What to Do When Your Tenant Stops Paying Rent

A common question from Landlords is, what do I do when Tenants stop paying rent? It’s a frustrating issue for many Landlords and a top concern for investors considering getting started with long-term rentals. 

While it’s a common source of angst, the reality is that the right property management systems can dramatically reduce the risk of having Tenants who are behind on rent. Landlords rarely have to deal with Tenants falling behind on rent when they:

• Keep their property in good condition 
• Thoroughly screen Tenants and only rent to qualified applicants 
• Communicate well with Tenants
• Have clear policies for late rent

That said, sometimes it happens and Landlords need to know what to do when it does. With that in mind, here’s a step-by-step guide for dealing with Tenants who fall behind on rent. 

Step 1: Review Your Lease Agreement 

Your Lease is crucial when things go wrong. Your Lease Agreement should specify the day rent is due each month. It also may provide a grace period for paying rent. Some states require grace periods, others don’t. Your first step should be checking the Lease to confirm that rent is late. 

You should also review your Lease for details about late fees and late fee policies. Before contacting your Tenant, you want to make sure you’re familiar with all Lease terms dealing with late rent. 

Step 2: Remind your Tenant That Rent Is Late

Ideally, you use a rent payment system that sends reminders when rent is due and past due. That said, sometimes a Tenant just forgets to pay rent. Start with a friendly reminder to your Tenant that rent is late. This can be as informal as a phone call or text. You can also send a Late Rent Notice. 

More often than not, this reminder is all it takes for a Tenant to get current on rent. However, in some cases, there’s a bigger problem and you’ll need to work with Tenants. If this is the case, you want to talk with the Tenant about a plan to get them back on track. It’s important to strike the right tone in this conversation – you want to be firm, professional, and respectful. 

Life happens and everyone has seasons where they get behind. If your Tenant is communicating with you, try to work with them to create a plan to get them back on track. This is ideal for both parties. 

Step 3: Send a Notice to Pay or Quit

If your Tenant isn’t communicating with you or is unwilling to work with you, send an official Notice to Pay or Quit. The Notice gives the Tenant a set number of days to get current on rent or vacate the property. The period varies from state to state. Use your state-specific form to customize this official notice. 

Many Landlords hesitate to take this step, but we’d encourage you to be proactive. It’s a good way to determine whether your Tenant plans to stay in the property or move out. If your Tenant isn’t going to stay, you want to figure this out as soon as possible. 

Step 4: Consider a Cash-for-Keys Agreement 

If the Tenant doesn’t pay within the period provided in your Notice to Pay or Quit, you have two options: offer a Cash-for-Keys Agreement or begin the eviction process. 

In a cash-for-keys agreement, the Tenant agrees to vacate the property in return for a one-time cash payment. While this might sound counterintuitive to Landlords, it’s cheaper and faster than an eviction and a good last attempt to negotiate with Tenants.

We always encourage Landlords to try a cash-for-keys agreement as a way to minimize move-out costs and time. You want to get a bad Tenant out as soon as possible so that you can get a good Tenant in your property. 

Step 5: Start the Eviction Process 

If the Tenant doesn’t pay or accept a cash-for-keys agreement, it’s time to start the eviction process. We always encourage Landlords to hire an attorney to handle this. 

The eviction process is time-consuming and complex, and it’s essential to do every step following state laws. A local attorney who specializes in evictions will ensure everything is done correctly and that the process goes as smoothly as possible. Plus, it’s one less headache for Landlords to handle. 

 

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