Tenant Informed can't pay...What to do?

Question

Hello All:

Here is the story. I just go informed by our tenant that she didn't make enough money to cover the month of December. She is requesting to use the Last Month Deposit as payment for December.

There is no much options here, although I feel limited in seeing the bigger picture.

What would be the best possible option considering the circumstances?

This tenant hasn't been perfect, minimal problems but always got payed. Her lease was renewed for another 6 months.

Looking forward to hear your thoughts.

Michaela G. · Answer

I would not use the deposit for rent.

Did she tell you when she'll have all the money together? If she states 'this Friday' then I'd work with her. I would put a 'pay or quit' notice on by this weekend. That usually pushes people to borrow the funds from others.

If that doesn't get you anywhere by next week, I would tell her that you'll have to file for eviction. She can always stop it by paying you for the rent and filing fees.

But if you were to use her deposit and then she doesn't come up with January rent, you'll have no leverage and she'll have no incentive to keep the place neat, when she moves out voluntarily.

Aly W. · Answer

I would only work with a tenant who had a good track record, in a property that was difficult to fill, as opposed to having it become a vacant target for pipe thieves (been there, done that). My husband and I own two such properties.

If the property would be easy to re-rent, do as others have suggested - let them know the Pay or Quit will be posted as a formality, and once they pay, they can stay. If they don't, they won't. "Borrowing" the rent money from the landlord until their tax return or lottery ticket wins is not an option.

Dawn Anastasi · Answer

Sometimes after the first of the year the tenant files their tax return and gets a big refund check and they use that to get caught up.  I would agree that you want to stress that if they don't make good on their promise, that you will have no alternative but to file eviction.

Smokey the Bear to campers:  Only YOU can prevent forest fires!

Charley the Landlord to tenant: Only YOU can prevent being evicted!

Bill S. · Answer

@Charley Fernandez

I understand what you are doing and have a few (jaded) comments.

1) She couldn't afford last month's rent (late)

2) She couldn't afford this month's rent (late and partial payment)

3) See the pattern (digging deeper hole)?

4) What makes you think she can afford Jan rent plus 1/4 of Dec rent? Remember Christmas falls in the month she will be "earning" the money to pay Jan Rent.

Personally I think she needs a plan to move out (by Jan 1) and you to get someone in who can afford to pay rent. Let us know how it goes.

Nicole A. · Answer

If her deadline comes and goes for her next payment and you see nothing, act fast. Do not even wait one more day. Just file the court papers and get the process started. Even if she at least calls to push the date even further...she sees it works...and will keep doing it. You can only wait so long. Once she has court papers, she'll find a way to pay you. Nothing personal at her. All business.

Elizabeth Colegrove · Answer

@Charley Fernandez

She is testing you. You need to stand by your lease. Threaten eviction, her poor choices are not your emergency. If you use the deposit now you will have nothing to hold against any damages at the end. Plus you will have no leverage.

George P. · Answer

if u are desperate and can... Reduce the rent. For a month or two. Then bring it back up. If no, evict and get a better tenant.

Bill S. · Answer

@Dawn Anastasi  I think the schedule is a little before tax refunds would help. I don't know the ins and outs of tax refunds for just plain W2 wage earners. I do know that employers are not required to have the final forms out until the end of Jan. Jan rent is due end of Dec and Feb rent is due end of Jan. I don't have experience with this but I suppose they could get a loan against their tax return? I do know lots of landlords that have ended up holding the bag waiting for that ever illusive tax refund. Some tenants use it to move. They just think of it as starting over. They drag the landlord out over a few months and then in the middle of the night they are gone owing a couple of months rent and some damages.

Charley F. · Answer

Hello Bill and Nicole:

Yes, I see the pattern and both of your comments are indisputable.

This is the first time I give her a break, at least of this caliber. I went over my options and decided to take this route because it gives me some peace of mind I was able to work a doable option for her. Yet I am ready to proceed the minute she does not comply with the agreement.

I offered her an option #2 which was to live last month rent on December and move by Jan. The offer included break the lease with no repercussion other than few minor things as agreed on the lease.

I will certainly let you know how it goes.

Charley F. · Answer

Greetings all:

Thank you for all your suggestions. I ended up combining some of your suggestions, the tenant agreed, and I hope helping her works out.

Here is what I did:

- Did not accept Last month rent as December payment.

- Offered to accept half of Decembers payment along with a late fee pending from last month (her first late payment) as well as a late free for December.

- The other half of the rent would be payed in two additional payments, one in January, the last one in February.

I am hopeful that she understand the flexibility we have applied to help her out and that she do her part as agreed.

Thank you for all your great comments and suggestions. Happy 2014 to all and that is a great year for your investing business! :)

Tenant Informed can't pay...What to do?

Most Popular Reply