Tenant owes money at move out...

[Bradley Johnson]

Hey guys,

First post here, and new listener of the podcast. I own a rental condominium in San Diego, and have had a long term tenant stay there since July 2018.  He paid always on time in 2018, until he renewed his lease with me this year.  Since then, he's been 4-8 weeks late on rent for 9 months now, and has only been able to make periodic payments of $400-$800 at a time.  Currently he owes 1.5 months rent, and his lease ends about 60 days from now.  I don't have high expectations of him being able to pay off the remainder before his move out...or him having much funds to move out in general.  I probably should have gone through with eviction in the Spring, but now since it's so close to move out, I've decided to just try and collect as much as possible before move out.

Any advice for this situation?  If I don't do an eviction and get a judgement, do I still have power in small claims court to try and get a lien against him for any delinquent rent?  Has anyone had any success with payment plans which allow him to back pay the dues even after move out?  My biggest goal is to ensure he's out of the property so I can find a new renter, so I don't want to do anything to risk that scenario.

[Nathan Gesner]

You're making a mistake by kicking the can down the road and thinking it's going to save you. You failed to enforce the lease so the tenant has no problem walking all over you. It's common for tenants to not pay the last month of rent; it's even more common when the Landlord is a pushover. Your tenant is 90 days behind on rent and will likely expand that up until the point of departure. I suspect he'll leave owing at least two months of rent. He won't clean and there may be damages you'll have to pay for. And you'll have a vacancy while you turn it around. On a $1,500 rental, that's $5,000 lost plus all the stress and worry. A good Property Manager would cost $2,000 and they would prevent and/or handle all the headache.

The correct answer is to hire an attorney and start the eviction process. That's it. Don't mull it over. Don't try to negotiate. Don't offer cash for keys or some other nonsense. Hire an attorney that specializes in evictions and start the process immediately. Anything else is a waste of time because your tenant will just draw this out and walk all over you.

You're actually fortunate that it's not worse. You have to stop and think about what self-management is costing you and what it could cost you if this continues. One bad tenant can cost you an entire year of rent income, possibly more. Why not hire a professional property manager that ensures your home is at market rate, that tenants are properly screened, the lease is enforced, problems are dealt with quickly, you are compliant with the law, and that can take on all the headaches so you can focus on more important things?

You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!