Late rent payments are frustrating, and as a landlord, you might have come close to losing your cool if rent hasn’t come in and it’s well beyond the first month.
There’s a way to handle late rent payments professionally, however, and it’s a much better path to follow.
Let’s talk about some best practices when it comes to late rent payments, including how you can handle them and how you can prevent them.
Establishing a Rent Collection Process
Let’s say you have done the screening. All the due diligence during the leasing process has come to an approved tenant. You’ve checked past payments, rental history, and eviction records. You’ve placed this tenant because you expect they will be able to pay rent on time and follow the terms of your lease.
That’s great. Your next step in avoiding late payments and enforcing on-time payments is a specific policy that outlines your rent collection process. This will tell your current and future tenants how, when, and where you will collect rent.
We have had the most success with rent collection policies when we’re thorough. We cover every possible detail and anticipate every possible question.
Include the rent collection policy in your lease and provide it to your tenants as a separate document, too. You want them to understand the urgency of this.
It has to be more than the simple expectation that rent is due on the first of the month. An effective rent collection policy will provide an explanation of why it’s so important to pay rent on time.
- List the Day Rent is Due. For most renters and owners, rent is due on the first of the month. Tenants will expect this. But, make you’re your policy is clear about which day rent is due and on which day it is considered late. Reference weekends and holidays and whether payment will be accepted on the day following a Sunday or a holiday. Tenants cannot claim to be confused about when rent is due when it’s in your written policy.
- Establish Grace Periods. California does not require a grace period, but it’s not a bad idea to allow tenants a day or two to pull rent together.
- Share Late Fees and Consequences. Penalties for late payments need to be specific and fair. The rent collection policy should include all consequences – from late fees up to eviction.
You also need to indicate how rent should be collected. Let tenants know whether you’ll accept checks, credit cards, electronic transfers, wires, or online payments. Now that you have a written and documented rent collection policy that complies with all state laws, you’ll want to consistently enforce that policy. Charge the late fees when it’s time. Serve the eviction notices. You need to let your tenants know how seriously you take this, even if you’re willing to work with them in order to get them caught up with the rent that is owed.
Online Payments Can Help You Avoid Late Rent
The National Apartment Association recently reported that 79% of tenants prefer to pay rent online. This is an excellent way for Santa Rosa landlords to ensure their rent is paid when it’s due. Online payments can:
- Cut down on the risk of late and unpaid rent
- Provide convenience for your tenants
- Contribute to a better relationship
- Offer an improved rental experience
- Increase the likelihood that your tenants will renew their lease agreement.
With the world constantly evolving and people preferring the convenience of online everything, there is no reason for you not to offer an online rental payment option to tenants. Let’s dive a little deeper into why online payments matter so much to tenants and your on-time rent collection goals.
While the majority of tenants prefer online rent payments, not every tenant will want to do that. So, provide additional options. You should still be prepared to accept checks or money orders. Some tenants may want to pay in cash. While accepting that much money may not be safe, there are programs where tenants can pay in cash at retailers such as 7-11. The store accepts the cash, and the money is deposited into your account.
Steps to Take When Rent is Late
The due date comes and goes, and the grace period has ended. You still don’t have the rent. What can you do? Here’s how to approach the matter professionally.
- Communicate with your tenant. There’s always the chance that your tenant simply forgot. Or, maybe they were out of town unexpectedly and they’re struggling to catch up with bills and general life details. It could be as easy as this, and your phone call or your text will trigger them to pay the rent. Problem solved.
- Remind tenants of your rent collection policy. Whether the tenants are cooperative or ignoring your outreach, always remind them of the late fee that will now be charged and the next steps if rent does not come in immediately. Invite them to contact you in order to prevent an eviction notice.
- When you’re unable to reach your tenant or the rent still doesn’t show up, you’ll want to move quickly to begin the eviction process. We think eviction is always a last resort, and we recommend you continue trying to work with your tenant. However, be prepared to evict because the entire process will likely take longer than you expect, and you want to mitigate the risk of losing more rental income.
- When you cannot collect rent or motivate your tenants to cooperate with you, serve a Notice to Pay or Quit. Then, talk to a local Santa Rosa property manager like the team at Prestige Real Estate & Property Management, or work with an attorney so you can move forward with an unlawful detainer action.
The idea is to avoid the eviction option but to still be prepared for it. Time will be of the essence, and if it looks like eviction is the only answer, you will want to move along in the process already.
A good relationship with your tenant always helps. When you can establish and maintain a positive, transparent, and respectful relationship, you’ll notice that tenants are less likely to pay rent late. And, if they know that something might prevent the rent from coming in on time, they’ll give you a head’s up ahead of time. That’s very helpful to you, and it’s less stressful overall.
Negotiating and Accepting Payment Plans
Another professional way to deal with late rent is to offer a payment plan.
If your tenant is unable to pay their rent on time but you believe they are capable of doing so in the near future, it may be beneficial to establish a payment plan. Setting up a payment arrangement can leave your tenant feeling supported, and it can also ensure that rent will be paid without having to march towards eviction.
Talk to your tenants about what they can do and where they are financially. Get a sense of why rent is late this particular month. Is it because of an unexpected financial obligation? That’s easier to work with than a situation that may be more long-term, such as a job loss.
Payment arrangements will allow the tenant to make smaller, more manageable payments until they are caught up. You can also consider adjusting the lease agreement to reflect the new payment plan terms. It’s crucial to put any payment agreement in writing and make sure it’s signed by both parties. Hold your tenants accountable for what they agree to pay.
Documenting Santa Rosa Rental Payments and Collection
Document everything in the process of rent collection, especially if rent is late. Keep careful track of each payment and all correspondence. This is absolutely essential when you’re renting out a home in Santa Rosa, even if it’s just one home. You need to create a reliable, accurate, and transparent system for collecting, recording, and managing rental payments.
It’s important to keep a careful watch on rental income for several reasons. This is not only to ensure it’s paid on time but also because this will be income that you later claim on your taxes, and it needs to be correct. It needs to be easily tracked. Document any late fees or letters you may have written trying to collect overdue rent. Keep your emails and text messages. If there are notices served, keep copies of those as well. If court dates are scheduled, get those into the calendar as quickly as possible.
Late rent is no good. You need a consistent income stream in order to remain profitable. When you’re not sure how to handle a tenant who always seems to pay rent late, we can help. We can also work with you on evicting a tenant who simply refuses to pay and in placing tenants who are likely to follow the terms of your lease.
Please contact us at Prestige Real Estate & Property Management. We manage homes in Sonoma County, including Santa Rosa, Windsor, Sebastopol, Petaluma, and Rohnert Park.
