Use security deposit for late rent?

Question

One of our tenants is late with her rent. She paid 50% last month and has not paid this month. She asked me to use her a portion of her security deposit (1.5 months rent) to cover the half month rent for last month.  Is it legal or advisable?  She told us she will mortgage her house overseas to pay for the rent.

She gets alimony and child support from her husband which was taken into consideration when we rented the apartment to her.  She would not qualify based on her own income. However, per our tenant, her husband has been late in paying for several months and she showed us her bank account which is in a bad shape.  On one hand, we feel bad for her and has been lenient with her (no late fee was charged). On the other hand, I think business is business and I fear that our kindness will cause trouble collecting or evicting down the line.  Any thought?

Thanks,

Sylvia

Account Closed · Answer

The Advantage of a Written lease Agreement, By Nancy Neville

Yes, this article is pertinent to the above question:  Please read on:

The advantage of a written lease agreement is that it is a written record of the Rental Agreement.

A written record is a permanent record which may be used for reference if misunderstandings arise.

In absence of a written document signed by both parties (the Landlord and the tenant), it is advisable to keep a personal written record of mutual agreements.

SIGNING THE LEASE

Once you have chosen the best applicant, you are now ready to sign the lease.  The very first thing that I establish with the tenant is that the utilities must be put into their name prior to us signing the lease.  If it is not, then we do not sign the lease and they better have a good reason as to why this wasn’t done or I don’t rent to them at all.

I usually schedule the signing of the lease the same day the utilities are placed in their name.  I have the Lease Agreement all typed out on my computer and when I confirm with the utility company that the utilities have been put into their name I print it out.

If the previous tenant left owing a bill, the utility companies will want to see the signed Lease/Rental Agreement first before they put the utilities into the new tenant’s name because they want to see if the tenant is really a new tenant or if the old tenant is just pretending to be someone else.  In this case we will sign the Lease as agreed upon, but I will not turn over the keys to the new tenants until I confirm that the utilities have been taken care of.  I usually put a lock box on the rental unit door with the keys inside it.  When I confirm that the transfer of utilities has been done I give them the combination of the lock and the home is officially theirs. (If you live close by your rentals you can just stop by and give them the keys.  Our office is 60 miles away from our rentals so we choose to do it this way).

The items I take with me when signing a lease are:

*The Lease Agreement:

a.Copy for me called “Office Copy”

b.Copy for them called “Tenant’s Copy”

*Pens

*Move in Move/ Out Sheet

*Keys

*Receipt

*Lead Paint Brochure

*Lead Paint Brochure Signature Page

*Move in Pictures (Photos of the home)

*Photo Signature Page

Prior to signing the lease (Rental Agreement) I prepare this new tenant that it will take about 20 minutes to go over it with them. As lawsuits become the “in thing”, it is important to cover every detail in your lease to protect yourself.  My tenants love the way their lease looks.  They feel protected as well and feel they are dealing with someone who is looking out for them!

When signing the lease, I do not read the entire Lease Agreement with them.  I go over the basics....... when rent is due, what happens if they don’t pay their rent on time.... or not at all, and I go into great detail explaining to them the eviction process.

This is how my conversation goes.  Using my business voice, I begin explaining the Lease.  Right off the bat I begin explaining when their rent is due and go into great detail on how the eviction process is done.

I tell them that their rent is due on the 1st of every month.  That all my rents are due on the 1st of every month and if their rent is not received in my office on or before the 1st of the month, then their rent is late and on the 2nd of the month I will send them a 7 Day Notice to Quit (my state).  I tell them not to be offended if and when they receive one, (and I tell them that they will indeed receive one because all my tenants receive one at one point or another if not every month), because this notice is just that…… a NOTICE and nothing more at this point.

I tell them that this notice is just telling them that I have not received my rent yet and it is something that I have to legal do to protect myself just in case a tenant decides not to pay their rent.

I tell them that the only time to worry about receiving this 7 Day Notice to Quit is if they don’t plan to pay their rent, and I smile a little and add quickly, but I know that won’t happen with you because I’m very picky who I choose for my rentals and I picked you!  (I say this happily).

I tell them that if rent is not received in my office on or before the 5th of the month than a late fee of $25.00 is charged to them.  And if rent is not received in my office on or before the 10th of the month than on the 11th of the month, no matter what, I file for eviction and they are charged a $90 filing fee and it is recorded on their credit report as a suit for non-payment of rent.

I explain to them, still in my business voice, but now becoming softer, that their rent check is MY INCOME.

I tell them that they wouldn’t like it if their boss told them that he couldn’t pay them today because his car broke down or he was sick, and I am no different.

I remind them how much they look forward to their pay check because they have to pay bills, buy food, and need it to live on and I feel the same way.

I tell them that rent is the very first thing that they need to pay out of their paycheck, because without a roof over their heads they don’t have any private place to lay their head, to change their clothes, to take a bath, to go to sleep or any place to STORE THEIR STUFF!

By the time I’m through with this little speech they “get it”.

I then tell them that I always will bill them for rent that is due.

Because I have chosen tenants who are COLLECTIBLE and who pay their bills on time, I have found out over the years that if you treat rent as a bill, the tenants will pay on time.  However, if you allow tenants to think of their rent as rent, they feel that rent can be paid anytime as long as it’s within a rental month.  There Is just something about the word RENT!

Since I have implemented the billing system for my tenants, I hardly have any evictions anymore, and life is so much better.

After I tell them all about the eviction process and how I will bill them, I then tell them what they can expect from me as their landlord.  This shows them that it’s not all one sided.  That I am responsible for things to.

I tell them that I will take care of them.  That they can call me any time, night or day, no matter what time it is, if there is an emergency, and that I will have someone out within 24 hours and no later than 48 hours, guaranteed!  I tell them what I consider an emergency, no lights, water, gas or leaky toilets and pipes.

I tell them that if they have any repair requests that are non-emergency to put it in writing and I will take care of it in the order that it is received.

I expect a lot from my tenants but they also know that they can depend on me to take care of them in an emergency and they know they will have a nice home to live in not just for a few months but for the length of their tenancy.  (The only exception to this rule is if the tenants do the damages themselves.  I refuse to repair anything that is damaged by the tenant while they are living in the unit unless they pay for it themselves)!

If tenants forget all about my speech at the signing of the lease regarding their rent being late, I tell them, that I’m sorry they are having difficulties (and I mean it) and I am very sympathetic, but I stand my ground and tell them that the most time I can give them is what the law  allows. (You must understand that the eviction process is very long and lengthy.  You MUST start an eviction immediately if you wish to get your home back or your rent, and if you’re lucky, a money judgment).  No matter how much you like the tenant or how sad their circumstances can be, you must file for eviction post haste!  If you won’t do it, or can’t do it, then you’re heading for trouble.  Whether it is then or later on down the road.  It is very important for you to establish a policy and adhere to it without fail.  I can’t stress this point enough!  I also ask the tenants if there is any way they can borrow the money from someone?  A family member?  A bank?  A friend?  But once again.  I never give in!

Thomas S. · Answer

A damage deposit or last month rent should never be used to cover rent. To do so is one of the common major mistakes of a amature landlord. It is to be used for exactly what it was intended to be used for and nothing else.

Business operations should have no "feelings" for a customers situation for the simple reason that it hurts the financial bottom line. You need to decide if you are operating a business or a charity. If you determine you are prepared to loan tenants money or operate as a charity you simply adjust your practices to allow for these types of circumstances.

I personally would have been charging late fees as I would any tenant. Why should she be treated special. Last month you should have issued an eviction notice to protect yourself. She would then be motivated to pay as opposed to you now facing another month with out rent and probably more.  Once you ignore proper business practices it is a very slippery slope that ultimately will see you losing money and eventually becoming more serious about operating your business or selling.

Your first mistake was renting to her and now you are sliding down the slippery slop of feelings. You are not at bottom yet and will not be able to climb out till you get rid of her.

Bob Cohen · Answer

Hi Sylvia, How'd you make out with your situation?

PS: I've had this tremendous legal service for the past 17-years where I can pick up the phone and talk to top attorneys (On any matter,) get their advice and not get charged for the call.

Let me know if you would like to learn more.

Bob

Dolly Caswell · Answer

WOW @Nancy Neville...wouldn't you like to come live in Alaska and manage property?

Derreck Wells · Answer

In some states, it is illegal to use the security deposit to pay late rent. If you do, you may still end up owing her the security deposit when she moves out.

Max T. · Answer

A security deposit is for damages only.

Rent should be paid on time, or late plus late fees, or not at all - then evict!

Jason Hirko · Answer

my concern, as others have alluded to, is If you catch her up on rent with her security deposit, in a month and a half you'll be in the same position except without a buffer in case the place is torn up

Use security deposit for late rent?

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