A late rent payment is a major issue faced by property management, since it restricts cash flow and the profit margin can come down. However, late rent payments could be inevitable due to the economy and the sudden changes in the financial situation of tenants.
Sometimes payments are late simply because the tenant forgot to send the check or put the check in the slot on time. Hence, some amount of flexibility is required to maintain cordial relations with tenants; however, providing flexibility should not be construed as acceptable behavior. Here are some tips that can help reduce occurrences of late rent payments.
According to studies, people who have a history of skipping rent are most likely to repeat this behavior. Therefore, the first step would be to avoid renting properties to such people, by having an effective screening procedure. History of rental payment of prospective tenant can be accessed from Experian Rent Bureau. The history will have information about how well the person has paid rent in the past and whether there are any negative remarks. Hence, property management should take tenant screening seriously, and form policies for an effective screening procedure.
Late rental payments can be avoided largely by having some punitive action clause in the lease agreement for defaulters. Initial defaulters could be given a warning, but tenants who regularly skip rent should be penalized with late payment fees. Property management can keep track of such tenants, and keep sending them reminders before the due date.
However, the property manager should maintain a personal connection with the tenant and find out why the tenant is paying the rent late. Sometimes it can be a legitimate reason such as health problem or sudden unemployment, and so on. In such cases, property management should judiciously decide whether to be lenient or not. This is always a tricky issue because other tenants will start expecting the same treatment even when they are facing some sort of financial difficulty, which may not be as severe as unemployment or bad health.
In case of legitimate reasons, the property’s management can chart out a payment schedule with extended due dates, which is more favorable to the tenant. However, a firm stance should be taken against repeat defaulters, and tenants who are not able to keep up with the revised payment schedule.
Eviction should be the Last Resort
Leniency towards certain tenant who has legitimate reasons for paying the rent late could be warranted. However, when the problem persists and the tenant is not paying the rent due to habit or circumstances, property manager cannot afford to lose income. Therefore, ultimately, evicting the tenant will be the only solution to the problem.
However, before taking concrete steps to evict the tenant, property manager can serve a "pay or quit" notice, which will make the stand taken by property management quite clear. If the tenant does not respond even to this notice then the eviction process should be initiated immediately. There are laws governing the eviction of tenants, and property management should make sure not to break any law; otherwise, the eviction can prove very costly, and the defaulter might even win the case in the end.