Tenants not paying last month's rent. How to avoid this?

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Tenants not paying last month's rent. How to avoid this?

Anna Sam
Investor · Jacksonville, FL · Member since 2008 · 61 posts · 12 votes

Hi

I have had a few tenants in Florida who pay for all the months during the lease but then don't pay the last month's rent and the move after that. They ask me to take that from the Security deposit. But luckily I didn't have any damages to my units so I am OK in those scenarios.  If there are any damages to the unit then I would be paying for them.

Any of you having similar issues? Could you please suggest any ideas to get over this issue?

I am currently collecting Security deposit + first month's rent. Would it work if I made this into 12 payments as follows... for ex.. if rent is 1000/month then the total rent due would be 12 X 1000 = 12000. I would collect 1 payment as 2000 $ and the tenant would owe me another 10 payments of 1000$ each. $100 Admin /security deposit.

Just brainstorming ideas. Even in the above situation if there are damages to the unit then  I have to put money out of pocket.

Please let me know any suggestions.

Thanks

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Marcia Maynard
Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
11y

When tenants move-in, we give them a written "Move-Out Instructions" packet to follow at the inevitable time when they plan to move. If they lose it, we give them another one as soon as we get wind of their intention to move. It includes a "Notice to Vacate" form for them to give us written notice of their intention to move with their anticipated end date. It also explains they must pay rent in advance for the last month and utilities in full for the entire last month.  We also emphasize that security deposits can not be accessed during the term of tenancy. It is held strictly as security.  

If a tenant tells us they want us to use the security deposit for last month's rent, we simply say..."It doesn't work that way. Your security deposit stays in the bank trust account until we have regained possession of our property." and  "You need to continue to pay rent on time and utilities until the end of your tenancy." If we don't get our rent on time for the last month, they receive a 3-day legal notice to pay rent or quit. We charge a $20 posting fee with each legal notice we must serve.

Nip the behavior in the bud... using their security deposit prematurely is simply not an option... they need to know this from the start.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
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    When we start discussing terminating the lease I bring up that the security deposit CANNOT be used for the last month's rent.  So, the solution is simple.  No rent on the due date for the last month starts the clock.  On the 5th (CO law, yours may be different) I post the "pay or quit".  If I don't have rent on the 8th and they are still there, I start the eviction.

    I also make my security deposits a bit less than the monthly rent.

    4Reply
  • Dick RosenPro Member
    Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes
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    Depending on where you are, Arizona law doesn't allow me to collect that much up front. I do however have a statement in my lease that clearly tells the tenant that the security deposit can not be used as the last months rent. In that last month, late fees will accrue and my notices and phone calls will begin just as in any other month. So if I am not able to collect that last month I will gain late fees from the security deposit. I will also start the eviction process in that last month, as a scare tactic more than anything because they don't want that on their record.

    That's what I would consider doing but honestly, if you explain it well enough in the beginning, I've never had that problem.

    0Reply
  • Peter MacKercherBusiness Member
    Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
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    I charge $50 more deposit then rent. Since i started this no problems. I also go over this when signing the lease. 

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  • Marcia Maynard
    Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    11y

    When tenants move-in, we give them a written "Move-Out Instructions" packet to follow at the inevitable time when they plan to move. If they lose it, we give them another one as soon as we get wind of their intention to move. It includes a "Notice to Vacate" form for them to give us written notice of their intention to move with their anticipated end date. It also explains they must pay rent in advance for the last month and utilities in full for the entire last month.  We also emphasize that security deposits can not be accessed during the term of tenancy. It is held strictly as security.  

    If a tenant tells us they want us to use the security deposit for last month's rent, we simply say..."It doesn't work that way. Your security deposit stays in the bank trust account until we have regained possession of our property." and  "You need to continue to pay rent on time and utilities until the end of your tenancy." If we don't get our rent on time for the last month, they receive a 3-day legal notice to pay rent or quit. We charge a $20 posting fee with each legal notice we must serve.

    Nip the behavior in the bud... using their security deposit prematurely is simply not an option... they need to know this from the start.

    5Reply
  • Account Closed
    Retired Landlord/Author · Commerce Township, MI · Member since 2012 · 1k+ posts · 1k+ votes
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    I have in my Lease Agreement that any rents received will be applied to any outstanding charges in your account. 

    Please be advised that if this happens, and your rent is applied partially or in full to any outstanding charges, then your rent is late for the current month and must be paid in full in order to stop the eviction process against you.

    I go over this in great detail with the tenants when we sign the lease.

    Nancy Neville

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  • Walter E.
    Professional · Salem , OR · Member since 2014 · 44 posts · 10 votes
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    @Anna Sam 

    Does your state allows you to ask for first, last month's rent and deposit?

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
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    Just be clear about your expectations for the last month when the tenants move in and make sure the fact that they cannot use their security deposit for the last months rent clearly written in the lease. 

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  • Walter E.
    Professional · Salem , OR · Member since 2014 · 44 posts · 10 votes
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    @Anna Sam

    Also, your deposit amount should never be the same as your rent amount, that only confuses tenants

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
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    Originally posted by @Jon Holdman:

    When we start discussing terminating the lease I bring up that the security deposit CANNOT be used for the last month's rent.  So, the solution is simple.  No rent on the due date for the last month starts the clock.  On the 5th (CO law, yours may be different) I post the "pay or quit".  If I don't have rent on the 8th and they are still there, I start the eviction.

    I also make my security deposits a bit less than the monthly rent.

    Even with this discussion, many tenants are surprised to find out that regardless of deposits, that they lawfully owe rent.  That quit or pay is a wake-up call and an education for many tenants.  That being said, it works best with tenants that need referrals and/or care enough to avoid an eviction filing.  

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    this happens to me all the time... and of course I am too busy to do anything about it.

    Only 9 left to go and I am out of buy and hold  !!! only 9 more people to abuse me !!

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    1Reply
  • Russell BrazilBusiness Member
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    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
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    In New England where I am originally from it is customary to collect at lease signing, first months rent, last months rent and security deposit.  I wish that were the case down here in Maryland.  Ive had tenants skip out on last month rent here and told me to keep the security deposit (Which is against the law in  Maryland).  While I have tried to nip this in the but, I usually just chalk it up to the cost of doing business as long as damage to the property is minimal. 

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
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    Indeed my hope would be the pay or quit is a notice that they need to pay.  Here in CO, an eviction is only a few weeks so it is possible to actually evict someone if they don't pay the last months rent.  Not that it really helps, but it puts an eviction on their record.  To me, an eviction means I won't accept you as a tenant, period.

    No way would first, last and deposit fly.  Tenant struggle to come up with a month's rent plus deposit.  I'm sure it depends on your rentals and tenant pool.

    1Reply
  • Sam Leon
    Investor · Fort Lauderdale, FL · Member since 2012 · 1k+ posts · 465 votes
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    I ask two things in my lease:

    - First month's rent, last month's rent and security deposit when the lease is signed.  Basically three months worth.

    - Early termination fee of two month's rent.

    By doing this, the 12th month is "free" and you still have the deposit for damages.

    Also, if they break the lease on month #5, you can keep the last month + deposit which is two month's worth of rent.

    In some cases when they can't put up three month's rent I would allow prorating the last month's rent over the first three months.

    It does depends on your locale whether you would be pricing yourself out of the market by doing that though.

    1Reply
  • Brian G.
    Entrepreneur · Miami, FL · Member since 2013 · 133 posts · 83 votes
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    Here in Miami, Fl first + last + sec. deposit works like a champ.
    1Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
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    Lots of landlords collect last months rent in addition to security in hopes that the tenant won't bail on last month's rent.  However, in CA those deposits must be refundable. Here's a good description:

    All Security Deposits Are Refundable, Even If The Lease Says Otherwise.
    Pursuant to California law, the total security deposit (including last month's rent, a processing fee, a cleaning fee, etc..) cannot exceed two month's rent for an unfurnished apartment. California Civil Code Section 1950.5(m) prohibits any rental agreement, or lease, from characterizing a security deposit as "nonrefundable." There is no such thing as a non-refundable security deposit no matter how it is characterized (last month's rent, move-in fee, pet deposit, key deposit, etc…). All money paid by a tenant beyond the first month's rent is refundable.

    0Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
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    @Anna Sam that is exactly what I do. If everything is stellar as far as credit and income ratios then I will take the last month's rent over 10 payments. I do this to make it easy to remember even numbers. If their income is a little weak but they have offsetting factors, like ample savings, then I require all upfront. That way if they aren't perfect for my criteria then they can get in with adjustments.

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  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
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    @Anna Sam that is exactly what I do. If everything is stellar as far as credit and income ratios then I will take the last month's rent over 10 payments. I do this to make it easy to remember even numbers. If their income is a little weak but they have offsetting factors, like ample savings, then I require all upfront. That way if they aren't perfect for my criteria then they can get in with adjustments.

    0Reply
  • Jeff S.
    Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
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    . 

    @Account Closed that is fine and if they pay the last month they get the last month back. If they don't the refundable deposit if no longer refundable.

    0Reply
  • Daniel Raposo
    Rental Property Investor · Norwalk, CT · Member since 2013 · 276 posts · 147 votes
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    This may be specific to my area, but in CT you are limited to collecting three months up front (two for elderly) no matter what you call it. First, last, security, pet fee, etc. doesn't matter as long as it is less than three months rent. So typically to avoid this question I collect first and two month security, state up front the security can't be used for last months, and then remind them again when they give notice. Then if they do it anyway I charge late fees and keep it from the two month security deposit.
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