Being a property manager/owner comes with the potential for serious risk, liability and consequences at a time when the scales of justice seem to be tipped in favor of the tenants, even if the tenant is delinquent.
While you want to have an agreeable relationship with your tenants, this is your business and as such, you should expect rent to be paid on time and in full each month.
Unfortunately, tenants miss payments.
But when is it time to take legal action against your delinquent tenant?
Before acting on a delinquent tenant, you need to consider how to deal with the delinquency. Is it truly a sign of an ongoing problem or is it an anomaly and your tenant made a resolvable error?
While your goal should be to protect your investment, you don’t want to let a good tenant go if the late payment was truly a one-off.
As such, when determining the level of severity, you should use when acting on a delinquent tenancy, it is important to ask yourself some important questions.
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, is often a sign of bad future behavior. 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 while 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. If they catch up on rent promptly and you feel it is something that won’t likely happen again, you may want to wait it out until next month.
If it is a repeated offense, or they stop responding to you, it is probably time to take action.
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.
Similarly, if you have discussed the problem and come to an amicable solution, they should follow through. If you have allowed them to pay rent a couple 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 for your tenant.
If you suspect that your tenant’s missed payment is a sign of ongoing delinquency, but you are unsure of their financial situation, you could look into an in-depth delinquent tenant report, such as our Asset Accumulation Report.
With our Asset Accumulation Report you can identify assets and liabilities as well as locate the tenant for service purposes. This report will help you make decisions at different stages, from the time the tenant first falls into arrears to the time the tenant makes the midnight move.
The Asset Accumulation Report is also a great tool if you have decided to take action against your tenant, as you must determine whether to proceed with a legal action. After all, if there is a minimal probability of recovering the debt, why incur the costs of a suit? It may simply be easier to find a new tenant and learn from the experience.
Whether you are dealing with a rent abatement situation or considering terminating a tenant’s lease for unpaid rent, this report is an excellent decision making tool as it gives property managers the answers they need prior to sending a case to legal counsel.
Find out more about how our reports can help you with your skipped or delinquent tenant and Request a Sample Report Today!
