A Tip for Better Rent Collection
A Tip for Better Rent Collection
Never Give the Tenant a Reason Not to Pay Rent
Collection of rents is arguably the most important issue related to property management. Most landlords depend upon the monthly rent to cover mortgage payments, property taxes, and other property expenses. When tenants fail to pay rent, these landlords may find themselves scrambling to cover these expenses.
First and foremost – follow the law. The legal relationship between landlord and tenant is spelled out in state statutes, local ordinances, safety and housing codes, common law, contract law and case law. Each party has obligations to the other that must be fulfilled. Both landlord and tenant have a duty to treat each fairly and to act in good faith.
Of particular importance are two rights given to tenants under law that could affect the landlord’s ability to collect his rent. The implied covenant of quiet enjoyment is basic to all leases. It ensures that the tenant’s possession of the property will not be disturbed by the landlord acting or failing to act in a manner that seriously interferes with or destroys the ability of the tenant to use the rental premises.
The implied warrant of habitability provides the tenant decent and sanitary rental housing at the time of rental and throughout the tenancy. A breach of this warrant violates housing codes and may cause constructive eviction of the tenant, allowing the tenant under statute to withhold rent, repair and deduct damages from the rent, and/or recover other damages.
It is possible for both rights to be violated at the same time. For example, if the landlord causes the rental premises to become uninhabitable, such as allowing unsanitary conditions, waste, or nuisance, the landlord has committed a breach of the lease agreement and may have caused constructive eviction of the tenant. By his breach, the landlord may have given the tenant the right to withhold rent, terminate the lease, or both.
Disputes between landlords and tenants must be resolved by prescribed legal means, not through unilateral actions.
State laws govern most rent issues and the laws vary significantly among the states. There may be statutes regarding the amount of rent that can be charged (in rent control jurisdictions), the amount of deposit that can be required, when and where to pay the rent, grace periods, late rent charges, returned check charges and rent increases. These laws will apply unless the landlord’s lease agreement stipulates different conditions that are not in conflict with the laws. Once the landlord understands what is required by applicable landlord-tenant statutes, he can write his lease agreement to meet or exceed legal requirements in order to better protect his business interests including collection of rents.
A landlord must thoroughly understand his lease agreement and apply the lease terms uniformly and firmly to all tenants who have signed that lease agreement. While the landlord holds the tenant responsible for the terms of the lease agreement, the landlord must hold himself equally accountable under the lease agreement for his duties and responsibilities.
The lease should clearly define all issues related to rent in order to avoid misunderstandings and disputes with the tenant at a later date, perhaps when the payment of rent has already become an issue.
The lease agreement should have clauses that clearly address the issues of:
- Amount of rent
- Due date
- Grace period, if any
- Type of funds
- How/where to pay
- Late charges
- Returned check charges
Lease agreements must include tools for enforcing timely payment of rents and management of the property. For example, if default provisions aren’t adequate, the landlord may be unable to evict a tenant who defaults on rent payments or other lease obligations.
Communication about rent rules is crucial to getting the rent money. Clearly defined rules help the tenant understand what is required and the consequences of non-performance. Landlords must not be afraid to ask for their money and to follow through with appropriate action if the tenant defaults.
There are some landlords who, as long as they receive the rent within a week or two of the due date, don’t make a big fuss about rent collection. They allow the tenant to develop bad payment habits by not enforcing the landlord’s own rent rules. Lackadaisical behaviors by landlords contribute to unwanted tenant behaviors. If rent collection is not important to the landlord, it will not be important to the tenant. Some tenants take maximum advantage of permissive rent collection. Until rules are enforced by applying consequences to undesired behaviors, the tenant will remain convinced that if he ignores the landlord’s requests the landlord will go away and perhaps even forget about it. Control has passed from the landlord to the tenant. Professional property managers recognize this issue and have standard procedures in place to fairly and consistently enforce the rules for all tenants. Tenants obey the rules because there appear to be serious consequences.
The process of evicting a tenant for nonpayment of rent is usually among the quickest and most streamlined of all legal proceedings in most states, assuming the legal procedures are properly followed in a timely manner. A common mistake is that the landlord delays taking action against tenants when they default on their lease or cause problems for other tenants. A “pay or quit” notice should usually be served on a tenant the day after the rent is due or after any grace period provided in the lease or by law. If the tenant fails to pay by the end of the notice period required by state law the landlord should immediately begin eviction.
Landlords are justifiably concerned that serving the “pay or quit” notice immediately may alienate the tenant or create unwanted disputes about maintenance or other issues regarding the tenancy. They hope that waiting to serve the notice, on the other hand, may allow the problem to resolve itself because the tenant will eventually pay the late rent.
However, it is best to serve notices as soon as possible. The landlord can always waive the notice if the tenant pays the rent and applicable late charges or cures any other default and can always terminate the eviction process if the problem is resolved only after proceeding to court. Delaying action only increases losses in the case of a tenant who will never again pay the rent and will cause additional financial and/or other problems for many other types of defaults. For example, the longer a tenant is allowed to disturb other tenants, the more likely good tenants will be leaving.
Furthermore, if a landlord doesn’t routinely serve the notice immediately each time a rent is past due, a tenant could claim during the eviction proceedings that the landlord “waived” the right to receive the rent on the first of the month or that you orally “worked a deal” for rent to be paid late. The tenant can even claim that the lease has been permanently modified and that the landlord can no longer demand the rent on the first of the month because he accepted the rent late and did nothing in the past.
When you always serve the “pay or quit” notice promptly you maintain complete control of whether to allow the tenant additional time to pay the rent or not. There should always be a written agreement when giving permission for late payment.