Legal Matters & Taxes What’s the Legal Way to Deal With Rent Arrears? by Nadia Abulatif September 18, 2017February 5, 2019 by Nadia Abulatif September 18, 2017February 5, 2019 One of the biggest problems that landlords face is rent arrears. However, that doesn’t mean that tenants don’t pay at all. Sometimes, they pay only a portion of the rent, and fall behind on paying the rest of it. Regardless of your specific situation as a landlord, the best way to go about it is to always follow the legal procedure. Although the term ‘legal procedure’ sounds pretty scary, it doesn’t mean that the landlord can’t take prior actions to actually reduce the possibility of rent arrears situations. There are steps that can be followed to prevent this kind of situation in the future. If it still appears, then there are other steps that can help solve the problem. Only if all other attempts fail, then you, as a landlord, can take more serious legal steps towards getting your tenants either to pay you the rent, or move out of your rental property. Related: Becoming a Landlord: 5 Guidelines to Being Fair to Tenants First, preventing getting into rent arrears Although some of these steps might sound too obvious, it doesn’t mean they are not important. So, here’s a list of the best tips on how to to prevent rent arrears from scratch: Find the right tenants. You might be wondering how. In fact, it isn’t so hard. Just consider listing your rental property on an official real estate website. This can actually help with attracting tenants whose number one priority is paying the rent on time. Moreover, set a clear screening process for all prospective tenants. Avoid renting out your investment property to family members or friends. This is very important. Otherwise, you will be expected to accept their excuses for why they can’t pay you on time or even at all. Always, and I mean ALWAYS, get proper IDs and proof of income before even signing the lease document. This will always help you in case you have to take legal action. It will also ensure you get your rent payments on time. Related: 8 Types of Tenants to Beware of When You Rent Out Your Property Second, the lease agreement This is crucial, so you don’t have to stress about it. You, as a landlord, have to make sure that you sign the lease agreement before the tenants move in. Make sure to mention the consequences of rent arrears in the agreement. This way you can maintain a professional relationship with the tenants under any circumstances. That will also make sure they know what will happen if they get behind on rent. Third, payment methods Here you have a guaranteed method of getting paid. Set your tenants on credit card payments. This means you will be able to take the rent directly from their bank account on the due date. It is a great way to make sure your tenants don’t get rent arrears. Another important thing is to keep payment records. This is actually an obligation. This way you will guarantee proof of payments. The payment records will furthermore serve as evidence in case you have to go to court for rent arrears or any other reason. Fourth, regular inspections and keeping up with the repairs and maintenance Regular inspections mean to show you whether the tenant that actually takes care of your rental property, and how important paying the rent on time is for you. Keeping up with the repairs and the maintenance is an obligation of the landlord though. If you fail to keep up with it, it might lead tenants to stop paying you and stat accumulating rent arrears. So make sure you do what you have to do in terms of your obligations to be able to expect your tenants to also follow their obligations. Now, if you have done all the above and your tenants still fall behind on rent payments, here’s what you need to do: Send late notifications Sending a late notification is important in case of rent arrears. Sometimes tenants simply forget to pay. So, it might be a good idea to give them a couple of days before taking this step. Moreover, if you send a late notification, make sure you document it the right way and keep a copy for your own records. This will serve as evidence in case you need to take further action. Sometimes, though, keeping a good communication relationship is a better idea. This way you can avoid any misunderstanding or embarrassment between you and the tenant when asking for the rent. Be objective Remember, your number one goal is to have the rent paid on time. So, being objective is important. Don’t let your feelings get in the way. Even though every person has his/her own circumstances and excuses, which sometimes might be convincing, if your tenants don’t pay you on time, you will be the one to get in financial trouble. Nevertheless, keep in mind that there’s always a way to compromise. Sometimes the best option with regards to rent arrears would be to offer a payment plan. This way you can get paid according to the plan and prevent rent arrears. Payment plan If you agree to a payment plan with the tenant, you should document it. Again, it will be evidence in case of any further legal actions. All you have to do is to make sure that the payments have been planned carefully, so both of you won’t have any problems with this in the future. If the previous methods still don’t work, then it’s time for even more serious actions. Here you can actually take legal action to evict the tenants. So, in this case you will have to: First: Termination/eviction notice This is the first step towards legal action. This notice gives your tenants a short period of time, set by the state law, in which they must pay any rent arrears. Otherwise, they’ll be subject to court eviction. Related: What You Need to Know About Eviction Laws in the US Second: Applying for court Even though it is rare to go past the eviction notice, there’s still a chance that you will have to go to court. This happens when the tenant still fails to pay you by the period set in the eviction notice. At this point, you will have to prepare all related documents you have, such as the lease agreement, the late notification, the payment plan, and any other records or documents you have related to the rent. This you will guarantee an eviction order. Third: Warrant of possession If the tenant refuses to move out of your investment property, you can apply for a warrant of possession. In this case, the police will have to physically kick your tenant out. Though it doesn’t happen often, this is still a possibility. Fourth: Compensation for rent arrears After you claim back your rental property, you will still be at a loss. So, you can go to court and file for compensation. Just make sure you provide the court with all the documents needed. In conclusion, it is an obligation for you, as the landlord, to keep track of all the documents related to renting out your property. It is also very important to follow the legal procedure in case of rent arrears. Otherwise, you might get very late on payments and get in a bad financial situation yourself. To read more on buying, owning, and managing rental properties, sign up for Mashvisor Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL EvictionLandlordRental ManagementRenting OutTenants 0 FacebookTwitterGoogle +PinterestLinkedin Nadia Abulatif Nadia Abulatif is an experienced Content Writer at Mashvisor. She was a trainee lawyer before switching to writing about real estate. She is currently doing an LL.M. in Human Rights and International Law. Previous Post How Do You Become a Commercial Real Estate Agent? Next Post Real Estate for Beginners – The Advice You’ll Need Related Posts What You Need to Know About Real Estate Taxes as an Investor Real Estate Professional: 4 Secret Tips to Qualify Chain of Title in Real Estate: The Complete Guide Airbnb Regulations by City Part 2 – Orlando, Kissimmee, and Las Vegas Landlord Disability Law: Is Your Apartment ADA Compliant? What Landlords Need to Know About Filing an Eviction Notice All You Need to Know About San Antonio Airbnb Laws Your Guide to Short-Term Rental Property Tax Deductions The Right Way to Do Taxes as a Real Estate Investor Is It a Good Idea to Invest in Real Estate in These States With No Property Tax? How Does the Atlanta Real Estate Market Look Like for Investments at the Beginning of 2018? Airbnb Palm Springs in 2018: Yes or No? Leave a Comment Cancel Reply Save my name, email, and website in this browser for the next time I comment.