How to deal with bad rental payments
A thorough tenant screening and glowing credit record, unfortunately, doesn’t guarantee a flawless payment journey to any property owner. Most property owners will have to deal with lousy payment habits from their tenants at one point or another.
Fortunately, it is customary that tenants pay a minimum deposit of at least one month’s rent beforehand, so a property owner should at least have a month’s bond payment covered with the initial deposit. It is however not ideal to use the deposit for this reason as it is easier to claim for unpaid rental than damages when going to court.
Unfortunately, life happens to all of us and landlords need to have some savings to cover for difficult months. Your tenant could easily inform you that they will be paying late this month and promise to pay the full rental together with the next payment — just to fail again… and again. What are the proper steps to take when this happens?
Prevention is always better than cure. So before you find yourself in a position where formal steps are needed, there are some ways to try to avoid late payments, let’s look at some ideas:
- Frequent and early reminders: Make it a priority to remind your tenant that his/her rent is due in a few days. This could be via email or a text message; however, you prefer to communicate. You can also make it a generic message that goes out on the 20th of each month — same text, same smileys — to ensure that your tenant won’t feel offended by the reminder, but see it as standard monthly communication.
- Invoicing: Many private landlords do not send invoices to their tenants. Yes, it is a bit of admin, but your rent sure is worth it. We advise sending monthly invoices and sending them early so that this also acts as a reminder to the tenant.
- Follow-ups: Be on top of your game; you should be aware of your rental payment or the failure of payment on the due date as stipulated in the lease agreement. Try to follow up on a late payment by the end of that same day to allow a breathing space, but also to prepare your tenant that action will be taken if they continue to be in breach of the contract.
Sending a letter of demand
If a tenant fails to pay his/her rent in due time — that is to say the money should reflect in the property owner’s account on the date the lease agreement stipulates — it is the responsibility of the property owner to take the correct steps. The first step legally is to send your tenant a letter of demand. A letter of demand is a formal letter where the landlord states that the rental payment is due in twenty business days and if they do not comply with this the lease will be cancelled. This could seem like a drastic move, but one should remember that a tenant is in reality in breach of a legal and professional contract. Preferental released a guide to writing your own letter of demand which explains the purpose and content of this.
If the tenant fails to make full payment within the twenty business days after the letter has been sent, the property owner is in the right to terminate the lease and ask the tenant to vacate the property. Requesting the tenant to go might unfortunately not result in the tenant leaving, and eviction will be the next process to start. In this case, you will wish you had a solid rental guarantee in place because lawyers and courtrooms will become a reality for what might last for several months.