Advice Needed: Long-Term Tenants Behind on Rent – How to Handle?

Question

Hi everyone,

I’ve been a landlord for a while now, but this is the first time I’ve found myself in a tough situation like this, and I’d appreciate some advice.

I have tenants who have been with me for 2 1/2 years. They’re a family with two kids and have generally been great tenants—almost always paying on time, except maybe once or twice, but they’ve always caught up. Unfortunately, the husband lost his job about 8 months ago and, from what I'm told, hasn’t been able to secure another one—not even in retail or fast food. I'm having a hard time believing this. Not even Walmart or McDonald's?

As of now, they owe me:

• Half of November’s rent
• All of December’s rent
• All of January’s rent

That’s about $5,500 total, which is a lot of money to lose. Given their track record, I’ve been lenient because I feel for them and understand how hard it must be for their family (I also have their $1,900 deposit). I offered to temporarily lower their rent until they’re back on their feet. But after nearly three months with no full payment, I feel like I need to take action.

I recently told the wife (who I know works hard to support the family):

I feel I need to be a little more firm so I told them I need November's rent by tonight, and asked for 10 proofs of job applications. My idea is to set up a ~$450/week payment plan for the remaining balance, and to get them back into the rhythm of paying with a deadline. I will continue to ask for proof of job applications and rejections. If they don't pay these next weeks they're out.

I know some landlords might say I’ve already been too lenient, but I feel for this family and don’t want to displace them. At the same time, this is a business, and three months behind on rent is a serious issue.

What would you do in this situation? Any advice or suggestions would be greatly appreciated.

Thanks in advance!

– Marcos

Patricia Steiner · Answer

@Marcos Carbi

You're not looking at this situation realistically.  Brace for impact:  YOU DON'T WANT THEM TO STAY.  YOU WANT TO SCARE THEM OFF.  THEY ARE STEALING FROM YOU (remember your remark about him not even getting a fast food/entry level job?  He didn't have to do that...you're carrying him). The longer they stay, the greater your loss AND the greater the risk that you will never recoup YOUR loss.  You're not helping them either...you're allowing them to run a tab that is putting them financial ruin.  There are many ways to attempt to collect your loss:  file a small claims complaint against them; get a judgement so you can garnish future wages/bank accounts - and the judgement will be recorded in the credit bureau.  Assign it to a collection agency on a contingency basis.  Report it to the credit bureau as a loss - and they won't be driving a new car, getting a new phone, renting/buying home until they settle with you.  There is also a solid chance that when you act decisively as a business owner that the 'bank of mom and dad' might just kick-in and settle all.  And, this: you may never recoup this loss...this is why you must manage to the lease.  The first day a tenant is late, you give notice.  Again, you're running a business - not running scared.  Stop the bleed, get a tenant who is able and willing to pay you (some of us would work 10 jobs before not meeting our financial obligations!), and then go after collecting 'their tab.'

Please forgive the directness of my response. I choose not to contribute to your loss.

Best.

Patricia Steiner · Answer

Whoa!  You're running a business...you are not a social services provider.  If they cannot afford to live there, they can't afford to stay there.  There are organizations that can provide the family with rental assistance; every municipality has one - and the assistance covers utilities as well.  Next steps:

1.  Send them a Notice to Quit for Unpaid Rent. It will give them a cure period to pay the rent in full. In my state, it's 3 days so check your state law.  Send it by US Mail with proof of delivery required and/or place it in an envelope with their name on it and post it on their door.  Failure to cure will result in eviction.  Again, you're running a business.

2. Advise them of the rental assistance program and have them apply immediately. It most likely won't help them in this case but let's face it - they're not big on resolving their own problems especially when you're accommodating them.

The longer you allow them to live rent-free with no solution in place, the longer they will do just that. Chances are they are paying others who are not as accommodating as you (amazing how people will make those car payments while jeopardizing their homes) - and it's time for them to move on to housing they can afford and to a tenant that does not require you to subsidize them.

Bottom line: you're not helping them by allowing them to keep digging the hole deeper AND you're cheating yourself. The #1 reason why landlords fail - according to the American Apartment Owners' Assn - is failure to manage to the lease.  Run your business as a business or risk it.

Hope this helps...

Nathan Gesner · Answer

1. Yours is a common scenario. You buy investments and everything goes well, so you sit back on your laurels thinking this is a pretty easy gig. Then reality hits and you find yourself in over your head. Bad things like this are common. You need to educate and prepare for them now. If you wait for the problem to occur and then try to educate yourself, you will exacerbate the problem and lose more money.

2. Stop what you are doing. You want to play the charitable hero. You want to show them what a nice landlord you are and help them get back on their feet. In return, they will be motivated to get a job and pay back every dime owed while lavishing you with praise. HA! The truth is, they will keep playing games and milk you for every penny they can, then they will leave the house a mess and cost more with cleaning, repairs, and vacancy. You'll be stuck with twice what is owed now, and you won't collect a dime.

3. Find an experienced eviction attorney and start the eviction on the first business day available. Do not communicate with the tenants except as advised by the attorney. If the tenant asks you what's going on, tell them they can move out or talk to your attorney. Watch the house to see if they abandon it, which they probably will.

Buy some books and educate yourself on how to be a better landlord. Just a few hours of preparation could have saved you many hours of effort, a lot of worry, and thousands in lost income.

Jill F. · Answer

@Marcos Carbi  If you want to allow a payment plan, Tell them this is the best I can do:

Pay $xxx cash by tonight at 8pm for November's rent. and then beginning Monday Jan 20, pay $450 each Monday (in cash? deposit to account xxx? by money order? cashiers check?) until past due balance is paid off. I wouldn't take checks, zelle (or similar) or epay in this situation.

You are unlikely to get your money back. Cut your losses the first time they miss a payment and start the eviction process.

You'll probably need to start the eviction process Monday morning.

Jules Aton · Answer

This is tough. I've worked with tenants in a similar fashion and ended up feeling ok about it but it was short term, over the course of a few months and they paid me something the entire time. I think the issue here is how long Dad has been out of work. That doesn't make sense to me and I would immediately require they start paying something or start process to evict before you are further in the hole.

Steve K. · Answer

Make it your business practice to post the notice to pay or quit precisely on the day after the grace period ends, every time. That’s your primary job as a landlord. It’s not always pleasant but you have your expenses on the property too, right? Does the bank let you get 2.5 months late on your mortgage payments? What about the utilities, property taxes, maintenance and repairs, capex, etc. are any of those optional for you? You can be firm while still being kind. I always just explain nicely that it’s my company policy to deliver the required notice and collect the late fee as per the lease every time rent is late, no matter what, sorry no exceptions for anyone as I treat everyone equally and adhere to the lease agreement that we both signed. If they pay then no need to take next steps but if they don’t then at least you’ve started the (sometimes long) process and are ready to move on to the next step (eviction). This sets the right expectations.  If you don’t collect rent, they will keep taking advantage of you as long as you let them. Sometimes I have even directed troubled tenants towards assistance programs (such as single moms because there are a lot of programs for them specifically in my area especially). But if they don’t even bother to fill out the forms to apply, or get a basic job to make ends meet, or borrow money from family or friends/ somebody else besides you, then they can’t stay. You’re running a business not a charity after all. Good luck!

Theresa Harris · Answer

They are 2.5 months behind on rent, it is time to tell them they need to move or you will start with an eviction.  There are plenty of community organizations (eg churches, charities) that they could reach out to for help and they should have done that sooner.  I also find it hard to believe the husband can't find a job or they aren't paying partial rent.  While you are willing to work with them, they are apparently happy to live rent free and don't seem to care about you.

I had a long term tenant (5 years) who stopped paying the rent. Single mom with two kids.  She'd been late on rent periodically (a week late here and there), but I told her she had to move.  She did so on her own after I gave her notice.  I never saw the unpaid rent (and knew that I wouldn't).  You can try small claims court, but nothing is enforceable, so it is mostly a waste of your time...and some of the problematic tenants know this.

I agree with Jill, if they do make payments, take cash or money orders-no cheques.

Marcos Carbi · Answer

Hi Patricia, thank you very much for your input. How do you think I should go about recovering the $3,600 owed? I've printed out a Notice to Quit and will post it on their door for legal protection. However, I'm afraid to scare them off and never getting a chance at those $3,600. What do you think I should do?

Advice Needed: Long-Term Tenants Behind on Rent – How to Handle?

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