Any ideas for how to deal with tenants that owe money without court?

Question

As I'm sure many/most everyone here has had happen - I just had a tenant leave in the middle of the night last night with no warning etc (at least according to the other tenants - my management company is still trying to verify).  He just had his lease renew (less than 2 weeks ago) so he still technically owes another year's worth of rent money.  As I run my rentals like a business, generally I don't think it makes financial sense to take a tenant to court to sue for these costs as most times when something like this happens, they don't exactly leave a forwarding address to deliver the notice in the first place in addition to the fact that after I pay the management company to take them to court (or my attorney to sue), even if i "win" they are not going to have money to pay it - blood from a stone.  (Incidentally, if any of you have had a different experience on the whole and think it is worth it to go to court, I am all ears on that as well).  Assuming that it doesn't make sense to go to court though, does anyone know of another way to effectively ding these tenants for not living up to their legal obligations (lease)?  Its not just on principle (though that is compelling too, as I as the landlord am required to live up to my end of the deal, but as a responsible adult believe I should anyway), but its also because I don't want to hose the next landlord by not having something on record. Also, I don't want to send a message to other tenants in the building (or other potential tenants in my farm area) that I am soft and they can get away with this going forward.  This is the second time in a year that this happened.  I screen my tenants very carefully, in fact, this guy was truly a model tenant up until a few hours ago so this may just be the way it is.  I can, and will, chalk this up to a cost of doing business, particularly because its starting busy season for tenants now, but does anyone know of a fairly simple way of adding something like this to a tenants credit report without the pain and financial expense of a legal finding?  I was reading a BP post earlier on a different topic where I think @William Bannister mentioned something to that effect so William if you could expand on how you do that, along with others, I would be grateful.  Much appreciated.

Jon Holdman · Answer

So, when I say I've given up on long term leases, I mean I only do month to month.  If the tenants going to leave, they will.  So, I give them an out.  Better for them, better for me.  If I want them out, I simply terminate the lease.  No arguments that, no, there's no dog here.  Or, that's just a visitor.  If they don't leave, I can evict on the basis that they didn't leave when the lease was terminated.

Jon Holdman · Answer

He might theoretically owe you a year's rent.  But most areas don't allow double rent.  So, once you find a new tenant, you could no longer charge him rent.

I've given up on long term leases.  Great tenants are great.  Sometimes they give proper notice, leave the place clean and in good repair and stay great.  Sometimes they bug out in the middle of the night.  I only do month to month.  That encourages them to give me notice if they need to leave.  Stuff happens, and people need to move on sometimes.  If they need to leave, they will.   But if you want them out, a lease ties your hands.

Pursue him is you think there's a chance of collecting.  Otherwise, if he's truly gone (i.e., the keys are left behind), clean it, show it and find a new tenant.

Jon Holdman · Answer

Glad to here my advice helped.  I read that from someone here, perhaps our old member MikeOH who hasn't been around in a while.

I did have a tenant move out last year because they bought a house.  In Chicago, though, so I don't think that helped any agent here in Denver.

I have found that with the month to month leases I actually hear from the tenants if they're even thinking about leaving.  So, I usually find two or three months before they leave.   At first they don't have a specific date, they just say "we think will need to move".  That's a lot better than with the longer lease when I called and said "the rent is late, you said you could pay today, can I come by to get it?" and heard "oh, uh, no, we're in Kansas.  Keys are on the kitchen counter."

Bill Wallace · Answer

I only do 12 month leases but there's a method to my reason.

I'm a full-time Realtor and I give tenants an option to terminate their lease with me at any time if they use me to help them buy a home.  By having them tied to a 12 month lease it means they are more likely to use me as their agent.  I had a client last fall that interviewed 1 other Realtor but used me since they still had 6 months on their lease.

Commission on their new home was over $5k.

Dyna J. · Answer

Yep, its because of Jon H. that I have seriously considered month to month leases too. He makes a lot of sense and I'm grateful that he (along with many others here) is willing to share his knoweldge.

Jon K. · Answer

Jon Holdman

I took your advice shortly into my landlording after a problem tenant, and it's served me well. I only do month to month leases now as well. Much easier. Except for occupancy, but I would rather an empty room than a headache.

Account Closed · Answer

I work in property management.

You could send him to collections. There are many collection agencies out there and some specialize in residential real estate.

I agree with long-term leases as Jon said above. We stick to 12 months because anything beyond seems to fall apart. Sometimes we'll push for the lease expiration in a warm month, so its easier to rent when demand is higher.

When it comes to lease agreements and legal stuff there are two paths you can take. First, you can lawyer up and try to go strictly by the book. This is expensive, time consuming and stressful.(trust me, everybody loses) Second, you can enforce the rules and regulations to the best of your ability but sometimes you just got to go with an alternative.  I mean if a tenant wants to leave he is just going to leave. This does not mean I'm lax or a pushover, it comes from years of dealing with tenant psychology. Cut your losses man.

And just because you have a bonafide lease agreement and get a judgement does not mean you will collect. A judge could find a flaw with your lease, etc. It is always a gamble with the courts. He could just refuse to pay.

As far a qualifying a tenant, we do the following check. Credit (transunion), criminal (state and national), eviction (state), phone calls to verify employment and rental history, and request paycheck stubs.

In addition, there are a few other FREE online methods. Much of the stuff is public record.

1. Local sheriff's department has a way to search for PENDING LITIGATION, such as DUI, criminal or whatever
2. Sex Offender registry is in every state
3. Google search with name just to see what happens
4. If they claim to have a professional license of some sort, I'll even check the state registry just to see. 
5. If you really want to dig around, you can find other stuff too.

You don't want to go crazy and cyber-stalk your prospective tenant but it has worked for me.

Will Bockoven

Any ideas for how to deal with tenants that owe money without court?

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