10% increase so chronic late-paying renters will move California

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10% increase so chronic late-paying renters will move California

Ash Townsend
Member since 2018 · 5 posts · 0 votes

Hello,

One of my tenants has paid the rent late seven out of eight months (including the rent for August) this year. Typically, they pay less than half to half the rent around the 8th or 9th of the month (which is already late), then the remaining rent plus a late fee between the 18-22 of each month. I told them numerous times, both verbally and in writing, that the rent must be paid on time every month, yet they continue to break the terms of the payment terms per the rental contract. This morning, I verbally notified them that I will serve them a 3-day pay rent or quit notice if they pay late again. However, it would be easier if they moved out on their own, which will not happen at the current rental rate. My rental property is in Sacramento County, which currently has no rent control. I read online that a rent increase of 10% or more requires a 60-day written notice. Do you think Increasing the rent by 10% with 60 days to decide whether or not to pay the higher rent or move out by October 31 is a good plan? This is not about raising the rent; if they paid on time like my other tenants, there would be no problem.

Please let me know your thoughts on this.

Thanks,

Ash

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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
8y

They obviously get paid every 2 weeks. Since they are tight with money, you might force them into an eviction, because they'll be between a rock and a hard place, as they'd need to come up with deposit for a new place, but won't get deposit back from you until they've moved out. 

Have you considered making a rent increase and also splitting the rent up into 2 parts? Paid on the 1st and the 16th. It'll make it easier for them to come up with it on time and you'll make more money. 

In addition, this will be so helpful for them and knowing that most landlord don't do that, they will likely stay for a long time, which saves you money. 

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  • Ray Johnson
    Irvine, CA · Member since 2016 · 545 posts · 613 votes
    8y

    @Ash Townsend Are you trying to raise the rents now or waiting until the next lease term? Not sure if October 31, 2018 is the end of the lease term. The 10% or more increase is typically referring to an increase when you are ending one lease term and starting a new lease term, Since they are currently contracted at a certain rate until the end of that lease period, you would be in violation of the contract unless your lease states that the landlord can raise the rents anytime during the lease period. 

    You will also want to keep in mind and prepare for them to not pay one months rent when they leave or at some point before they leave, It's clear they don't have any money saved and when they leave their new landlord will want rent and a deposit and that money has to come from somewhere, usually it's the current landlord. 

    Also since you want them to leave willingly, you will have to lie to the future landlord when they do a reference check and ask about on-time rent payments if you want them out, or maybe articulate your response as "Their rent was paid every month" and not mention it was paid late every month just that it was paid every month.

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  • Dave Nixon
    Member since 2018 · 24 posts · 16 votes
    8y

    So they have paid rent 8 out of 8 months plus 7 late fees?

    Do you need the on time cash flow to pay your obligations or are you just being a stickler for on time payment?

    There are worse things than tenants who pay their rent, albeit only late.

    1Reply
  • Ash Townsend
    OP
    Member since 2018 · 5 posts · 0 votes
    8y

    @Ray Johnson thanks for your reply. I am the owner of the property. The lease went to month-to-month in May 2018, one year after the tenants signed the one-year lease agreement and moved in. They paid the first month's rent, plus a security deposit which is saved in my business checking account which they will get back as long as the apartment is left in serviceable condition. In California cities without a rent control ordinance, the rent can legally be increased to any amount once the lease has expired and continues on a month-to-month basis. A ten-percent or more rent increase is legal, as long as the tenant is notified, in writing, at least sixty days in advance. These days, most landlords in California use some type of online screening service. As for future landlords, they should sign up with Transunion Smartmove. After I had to evict another tenant back in February for destroying my other rental unit, I made a point to use T.S. to screen all candidates. No more verbal verifications, no more lies. f they have a prior eviction(s), or their income is too low to support pay the rent, then sorry, their application will be declined.

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  • Ash Townsend
    OP
    Member since 2018 · 5 posts · 0 votes
    8y

    @Dave Nixon thanks for the reply. The tenants have paid the rent on time twice in sixteen months. This was partly due because I enabled them to do so. Respect is a two-way street: they took advantage of my kindness; they made empty promises. I'm done. No more favors.

    It comes down to priorities; either you want a roof over your head, or you don't. Most people make the rent/mortgage payment their #1 priority (over partying, car payments, etc.) because being homeless really sucks. Not a single one of our creditors could give a damn about our personal situation. It's the agreement you sign and the promise to fulfill the said agreement that matters the most.

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  • Anne Smith
    Steinhatchee, FL · Member since 2017 · 77 posts · 69 votes
    8y

    If they cant pay on time now, they wont be able to pay on time if you raise the rent. Why not just give them 30 or 60 days notice, whatever your state requires, and just get new tenants?

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  • Ash Townsend
    OP
    Member since 2018 · 5 posts · 0 votes
    8y

    @Anne 

    @Anne Smith California has very strong tenant laws making it difficult to evict tenants. Plus, legal evictions are expensive so I want to proceed as economically as possible. If I increase the rent by 10% starting November 1, it basically gives them 70+ days to decide whether to stay or to move out. The way I see it, the right move is for them to give notice and move out by October 31. If they decide to stay, then they must pay the rent on time or face eviction. In the end, their irresponsibility will cost them much more than it will ever cost me.

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  • Dawn Boehmer
    Tampa, FL · Member since 2017 · 1 post · 0 votes
    8y

    I'm with Dave on this one Ash, If your late fee is fifty bucks - you've made an extra three fifty in the deal. I know it isn't much - but it all adds up. 

    Are they keeping the place clean - no holes in the walls, etc?
    That "new" tenant might be the devil you don't know as opposed to the devil you do know.

    I have a client with one tenant who has paid late for twenty years - always paying their late fee. My client calls it free money.

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  • Ash Townsend
    OP
    Member since 2018 · 5 posts · 0 votes
    8y

    @Dawn Boehmer I appreciate the suggestion. And yes, one never knows if a new tenant will be better or worse. Fortunately for me, the other tenants I evicted in April were replaced with an awesome couple who pay their rent on time! :)

    0Reply
  • Cat R.
    CA · Member since 2017 · 85 posts · 21 votes
    8y

    I agree with some responses here. If they’re clean and not destroying the property, let them pay late, yes with your verbal warnings to go with it, but it’s free money.  As long as they pay their lates, let them stay. If you increase the rent, then they may not be able to afford it. As it is they barely pay what it is now. 

    I have a rental where my tenants pay late each month. PLUS their late fee. I use that money for misc expenses or the tenant just bought me dinner as a thank you for giving them more time. 

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  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    8y

    Sometimes chronically late paying tenants aren't worth the headache or the extra money, so I get where you're coming from @Ash Townsend.  Also, it's been my experience that a tenant that pays late that much is living paycheck to paycheck and is just one unexpected bill (i.e. car repair, medical bill, etc) away from not paying rent at all.  So there is some merit to your plan to raise rent and hope they move out voluntarily before it gets to that point.

    Just so you know, you're actually only legally required to give a 30 day notice for a 10% rent increase.  The law in California is 30 days notice for 10% or less, and 60 days notice if the increase is over 10%.  I just mention that so you know what is required.  Since your goal is to have them move out voluntarily, I would still give them over 30 days notice so they have time to find a new place.  

    Good luck and hope it works out for you. 

    1Reply
  • Michaela G.
    Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    8y

    They obviously get paid every 2 weeks. Since they are tight with money, you might force them into an eviction, because they'll be between a rock and a hard place, as they'd need to come up with deposit for a new place, but won't get deposit back from you until they've moved out. 

    Have you considered making a rent increase and also splitting the rent up into 2 parts? Paid on the 1st and the 16th. It'll make it easier for them to come up with it on time and you'll make more money. 

    In addition, this will be so helpful for them and knowing that most landlord don't do that, they will likely stay for a long time, which saves you money. 

    2Reply
  • Robert C.
    Investor · San Francisco, CA · Member since 2016 · 338 posts · 444 votes
    8y

    @Ash Townsend, I disagree with the folks who say you should just put up with the late rents. In my opinion, that might work okay if you only have a handful of rentals and you don't mind bugging people for rents. However, your time is precious, and you don't want to spend it chasing people down all the time. Also, if you ever want to scale up, then you have to train good tenants and keep everyone to the same standard. There's also a high percentage of late rent tenants who ended up not being able to pay at all eventually, so you may just be dragging out the inevitable. 

    As far as raising rents versus evicting right away, the outcome will be the same. I'd rather rip off the bandaid, and pay the $1k to an attorney for removal, so it stops messing with my psyche. But that's me. The process isn't that bad if the city doesn't have rent control. 

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  • Marcia Maynard
    Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes
    8y

    What's the root cause for them paying late each month? Is it related to the timing of when they receive their paycheck or benefit check? Is it that they are not paying attention to the calendar? Is it that they're spending their money on other things and not prioritizing paying their rent first? Are they living paycheck to paycheck? Are they buried in debt? Can they still afford to rent from you or not?

    I really like the idea proposed by @Michaela G.   Sometimes it's more beneficial to work with a tenant to make it easier for them to pay rent and compensate yourself at the same time for being flexible. Even though you are receiving more money in late fees every month, the tenant is probably feeling the stress (and perhaps shame) of failing to pay rent on time. That would affect their psyche in a negative way. You also are experiencing stress and frustration when you see the rent not coming in on time.  It causes you more work every month too. Sort this out and find a win-win solution.

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