Managing a tenant not paying rent is a frustrating and challenging experience for landlords. It’s especially true if you rely on the income from your rental properties to pay your mortgage, property taxes, or other expenses. It may be a one-time thing or an ongoing issue, but either way, it’s no fun.
So what do you do when your tenant doesn’t pay rent? Can you immediately attempt an eviction? What are some rent collection steps you can take? In this guide, we’ll walk you through some options, including legal action.
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Quickly reviewing the lease agreement is always a good idea whenever you suspect a lease violation (including late rent payments). The lease should specify the date when rent is due each month, the grace period, and what fees you may add when the tenant pays late. As a reminder, local landlord-tenant laws sometimes regulate grace periods and late fees.
While not codified into law, the general rule of thumb is that if the first of the month (or whatever rent due date the lease lists) falls on a weekend or holiday, rent shouldn’t be expected until the next business day. Additionally, if the tenant is paying by ACH (or some other methods), processing times can result in the payment not hitting your account until a few days after the tenant pays.
Landlord software can be a great way to track lease agreements and rent payments quickly and accurately. Once you’ve confirmed the rent payment is late, it’s time to act.
Before taking any significant steps or making assumptions, attempt to talk to the tenant not paying rent. It’s easy to assume the worst, but they could have valid reasons.
It’s possible the tenant lost their job, is sick, or maybe just forgot to make the payment. It happens. In other circumstances, it’s possible that the tenant sent the payment, but that processing times or other errors could be holding it up.
Often, giving the tenant a call or shooting over a quick text or email will resolve the situation immediately. This is especially true if the tenant usually pays on time. You can also send a more formal late rent notice, stating the tenant must immediately pay before you take legal action. This notice lets the tenant know that the situation is serious, documents the attempt to collect rent, and proves that you notified them. We’ll discuss the types of notices you can send in the next section.
Even when good-faith communication attempts fail to move the situation along, it’s time for a more formal approach. Sending a formal notice escalates the request for immediate payment when tenants don’t pay rent, and you could use it as evidence in court should the situation progress that far.
A formal late rent notice should include:
If the tenant still doesn’t pay, after this nudge, sending a “pay-or-quit” notice is one last attempt to convince them to pay what they owe before the eviction process begins. Every state has its own rules on how and when to issue a pay-or-quit notice, but generally, states require at least 3-7 days to pass before a pay-or-quit notice can be issued.
This notice should demand that the non-paying tenant immediately pay the entire past-due amount or permanently leave (“quit”) the property. Landlords should follow state law very carefully to avoid any issues with the process should it proceed to an eviction.
For some tenants, a little help is all they need to get back into good standing, so offering a payment plan or alternative payment structure could make sense, especially if the tenant has been reliable. It could provide a temporary solution but is often a much better long-term strategy than a lengthy and difficult eviction process.
Further, you should clearly outline payment plans in writing, with both parties signing it to formalize the plan.
Another potential option for landlords who don’t wish to pursue eviction unless necessary is a “cash-for-keys” settlement. These settlements are lump sums of cash, paid to the tenant not paying rent, to leave the property promptly in exchange for canceling the lease and forgiving the debt owed. For landlords who seek to rent the unit as soon as possible, this could be a great solution.
Finally, you could refer the tenant to a rent assistance program that local governments or non-profits offer. While not a permanent solution, this could be a valid option if the tenant needs some help for a short time.
If all else fails and you’re still stuck with a tenant who doesn’t pay rent and won’t leave, eviction may be your only option. While each state has its own process for how evictions should occur, the general process looks like this:
And please, avoid “self-help evictions,” like changing the locks or turning off utilities, as they’re illegal and could result in significant penalties. No landlord dreams of evicting a tenant, but this could be your only path forward if your tenant is not paying rent and won’t leave.
After an eviction, it’s time to try to resolve your rental accounting discrepancies and attempt to recover as much of the lost rent payments as you can. While not always easy, recovering lost rent is possible, even if the tenant didn’t show up for court, resulting in a default judgment.
Here are some common ways landlords can recover lost rent:
The most common method of recovering back rent payments is to apply funds from the tenant’s security deposit to the unpaid debt. Landlords should use security deposit funds to cover unpaid rent per state landlord-tenant laws. Keep detailed notes in your rental accounting software (like REI Hub or TurboTenant) of what you’ve collected and what’s still outstanding.
Most states allow landlords to pursue a plan to garnish the tenant’s wages for outstanding debt related to an eviction and overdue rent. This option requires a separate legal process and hearing. A judge has to agree that garnishment is the best way to collect the debt. This method may be difficult to implement if the tenant has limited income or is unemployed.
Another option for landlords to recover what’s owed is to file a claim in small claims court. Every state has a maximum collectible limit, and while you don’t need an attorney, you will need evidence and documentation to support the claim. If the court rules in your favor, it’ll award you an enforceable judgment, and the former tenant will be legally required to pay, even if they’ve moved to another state.
Depending on the amount of rent still owed, landlords may consider hiring a collection agency to collect the debt, especially if the tenant is difficult to contact or is completely unresponsive.
Collection agencies collect a percentage of the recovered amount, incentivizing them to do whatever they can (legally, of course) to recover the funds. The percentage they take can be pretty high, but depending on the amount the former tenant still owes, it could still be worth it.
Further, collections will negatively impact the tenant’s credit, which could motivate them to resolve the debt with you directly if they know this is a path you’re pursuing.
Dealing with a non-paying tenant is not a fun position, so preventing it from ever happening again should be a top priority. Here are some strategies to reduce the risk:
It may be impossible to predict the future, but you can start off every new tenancy with reliable information. Carefully screen everyone who fills out a rental application to verify income and employment, confirm previous rental history, and review their credit and criminal histories.
Tenant screening is a great way to get to know an applicant and get a sense of what kind of tenant they’ll be. Consider calling references for a more personal idea of how they’ll fit in with your rental units.
Avoiding ambiguity in the lease terms could turn a tenant who doesn’t pay rent into a tenant who’s on time every month. A clear and detailed rental contract will explicitly state the rent payment amount, the date it’s due, a grace period (if there is one), late fees, and penalties for bounced payments.
These days, there are a number of property management software options on the market that allow landlords to streamline the day-to-day operations of their rental business.
These tools allow landlords to collect rent online via ACH transfers, credit card payments, or other methods that make life easier for landlord and tenant alike. Sometimes removing barriers can mean the difference between on-time and chronically late rent payments.
These solutions also allow you to send automated, personalized reminders for when rent is due and automatically assign late fees to overdue payments.
Learning what to do if a tenant doesn’t pay rent is key to finding long-term success as a landlord. From rental advertising to maintenance, you might have fine-tuned your property management strategy to minimize vacancies and maximize profit, only to be stymied by a tenant not paying rent.
If you do find yourself in a situation where your tenants haven’t paid, you do have some options:
But before even getting to this point, try to set yourself up for success by:
Finally, staying professional and consistent while maintaining thorough and detailed records will always be your best strategy.
If you find yourself with a tenant not paying rent, try to understand why they haven’t paid. If that doesn’t work, you can issue a late rent notice or a notice to pay-or-quit before moving on to the eviction process.
There are a number of ways in which you can let your tenant know that rent is overdue. If you’re using a property management platform like TurboTenant, the software can send automated reminders to a tenant as soon as rent is late. You can also deliver a formal late rent notice, containing the full details of what happened, including the original date rent was due, the amount, and any associated fees. If these options aren’t appealing, picking up the phone or sending an email could avoid escalating a situation that could be as simple as forgetting to hit “submit” on a payment form.
You can absolutely evict a tenant who isn’t paying rent by following your state and local eviction guidelines, which generally start with a “pay-or-quit” notice.
While there’s no surefire way to prevent a tenant from not paying their rent, screening tenants, using a clear lease agreement, and providing them with convenient payment options can help reduce the risk that a tenant will fall behind.
There are a number of strategies available to landlords attempting to recover back rent payments. These include using funds from the security deposit, filing a claim in small claims court, obtaining a court order to garnish wages, or hiring a collection agency. Whichever method you choose, make sure that you follow all state and federal laws and obtain the necessary court judgments.
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