It’s no secret that the pandemic was hard for landlords. However, reports from the last year show that several landlords are still stuck with thousands of dollars of unpaid rent.
As a landlord, you know that rent collection is one of the most important aspects of your business. But what do you do if your tenants don’t pay?
In this guide, we’ll give you some tips on how to handle rent payment issues and get your money back where it belongs: in your pocket. Keep scrolling to learn about your legal rights as a landlord and how you can navigate tough conversations with tenants who refuse to pay.
When Is Rent Late?
As a landlord, you are entitled to receive rent payments on time. But when is the rent actually late? The answer depends on what’s written in your lease agreements or rental contracts along with the state you live in.
Late rent rules vary from state to state. In Texas, for example, rent is legally late if the rent goes unpaid two full days after it was due. Tennessee rental laws are slightly different, though. You cant legally charge late fees unless the rent goes unpaid for five full days after it was due.
Here are some special cases to keep in mind when charging late fees or speaking with tenants about late rent.
If rent was due on a day that was a bank holiday then you cannot claim that the rent is late. In this case, there is some wiggle room for your tenant.
Tennessee law stipulates that landlords cannot charge a late fee until rent is five days overdue. If the fifth day falls on a Sunday or legal holiday, landlords must wait to charge the late fee until the next business day.
As a landlord, you should wait a day or two for rent payments to come through if your tenants make them via ACH payments. This is because ACH payments can sometimes take a few days to process.
We know it’s frustrating, but waiting a day or two gives the ACH payment time to clear and prevents you from a potentially uncomfortable confrontation with a tenant if they’ve already paid.
If your tenant pays rent via physical check, there’s always a possibility that the check could get lost in the mail. If you think this may have happened, the best thing to do is ask your tenant.
They may be able to tell you whether or not they sent the check, and if so, when they sent it. If the check was sent recently, it’s possible that it’s still in transit and will arrive soon.
However, if it was sent a while ago and you still haven’t received it, there’s a good chance it got lost along the way. In that case, you’ll need to ask your tenant to send another one. This is why we recommend that most landlords collect rent via an online rent collection platform, by the way.
Legal Grace Periods
Keep in mind that, as mentioned above, landlords in Tennessee are legally allowed to charge late fees for rent that is more than five days late. However, you must give tenants a grace period of at least five full days before you can charge the fee.
The late fee must also be reasonable, and it cannot exceed 10% of the monthly rent. However, if your tenant hasn’t paid after five full days then you’re free to charge that late fee. You simply have to ensure they had prior written knowledge of that fee (in the rental contract).
Late Rent: What Are Your Legal Rights As a Landlord?
As a landlord, it’s important to know your legal rights when it comes to collecting rent. While we’ve briefly gone over the late rent rules above, what else is there to know?
Landlords have the right to collect late fees from tenants who pay their rent after the due date. And as mentioned above, these late fees must be reasonable in amount.
In addition, landlords have the right to evict tenants who consistently pay their rent late. Before taking any legal action, however, you must first provide written notice to the tenant detailing the amount of overdue rent and any late fees that are owed.
Before you’re able to legally start the eviction process, you are required to give your tenants 14 days after your notification to make the payment. Then, you must give them sixteen days to move out. If by the end of those 30 days they still haven’t paid, you’re allowed to evict them.
6 Rent Collection Tips for Landlords
If your kind text messages and reminders haven’t worked then what are you to do? You’ve read through blogs full of landlord tips but you still need to turn a profit on your rental property. In that case, follow these six rent collection tips.
1. Double-Check Lease Documents
Make sure that the rent amount is clearly stated, and that the due date is easy to find. You should also include a clause about late fees so that tenants know what to expect if they don’t pay on time.
Once you’ve verified that everything is in order, reach out to tenants a few days before the rent is due. A friendly reminder can go a long way in ensuring timely payments.
2. Send a Late Rent Notice
If the rent is officially late then you’ll want to send your tenant a late rent notice. This notice should be clear and concise, specifying the amount of rent that is owed and the date by which it must be paid.
Additionally, it’s important to include language that clearly states the consequences of failing to pay rent on time, such as being subject to eviction proceedings.
3. Call the Tenant
Calling the tenant is always the best way to start rent collection. You’ll simply want to ask them why their rent is late first. Sometimes, the reason is as simple as the fact that they forgot or are having trouble with a bank transfer.
If they’re having trouble paying rent, this is likely when you’ll find out. If that’s the case, consider a payment plan. Talk about a potential payment plan with them, but be clear about late fees and other charges due.
4. Send a Pay or Quit Notice
This notice informs the tenant that they have a certain amount of time to pay their rent, or they will be required to vacate the property. While this may seem like a drastic measure, it can often be enough to prompt the tenant to take action.
5. Offer Cash for Keys
Many landlords have had success with offering cash for keys. This is where you offer the tenant a certain amount of money to move out within a set period, typically 30 days. The benefit of this method is that it allows you to avoid the eviction process, which can be lengthy and costly.
In addition, it gives the tenant an incentive to leave the property in good condition. Of course, you will need to have the funds available to pay the tenants, but if you can do so, this can be an effective way to collect rent from tenants who are behind.
Note that this is sometimes the best method to get rid of bad tenants who damage your property or who are extremely behind on rent.
6. Start the Eviction Process
If none of the above tips have worked then it might be time to start the eviction process.
The first step is to give your tenant a notice to vacate, which starts the eviction process. This notice must be in writing and state the specific reason you are evicting the tenant, such as nonpayment of rent or lease violation.
How to Handle Tough Conversations With Non-Paying Tenants
It can be tough to have conversations with tenants about paying rent, especially if they’re behind. No one wants to be the bad guy, but at the end of the day, you need to get paid. If you’re not sure how to broach the subject then follow these guidelines.
First and foremost, be respectful. This is a difficult conversation to have, but it’s important to remember that your tenant is a person too. Approach the conversation with kindness and understanding.
Second, be firm. It’s important to make it clear that you expect to be paid rent on time and in full. If your tenant is behind, lay out a payment plan and make it clear that late payments will not be tolerated.
Finally, be understanding. Your tenant may be going through a tough time financially. If they’re honest with you about their situation, see if there’s any way you can work with them. Maybe you can offer an extended payment timeline.
Work With a Property Management Company
Tired of dealing with rent collection yourself? Why not outsource the work to a professional property management company?
Some of these benefits of working with Reedy & Company include saving time and money, having someone to handle maintenance and repair issues, and avoiding the hassle of being a landlord.
If you own rental property, contact us today to learn more about our services. We would be happy to answer any of your questions and help you get started on the path to stress-free property ownership.