expenses, and sometimes that means moving in with a relative or friend. In many states, the landlord is entitled to continue charging rent to a tenant breaking a lease until a new renter is found. But if your tenant is out of money, take a look at your financial situation before you take a hard line. You may find that the expenses of keeping a rental vacant are very low, or that the local market is healthy enough that you can find a new renter in a matter of days.
Read:How to Find a Room for Rent ]
Your Tenant Has Asked for an Extension to Pay Rent
If the lease includes a late fee for rent paid after the due date, it’s a good idea to notify your tenant of the additional costs you intend to charge for late rent. Help ensure the tenant does not incur additional late fees by spelling out the process, including when fees increase.
However, if your tenant has a history of paying rent on time, waiving the fee for a one-time late payment is a kind act, especially if the tenant is struggling financially.
You can also offer flexible payment for a short period of time or accept partial payment in lieu of charging a late fee. Offers like these can look favorably on you if negotiations with the tenant fall apart and you eventually have to file for eviction based on nonpayment of rent. Michael Convery, counsel at the Keefe Law Firm in northeastern New Jersey, notes that a judge would likely recognize the landlord’s “action on good faith,” especially when it's documented in emails or letters.
You Tenant Still Hasn’t Paid Last Month’s Rent in Full
If your tenant only made a partial rent payment but has not communicated with you, reach out to the tenant and inform he or her of the short payment, then inquire if there are any problems. While the tenant should reach out first, starting the conversation can avoid legal action if it’s a solvable problem.
“(Landlords have) got to have a good understanding of what their tenants are dealing with and what their tenants are going through, and that really starts with the tenant,” Howard says.
Once you know the situation, you can determine your next move. That might include notifying the tenant of late fees for overdue rent and next steps if rent is not paid in full, amending the lease for a temporary partial payment plan or another solution that works for you and the tenant.
However, if issues persist, you may have to issue a notice to vacate. “Always have a next step if the solution doesn’t quite work,” Convery says. “If a landlord can’t get somebody to agree to that kind of arrangement, then I think that triggers your notice provisions on lease default.”
Your Tenant Is Consistently Late With Rent
Whether your tenant can't come up with the money or is a bit scatterbrained, habitually late rent is a problem, and it may make you late on loan payments or other regular costs, which affects your credit.
Late fees can act as a deterrent, but they're not always effective. Some state laws stipulate that consistently late rent payment is a cause for eviction, while others make it clear that as long as rent is paid eventually, eviction is not an option. In the latter case, you’re better off waiting out the lease and notifying the tenant with proper notice that you will not be renewing the contract.
Your Tenant Is Refusing to Pay Rent
If you have an ongoing dispute with a tenant that has escalated to a refusal to pay rent, your next step is to follow local eviction proceedings. In many states, this includes written notice to vacate a few days prior to filing for eviction. Be sure you follow the exact procedure established by the local and state governing body, since a missed step can easily have your eviction request denied by the court.
Especially if you live in a state or city with laws that lean in favor of the tenant, be ready for a long and thorough case. “The eviction process does take time, and the tenant has a lot of rights in New York City, so it’s not that easy to actually evict tenants,” Shin says.
If your city or state has a temporary moratorium on evictions, an eviction cannot occur before the moratorium is lifted. However, you can begin the process of notifying your tenant of lease default prior to the end of the moratorium period.
Your tenant may be refusing to pay rent due to lack of habitability of the rental property, so it’s important that you properly maintain the home. Heating and cooling, toilets, sinks, door locks and windows must all be operational. Otherwise, your tenants can fight an eviction filing or even take you to court themselves, based on your neglect of the property.