As a property manager, chances are you have dealt with late rental payments and delinquent tenants. While every property manager has their own approach for dealing with these scenarios, ensuring you apply the right solution for each situation will make certain that you walk away with the least amount of damage possible.
In some cases, property managers are too lenient and in others they are too rigid. The key is staying focused on the balance between reasonability and returns.
Taking a moment to ask yourself a few important questions can help ensure you make the best decision possible.
1. What kind of track record does the tenant have?
If you are dealing with a new tenant, you want to be very wary of delinquency. Having a late payment early on often signifies an inability to meet obligations in a timely manner. If this happens, you want to be more assertive in your approach. Don’t get your lawyers on the phone just yet, but be sure to communicate strongly that late payments are not acceptable.
If, however, you have been leasing to the tenant for a period of time and they are usually dependable, reliable and prompt in their payment, you can be more lenient in your approach. Contact the tenant - if they haven’t already reached out to you - and give them an opportunity to work with you.
If they catch up on rent promptly and you feel it is something that won’t likely occur again, it is better to wait for a recurrence than to head straight to court and potentially ruin an otherwise strong relationship.
If it is a repeated offense, or they stop responding to you, it is probably time to act.
2. Is the tenant communicating with you and following through with their promises?
Communication is key. If your tenant is avoiding your attempts to contact them and/or failing to respond to you, you will want to start looking into possible next steps. If you have come to an agreement, for example allowing them to pay rent a couple of days late this month due to an extenuating circumstance, it is important that the tenant follow through.
If they fail to follow through on the agreement exactly as you laid it out, it is time to consider the next course of action.
3. Have there been signs that their financial situation is going to be an ongoing problem?
Sometimes, inadvertently, tenants will comment on their current financial situation. Perhaps, they mentioned that they have been laying off employees or that they have lost a large client. These, along with other circumstances, can be key indicators that the delinquency is not temporary and that it will soon become a bigger problem.
Similarly, if your lease agreement includes payment terms based on profits earned, a consistent reduction in the amount of rent paid may signal bad times ahead for both you and your tenant.
4. Is there a high probability of receiving payment for unpaid rent?
If there are any signs of ongoing delinquency, such as repeatedly missing rent payments, failing to communicate, failing to follow through with promises, or suggesting a poor financial future, it is time to decide whether you should cut your losses or reach out to your lawyer.
While it may seem like the obvious choice to go after your delinquent tenant, it may not work out in your favour. Even if the court agrees that you are in the right and the tenant should pay you what is owed, a lack of finances can leave you with zero return and unnecessary legal and/or collection costs.
That is why, before taking a delinquent tenant to court, we always advise our clients to obtain an Asset Accumulation Report.
This report will identify assets and liabilities as well as locate the tenant for service purposes, allowing you to determine whether your time and resources would be better spent cutting your losses and finding a new tenant or going after your current tenant for back rent.
To find out more about how our reports can help you with skipped or delinquent tenants, contact us today.
Tags: Deliquent Tenants
