Collecting Unpaid Back or Delinquent Rent from Tenants: Basic Do’s and Don’ts
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UPDATED: Jan 20, 2020
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Other than dealing with vandalizing tenants, rent collection is probably one of the most frustrating aspects of being a landlord. Collecting unpaid back or delinquent rent can be a time consuming, frustrating, and costly proposition for landlords. The different methods of rent collection available will depend predominantly of the laws in your state and your individual rental agreement.
It’s human nature to want to trust people. Your grand-father probably conducted business on a hand-shake. Unfortunately, the world is a different place and more business relationships are now strictly defined by contracts and the law rather than trust.
Most of your legal avenues for collecting unpaid back or delinquent rent from tenants will be defined by your rental agreement. Before you jump into or continue in the rental industry, research or pay for a good set of lease forms. Oral agreements are extremely difficult to enforce and prove in court in the event there are problems later on. A well-written lease contract will define all the specifics of a rental agreement, including the amount of rent to be paid and when the rent is due. If you as the land lord can’t establish a clear due date, you may be precluded from pursuing any rent-collection efforts.
Do not blindly accept a pre-written agreement given to you by a helpful friend. Failure to understand the remedies and requirements of your contractual agreement can result in forfeiture of some collection avenues. Do not make verbal changes to your contract. Verbal changes can reduce your ability to collect through your written contract. When you are designing your rental agreement, include as many self-help remedies as the law will provide.
State laws usually address two types of remedies. The first set of remedies are considered “self-help” remedies, or remedies the land-lord can utilize for collecting past due rent without going to court. Only include and utilize remedies permitted by your state’s rental or property codes. Examples of self-help remedies include land-lord liens on tenant property, lockout, and notices of eviction.
When utilizing self-help remedies to collect unpaid back or delinquent rent, you must comply with the provisions in your contract. For example, if your contract allows you to enter a residence and only retrieve sports equipment to satisfy delinquent rent, then enter and only retrieve sports equipment.
Like in bankruptcy, some states limit the types of property that a landlord can seize to collect unpaid back or delinquent rent. If your state law or contract provides for lockout or eviction notices, you must comply with both the legal and contractual requirements of each method. Most states do not permit utility shut-off as a way to collect past due rent. If you think this is a viable option, contact an attorney in your state before you utilize utility shut-off as a way to collect unpaid rent.
Many times, an eviction notice will solve the delinquent rent issue because the tenant does not want to be evicted and will pay the rent that is due. However, if self-help remedies fail, you can turn to the court system. Most rent collection disputes go through a small claims court.
Filing suit against a tenant for eviction or a rent collection suit requires that you pay a filing fee. Many small claims courts will provide basic filing forms. Make sure that you request the costs of filing the suit as part of your damages, because you cannot collect them if you don’t ask for them back. After your suit if filed, you will have to make sure that the tenant receives notice of the suit to collect rent. Jurisdictions vary on the type of notice (person, by mail, by fax, etc.) that must be given. After proper notice is given and a court hearing is held, you can obtain a judgment for the unpaid rent.
Unfortunately, to a deadbeat tenant, a court judgment ordering them to pay back rent is just a piece of paper. They won’t usually be interested in paying the past due rent until it affects what they want to do, like purchase a home or car, where an unpaid judgment will affect their financing options. Small claims judgments are only reported for a certain length of time. However, most courts have a process where you can pay a fee to extend the filing and reporting of your judgment.
You can also forward the account or your judgment to a collection agency. However, before employing a collection agency to help you collect unpaid rent, make sure that you inquire about their collection practices through third parties. Some states have deceptive trade claims or causes of action based on creditors knowingly forwarding rental debts to an agency they know uses abusive collection practices.
When it comes to collecting unpaid back or delinquent rent, though the process may be frustrating, several legal options are available to you. Keep in mind that many state laws are designed to protect consumers, even the bad ones, during rent collection. To avoid counter-claims from renters you sue, follow the steps provided in your contract or the law. If you have questions about these steps, take the extra effort to consult with an attorney in your state.