We’ve all been there- rent out a unit to a model tenant, one that always pays rent in time, isn’t one to host loud parties, and is proactive about house maintenance. A year or so down the line, something happens that disrupts the rhythm you and your tenant have created. They lose their job, perhaps, or maybe their business isn’t doing well anymore.
It’s difficult and often overwhelming to figure out how to deal with such a situation. While honoring the relationship you’ve built with your tenant, you should to handle the situation in a way that is legally acceptable and protects your business. Here are five steps you should follow when your tenant is unable to pay rent.
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1. Ensure open communication
The ideal tenant will typically call in or send an email to inform you that the rent check may be delayed. Whenever the tenant reaches out to tell you they may be unable to pay rent on time, it’s essential to come up with written and signed documentation of when you should expect to receive the money. This document will not only make it possible for you to hold your tenant accountable when that time comes but will also serve as an important legal document should you need to evict the tenant later.
After talking to your tenant, you ought to fill out whether their current financial situation will be short-lived, or whether it might last for a while. This clarification will help you figure out whether or not to extend the grace period- for example, if your tenant projects that things would be better one or two months down the road, it may not make sense to evict anyway and then have to look for a new tenant.
2. Help come up with a solution.
Having an open and straightforward conversation with your tenant may help you develop a solution to the problem or at least come close. Try to be proactive. For example, allowing the tenant pay a reduced amount of rent for a certain period of time will ensure that you’re not losing too much money, and will also give the tenant the time to get their affairs in order.
You’ll understand why your tenant is having difficulties paying rent through this conversation, and you may find different ways to help. If, for instance, they’re unable to pay because they’re recently divorced or recently got out of a job, they may be eligible for federal benefits and allowances. Pointing them towards the local council to claim help would, therefore, be very helpful and proactive.
3. What does your lease say?
Whenever you rent out a unit in your building to a tenant, it’s important to point out the exact terms and conditions when it comes to paying rent. Include a clause in your lease that talks about the grace period you would typically extend a tenant to pay rent, and the steps you would take if this period elapses before they send you the funds.
By signing the lease, the tenant, therefore, becomes legally bound to these terms. Going back to the lease will direct how you should approach such a situation without violating the landlord-tenant contract.
4. Draft up a proper pay or vacate notice.
If the grace period elapses before the tenant pays rent, you ought to deliver a properly written eviction notice. This documentation will serve as a vital tool should the eviction case end up in court. Even if you don’t plan on evicting the tenant, serving this notice will convey that you’re serious about the rental agreements you have.
Before sending out a notice for your tenant to vacate, it’s crucial to ensure that the document meets all the legal guidelines and requirements. Make sure to keep your language formal, neutral, and as respectful as possible.
5. Evicting your tenant
Although it helps to be an understanding and patient landlord, putting up with a tenant that defaults rent isn’t the best financial decision to make. If the tenant has a history of defaulting, especially, you may have to evict them from your property and find a better occupant. Remember, rental units require lots of resources to maintain, and the loss of income from a problem tenant will not do you any favors.
However, before you execute the eviction, you must make sure the notices you issue are legal and properly written. You should consult with a professional eviction service or your lawyer to ensure the eviction is handled as smoothly and professionally as possible.