No one wins in an eviction action. The tenant gets a black mark on his record and in most cases, the owner gets a worthless judgement and a couple months lost rent to the freeloading tenant. Although the threat of an eviction is a strong one – evictions are a poor excuse for a bad collection policy.

Most residents with delinquent rents can be salvaged – if caught early enough. You can at least cut your losses on others by following a few creative approaches to collections. Why do your delinquent tenant a favor by giving him 2 or 3 month’s free rent – only to see him move out a day or two before the Sheriff comes out, to the apartment community down the road? Create a new set of options for yourself and your tenant and you can come out ahead – or at least cut your losses.

Tighten Your Collection Policy

Explain to all new residents your collection policy before they move in. Have this policy in writing and stress the seriousness of prompt payments. Have late charges and enforce them. Threatening late charges but never following through will only weaken your position.

To follow through, make sure you have a clause in your lease that states how payments are applied. For example, it should say that all payments are first applied to outstanding late charges and then to prior rent owed and then to current rent due. That way, whatever is owed is rent – and you can subsequently serve your tenant with a 3-day notice for the full amount.

Make Your Grace Period Short

Rent is due on the first. Because of the grace period in most leases, many tenants think rent is due on the fifth and late on the sixth. Consider shortening the grace period to the third, or providing no grace period at all. If you want to soften the blow, make rent due the first business day of the month (no excuses if the first was a Sunday or holiday).

Move Quickly On Delinquent Residents

The squeaky wheel gets the grease. Late residents like to hide. They’ll wait for you to come to them – while it buys them time. Most are in denial anyway. If your manager fails to act, you will lose days or weeks before you can do anything.

Residents who have not paid by the first should be contacted the morning of the second, preferably in person. Leaving a written reminder that the rent is now late is very effective. Even if you have a grace period, wording the notice to let them know the rent is now late but they can still pay without penalty if they get the rent to you by the 3rd, is much stronger than waiting and doing nothing.

Send the Message: Rent is Due On the First

Whether it’s by sending the above notice, or by another means, always send the message that rent is due ON THE FIRST. You might occasionally have a contest which is only open to tenants who have paid on or before the first. Or you might offer recognition or special privileges to tenants who consistently pay by the first (i.e. free carpet cleaning only to residents who pay by the first 6 months in a row).

Some people give discounts off the rent if it’s early. I’m not a strong believer in that policy (I think you’re throwing money away), but the message it sends is important.

Enforce All Late Fees and Penalties

Too often owners and managers are plagued with tenants who continually pay their rent late but never seem to pay for the late fees or other charges they are legally obligated to cover. If this is the case with you, make sure you have in your lease (or, serve a 30-day notice to change terms of tenancy) a provision that specifies the way you allocate any money received from the resident.

In our leases, we have any payments given first apply to outstanding late fees or other charges, with the balance due applied to rent. That leaves a tenant owing rent, which is much more powerful should you move to evict than owing a late fee. This system is very effective.

Find Creative to Solutions for Delinquent Residents

When a resident is late, be understanding. But do not bend on your expectation for payment. You might help the tenant come up with a solution to his problem. But don’t make it your problem! Do not allow the tenant to pay you “in two weeks”. Be adamant about the rent being due and be innovative in helping the Resident find a solution.

  • Solution 1) Resident borrows from credit card, credit line, friend, relative, etc.
  • Solution 2) Call Resident’s emergency contact. All applications have a line for “emergency contact”. Not getting the rent is an emergency!       If your tenant is avoiding you, phone the contact that you can’t reach the tenant and rent is due.       Word will get back to your resident.
  • Solution 3) Resident sells some of their possessions for quick cash.

Send a Final “It’s going to our attorney” Notice

Serve all your Three Day Notices in a timely fashion to protect your rights. If you don’t want to move immediately to an eviction because of the cost involved, or because the resident is a good tenant, you might give the resident a few extra days with a notice that spells out in detail all the negative things that will happen to them if they don’t pay.

It might start “We have referred your delinquent rental account to our attorneys. They will file an eviction against you on ______ (date) in the ___________ (court jurisdiction). They will ask for possession of your apartment, and for a judgment against you for all rent due, plus late charges…”

You are showing them exactly the consequences of not paying – and you’re giving them one last chance to stop this before it goes on their record. The letter should state how to contact you to arrange for payment (in full, and in certified funds, of course)

Move to Eviction – Then Keep Talking

If you don’t get your rent, you’ll need to file. Then you can make a legal payment plan – known as a stipulation. That will allow the tenant to catch up or you to recover your unit quicker. As part of the agreement to go on a payment plan, you can have the resident waive their right to contest the eviction.

Getting the tenant to sign off on a payment plan helps you in two ways. First, if they meet some or all of the plan, you get your money – which is what you wanted in the first place. If they don’t meet the terms of the plan (and they have to make at least the first payment), you can speed up the eviction process and cut your losses.

Evictions Are Costly

Don’t use threats of eviction as a collection policy. If you do need to evict, file quickly and move fast. Give enough time to solve the problem, but don’t let it go on for weeks and weeks. Too often owners wait until a tenant is two or more months behind before filing an eviction.

Even if you file, it’s not over yet. You still have to wait for a court date and then you have to win! That process could take another month or two! Consider other alternatives to cut your losses and to get the residents out quicker.

Fair but firm is your philosophy. Ultimately, you want to do everything you can to create the need in the mind of the resident that rent is THE priority bill. Too often, landlords have become the “lender of last resort” – and ultimately a lender who seldom gets paid.