| Bad payers are a problem for all landlords and | | | | A partial payment is the same as a late payment. |
| we've all found different ways to deal with the | | | | If a tenant pays $400 on time and sends the |
| problem. The best solution is one that gets the | | | | other $200 on the sixth day of the month, he's |
| tenant back on track and avoids a costly eviction. | | | | late - and must pay the late fee. A bounced |
| I use the term "bad payer" to cover late payers, | | | | check is worse than a late or partial payment. |
| partial payers, check bouncers, and non-payers. | | | | Now you have to pay a fee to the bank and the |
| There are a number of ways to deal with bad | | | | good check will still be late. Charge both the late |
| payers. First, you want to do everything in your | | | | fee and the bank fee to the tenant. More than |
| power to ensure that all tenants pay on time, | | | | one bounced check and you should require that |
| every time. For example, set up a schedule of | | | | the tenant start paying with a bank check or |
| discounts for on-time payments or late fees for | | | | money order. Many landlords insist on bank |
| late payments. Many landlords favor the discount | | | | checks or money orders for all tenants, |
| approach because it is an easier sell to a | | | | regardless of their payment history, but this has |
| prospective tenant, but you may find it is not as | | | | disadvantages. One is that they are inconvenient |
| effective in reducing late payments. Why? | | | | for tenants. Another is that if a bank check gets |
| Because there's no stigma attached to not getting | | | | lost in the mail, it is harder for the tenant to void |
| a discount. | | | | it than for a personal check. |
| Often people have good intentions about paying | | | | You may want to cut extra slack to tenants who |
| on time but don't remember to make payments. | | | | let you know ahead of time that their payments |
| Two ideas may help you here. One is to send out | | | | will be late. This is usually because the tenant is |
| rent invoices. Your tenants get a bill each month | | | | short on cash. If the lateness is not excessive |
| for everything else they have to pay - why not | | | | -three or four days at most - I will waive the late |
| their rent? Another is to offer an automatic | | | | fee. But if I start getting calls like this every |
| payment plan. There are companies that you can | | | | month or every other month, I will charge the |
| use to set up automatic payments by direct | | | | late fee. |
| withdrawal or by credit card. Again, these | | | | When a tenant tells you he can't pay full rent on |
| methods presume good intentions on the part of | | | | time because of financial trouble, get more details |
| the tenant. | | | | about his problem. The big question is whether his |
| What do you do with a chronic late payer? First | | | | cash crunch is caused by a one-time expense or |
| recognize that there are gray areas here. I | | | | loss of income, or a permanent or long-term |
| believe your actions should depend on whether | | | | change such as a layoff. If the cause is a |
| the lateness is consistent - for example, the | | | | one-time expense, chances are he'll get back on |
| tenant always pays between the third and sixth | | | | his feet and be able to pay in full on time next |
| day of the month - or gets worse over time. A | | | | month. He still owes you the money for the |
| tenant whose lateness gets worse every month, | | | | current month and you can make a separate |
| despite your late fees and complaints about late | | | | agreement for this payment. Make sure he |
| payments, probably has little regard for your | | | | knows that violating the separate agreement or |
| authority. When he is late enough to warrant an | | | | paying the next month's bill late will result in |
| eviction notice, send it, and follow through. | | | | eviction. And if you do make a separate |
| Chances are you've already seen other signs that | | | | agreement, run it by your attorney to make sure |
| this person is irresponsible- he doesn't return your | | | | it is legal and enforceable. |
| calls and may have misbehaved in other ways in | | | | The tenant in this situation may also be able to |
| the unit. | | | | find money from another source to pay the |
| On the other hand, a consistent late payer is | | | | current month's rent. In my city, the public |
| probably worth keeping, even if you can never | | | | assistance office will write a one-time check for a |
| get him to pay on time. Consider that the late | | | | tenant who has a cash crunch but is working at a |
| payments are actually improving your bottom line. | | | | job and can generally afford the unit. However, |
| For example, suppose I have a tenant who | | | | they won't make assistance payments every |
| always pays about the sixth day of the month, | | | | month. Check this with your own local office. |
| and is charged a $5 per day late fee on a $600 | | | | A tenant who can't pay because of job loss or a |
| monthly rent. This tenant is giving me a 5% rent | | | | permanent new expense can no longer afford the |
| increase in exchange for a few days lateness - I'll | | | | unit. He has to either increase his income or |
| take that. Another consideration is how long it will | | | | reduce his expenses right away, or move out. |
| take you to re-rent the unit. My properties are in | | | | Maybe the tenant could get a roommate who can |
| New Hampshire and it's very difficult to find a | | | | split the rent. Maybe he can get a second job. If |
| good tenant during the winter. If I evict my $600 | | | | not, try to convince him to leave voluntarily, |
| per month tenant for late payments in | | | | without a formal eviction. It's better for him, |
| November, and don't find a new tenant until | | | | because he won't owe court costs, and will leave |
| February, that's $1,800 out the window. Better to | | | | with as much of his assets as possible. But if he |
| put up with the late payments (and enjoy the late | | | | won't leave voluntarily, you must evict, as soon |
| fees). | | | | as possible. |