What to Do When a Tenant Stops Paying Rent

Nothing has the power to create more stress than a tenant who stops paying rent. Your expenses as a landlord don’t stop just because your tenant isn’t paying. You have to cover everything out of pocket at that point. And while it’s frustrating, you need to respond carefully. The last thing you want to do is escalate the situation to the point where your tenant damages your property. 

Here are the steps every landlord should take when a tenant stops paying rent.

Confirm the reason for unpaid rent and communicate

Not every missed rent payment is intentional, but tenants won’t always tell you what’s going on. Once you’ve double checked your records to make sure it’s not a clerical error, reach out to your tenant with a reminder that rent is due. If they still don’t pay, ask them directly if there’s something going on preventing them from paying rent. However, don’t be hostile. Be polite and open so they feel comfortable talking to you. 

Sometimes tenants end up with unexpected medical bills or family emergencies, or they lost some hours during the pay period and things will return to normal soon. You won’t know if the situation is fixable unless you ask. Communicating gives you a chance to solve the issue. For example, your tenant may have started a new job and their paychecks no longer line up with rent so they need a different due date. 

If the problem isn’t fixable, and they can no longer reliably pay their rent, you’ll need to move forward with eviction. But the process requires adhering to state law or you can get in a lot of trouble. That’s one of the main reasons investors hire professionals to handle their properties. 

For example, Green Residential, a Fresno property management company, handles evictions for Texas landlords so they don’t make costly legal mistakes. Judges tend to favor tenants and any mistakes you make will be a strike against your position.

Review the lease agreement

Your lease will tell you how to handle late payments. For example, check the grace period (if you set one) and make sure your tenant isn’t still within that time frame. If they’re genuinely late, apply your late fees – that often motivates timely payments. 

A strong lease won’t necessarily force your tenants to pay rent on time, but it will provide legal protection if you take the matter to court.

Send a formal notice

If a simple resolution fails, begin the formal escalation process. Send a “Pay or Quit” notice outlining how long they have to pay rent before they will be required to vacate. Be sure to comply with state law regarding notices. Consult with an attorney first to make sure you do this correctly. If your notice isn’t legal, you won’t be able to proceed with an eviction and you’ll need to start over.

Offer solutions

It’s more costly to turn over a good tenant than it is to replace them. Sometimes flexibility can solve the issue. Offer a short-term hardship plan by extending the deadline or allowing partial payments. However, be aware that accepting a partial payment is considered accepting rent and will postpone your ability to evict. Only offer this type of solution when your tenant can catch up and still pay next month’s rent on time. If they fail to pay rent on time again the following month, it’s a sign that they can’t catch up and will likely be late every month.

Begin the eviction process

You may not like it, but sometimes eviction is the only option, so be ready to pursue it. Every year, landlords file 3.6 million eviction lawsuits in the U.S. and it’s something every landlord faces at some point.

After giving the proper, legal notice to pay or quit, file the eviction paperwork with the court and follow the law to the letter. Avoid “self-help” evictions. Don’t change the locks or shut off utilities. These actions are illegal in most states and can get you sued. In some self-help eviction cases, judges grant tenants the right to remain on the property. 

Protect yourself financially

A tenant who doesn’t pay rent can devastate your finances. According to Transunion data, an eviction costs between $3,500 and $10,000. Don’t hesitate to seek damages in court for any unpaid rent and property damage. If they won’t pay the judgment, you can get a lien on their bank account or personal property. You can also hire a debt collection agency to pursue payment. 

Act in your business’ best interests

It’s frustrating when a tenant stops paying rent but be strategic and do what’s best for your business. Not every situation requires eviction, but sometimes it’s the only way to minimize your losses.

About Post Author

Ted Dawson

Ted is a serial entrepreneur with a knack for all things related to growth hacking. He writes for numerous publications online.

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