rent payment in cash next to a notebook and calculator

The most common dispute between landlords and tenants is late rent payments. Tenants that do not pay rent can cause a number of problems — they weaken your financial outtake and they can even cause legal trouble. While it’s sometimes a harmless case of forgetfulness, neglecting to pay rent is irresponsible and a breach of contract.

One of the best ways to avoid late rental payments is by screening your tenants to thoroughly understand their level of responsibility and ability to pay. If you have a tenant who doesn’t pay rent on time, however, it will become necessary to take action. In this article, we’ll show you how to settle this common dispute.

3 Ways to Avoid Late Rent Payments

These three methods are the most effective ways to avoid late rent payment issues and encourage your tenants to pay on time.

1. Communicate About Rent

Go over the lease with your tenant during the lease signing process. Make sure they are aware of all the policies, like when rent is due and what the late fee will be. When tenants know there is a late rent fee, they are more likely to pay on time since no person wants to pay more than they have to each month.

Sometimes, late rental payments are simply a side effect of bad communication, so effective communication will likely ward off payment mistakes. Likewise, establishing a good landlord-tenant relationship by communicating clearly and allowing tenants to ask questions as needed helps diminish the chances of them paying late.

Another option is to send a reminder to tenants that rent is due. Sometimes, rent is not paid due to honest forgetfulness, so a reminder can solve the problem.

2. Allow Tenants to Pay Rent Online

One simple way to avoid late payments is to collect rent online. Online rent collection simplifies the rent payment process and increases the likelihood of tenants paying on time. Avail has found that tenants who use automatic monthly payments are five times more likely to pay their rent on time each month.

Communication is also easier to facilitate with online rent collection. Automatic payments and monthly rent reminders encourage on-time payments, and payment information is documented for you and your tenants to access so you don’t have to worry about losing your records, having copious amounts of paper, or your computer crashing.

3. Improve Your Tenant Screening Process

Another way to avoid late payments is by improving your tenant screening process. If you thoroughly screen a tenant before signing a lease with them, including contacting previous landlords and verifying their employment, then you increase your chances of on-time rent payments each month.

According to a study from the Joint Center for Housing Studies at Harvard University, the number of people can’t afford their rent has reached record numbers. When renters are spending more than 30% of their income on housing, they are considered “cost-burdened.” While this doesn’t necessarily mean they will stop paying their rent, it’s smart to make sure you feel comfortable with a tenant’s income-to-rent ratio.

Screening tenants, checking their income, and setting guidelines for the minimum income you require is an important first step to avoiding late payments.

Procedure to Follow When Facing Late Rent Payments

In the event of late rent payments, always consult your rental lease agreement. It should document how you will handle late payments, and following the legal and agreed-upon procedure is the best method when a tenant fails to pay rent. You should note if there is a grace period of 3-5 days, if there is a late rent fee, and how much the late fee will be.

Although it’s rare, there’s a chance you are mistaken about when rent is due. Double-check the due date for rent payments and be sure the payment is actually late. If the payment is indeed late, then make sure you follow the procedure for late rent accurately and promptly. As you follow the procedure, document every step of the process so you have a record of how you handled it.

In some cases, tenants may argue that a late fee is unfairly high. Keep in mind that each state has a law regarding how high rental late fees can go, usually in terms of a percentage of the rental price. The Department of Consumer Affairs says that in “most communities late fees are limited by local rent control ordinances.” Make sure you abide by your local or state laws, and if your tenant believes you are doing anything unfair, refer to the lease to explain the procedure.

Keep Track of Rent Payment Records

Keep an accurate and up-to-date record of when all payments are received and how much was received. Remember: Do not accept partial rent payments during an eviction process. If late rent results in an eviction, accepting an amount as small as $1 can stop the eviction process altogether.

Track when you receive payments and who they’re from. Everyone on the lease is responsible for paying the full amount, unless otherwise outlined in the lease. The same goes for guarantors and co-signers on the lease — it is legal to demand rent from any signee on the lease, and failing to pay rent is a breach of contract.

Document All Communication About Late Rent Payments

In addition to recording payments (or the lack thereof), it’s also important to document how you are handling the situation. For instance, if you decide to post a late rent notice, document when and how you posted it. Sometimes landlords will post these notices on the front door. Other times the notice is delivered in person.

Essentially, a late rent notice is a more official document that outlines how much money is owed (including late fees), and the date by which it needs to be paid. These notices are technically the first step in an eviction process, which helps illustrate the seriousness of the matter to a tenant who has not paid.

If you do have to go to court, you will be glad you saved a detailed record of how you handled the situation. If your tenant contacts you or provides reasoning for late rent, be sure to write everything down. Save emails and any other correspondence so you can solidify what happened and when. This will save you time and effort if you have to take legal action.

While you are able to contact tenants who have not paid, be sure that you don’t cross the line. You cannot harass tenants under any circumstances, and it is illegal to cut off utilities or lock tenants out of the unit. You will be far more successful if you follow procedure and make sure everything you are doing is legal.

Keeping a record of late payments is also important when it comes time to possibly renew a lease. Depending on the severity of the late rent, you probably don’t want to renew a lease with any tenant that caused you problems. Before agreeing to renew a lease, always double-check your records to be sure they were responsible throughout the term of your current lease.

How to Deal With Bounced Rent Checks

If you receive a bounced check, be sure to contact the tenant right away. In most situations, they will apologize and fix the situation. But if they don’t fix it immediately, notify them that it is considered late rent and late fees will be added as necessary.

In some situations, a bounced check can be grounds for charging an additional fee simply because the check bounced. You can check your state’s rules to see if that is applicable, and your lease should also dictate how you would handle a bounced check. Remember that the lease is legally binding, so you must follow the procedures that were mutually agreed upon.

How to Handle Late Rent Explained

Late rent erodes trust between a tenant and the landlord. It leaves you wondering what else they aren’t taking care of in the unit, and it makes you question their ability to pay rent the next month.

Late rent is a serious issue, one that should be avoided if possible. Because rent often helps a landlord pay other rental expenses (like mortgages, utilities, and maintenance costs), taking the necessary steps to encourage on-time payments is essential. Remember to:

  • Communicate with your tenants about rent payments
  • Encourage tenants to pay their rent online
  • Have a thorough tenant screening process in place

If your tenant stops paying rent, make sure you follow a detailed step-by-step process as you deal with the situation, and learn more about how you can encourage future on-time payments with Avail online rent collection.