COLLECTIONS
A late payment policy is outlined in the lease agreement and tells the resident what to expect when rent is not paid on time. While some landlords may choose not to execute a late fee the first time, it is inadvisable to ignore a documented policy for late payments. Enforcement of a late fee or other consequences could encourage tenants to pay on time or perhaps pay early, ensuring that rent payment takes a high priority. Late fees can be cumulative so that tenants know the longer the rent remains unpaid, the higher the fees. Property managers should check with state laws for reasonable late fee charges. As a reminder, these fees can only be charged if included in the written and signed agreement.
Non-Payment of Rent
As late payment fees are incurred, it may become apparent that the tenant isn't going to pay rent at all. The next step in the process is the "pay or quit" notice. The legal notice is a demand letter that informs the resident that rent, plus late fees, are due and are required to be paid within a certain amount of time. In most states, the property manager must give the tenant 3 days to pay rent or vacate the property unless the lease agreement states differently. A "pay or quit" notice may prompt payment or at least the release of the property so that the landlord can seek other tenants. The notice must follow legal standards including required contents (amount owed with fees, deadline for paying, and other state-specific requirements) and how the notice is delivered to the resident (taped to the door and via certified mail).
Eviction
Although eviction processes may vary by state, county and city, the landlord will likely have to file a legal judgment against a tenant for violation of their lease. Property managers cannot remove any of the renter's property, lock out the tenant, shut off utilities or physically remove the tenant without a court order. In order to obtain the court order, the property owner must appear in court with the proper documentation and records of communication to prove the tenant is in violation of the agreement. Again, a court ordered notice of eviction may provide more motivation for the resident to bring their accounts current with the property manager.
Monetary Judgment
Some small claims courts will allow the property manager to also file a claim for past due rent and damages during the eviction process. The monetary judgment is still a challenge to enforce, meaning the tenant may still not pay what's owed to the landlord, but the tenant's credit will be affected and often their wages garnished. If the court will not allow the claim, the property manager may have to file a separate claim in order to collect past due rent. States and municipalities have their own ways of processing these claims and the burden of proof, plus court fees, is the responsibility of the landlord.
Property Management Debt Collections
To avoid eviction and legal proceedings, or at least a consideration before those steps, landlords have the option to pursue debt collections through a property management debt collections company. The collection agency, much like the courts, will require as much documentation as possible to pursue the account. Some items that are helpful include:
- Tenant application
- Lease agreement
- Itemized list of past due amounts
- Any attempts to contact and notes
- A timeline of attempts to contact and when notice was given of late payments or eviction
Collection efforts may not recover all the past due amounts that are owed but the landlord has a better chance of recovery if the agency has experience in property management collections. Any amounts recovered will be less a small fee as dictated by the collections agency agreement.
Property managers don't have to give up on tenant collections when the rent is past-due. There are many steps along the way that could prompt the resident to bring their accounts to a current status. A fair and reasonable process will hold up in court, if need be, but a collections agency may be a powerful step before eviction.
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