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Top 7 Mistakes That Landlords Make During Rent Collection

Two things are necessary for a successful rental business:

1. Good cash flow management
2. Timely rent collection

The biggest factor of your cash flow will be your ability to collect rent on time.

Without consistent rent payments, many things can go wrong. You may not be able to pay off your mortgage nor afford your property’s other expenses.

While state laws vary, you could have two options open to you when a tenant fails to pay their rent:

• To chase the tenant down for payment.
• Or to file for their eviction in court.

This is where many avoidable mistakes occur for far too many landlords. Unfortunately, these errors often result in serious financial and legal repercussions.

In this article, we’ll go through some common mistakes landlords often make during rent collection so you can avoid them.

1.   Irregular reinforcement of rules.

As a landlord, you have a lot of influence on your circumstances, especially when it comes to enforcing your own rental rules.

Only you can decide whether to let something slide or to really come down hard on a tenant for breaking their rental agreement.

More often than not, allowing things to slide is a recipe for disaster.

As the saying goes, when you give an inch, many will take a mile.

That’s because you’re creating a bad precedent that will work against you long-term.

The only way to avoid issues is to have comprehensive lease terms with regards to rent issues.

Make sure your lease includes:

• The amount of rent due each month.
• When, where and how it’s to be paid.
• The amount of grace period.
• The amount of late fee, if applicable.
• The consequences of bounced checks.

Being firm and consistent when it comes to these policies will help to ensure regular, timely rent payments.

Enforcing rent payment rules is just one of the many ways to get tenants to pay rent on time.

2.   Accepting partial payments.

Partial rent payments are when your tenants pay you only a portion of the normal monthly rent price.

Allowing tenants to make partial payments has several drawbacks.

To start, this makes a tenant less concerned about rent payments.

It also tells your tenant that paying the full rent amount isn’t really necessary.

If you must accept partial payments, make sure to clarify when you expect the rest of the money.

Remember to add a late fee charge to the amount owed since they are already late on their payment.

Follow rent collection best practices to improve your ability to collect rent on time.

For added security, you can also let your tenant sign an “Agreement for Delayed or Partial Rent Payments.”

This document will help you stay clear about the conditions surrounding late rent payments, should the tenant fail to pay you the rest of the money.

3.   Failing to charge a late fee.

This is yet another mistake landlords make during rent collection.

This fee should be imposed after rent is a couple of days late.

The amount of late fee is subject to legal limits. In some cases, it can even be illegal to impose one.

That’s why it’s important for you familiarize yourself with the Late Fee Fairness Amendment Act of 2016.

Below are some things to consider when including a late fee policy in your lease:

• Is my tenant withholding rent due to unfinished repairs?
• Does my state have any sort of grace period for late rent?
• Does my late fee policy blend well with rent control laws?
• How much can I legally charge for late rent?
• Is my policy on late fees enforceable if it’s not mentioned in the lease?
• When can I legally begin to charge the fee?

Your local laws, as well as your lease, can help you answer most of these questions.

4.   Failing to send your tenant a “pay or quit” notice.

Almost every state requires a landlord to send a “pay or quit” notice when a tenant fails to pay rent.

The notice tells the tenant that they have “X” number of days to either settle the rent that’s due or leave.

If the tenant pays the rent within the notice period, great!

Life goes on.

If the tenant fails to do so, then it’s a go-ahead to begin the eviction process.

Let’s suppose this “X number of days” is 3 days, as it is in most states.

If they don’t pay after the third day, and they don’t move out on their own, then you can formally terminate their lease agreement.

This doesn’t mean that you can evict them from your premises.

Remember, the only way to evict a tenant is to file an eviction lawsuit, also known as an unlawful detainer suit.

And, even after a court rules in your favor, only a sheriff can perform the physical eviction.

5.   Performing “constructive” evictions.

Refusal by a tenant to pay rent can really be very frustrating for a landlord.

Be that as it may, you can’t force them to leave by doing certain things. The following is a list of what you are not allowed to do:

• Changing the locks.
• Removing toilets and sinks.
• Refusing to fix a leaky roof, causing damage to walls.
• Blocking the entrance to a unit.
• Refusing to clean up an environmental hazard.
• Shutting off the utilities.

Even if your tenant doesn’t pay, it’s illegal to do any of these things to them.

The penalties for doing any of this can be pretty steep.

6.   Not reporting rent payment history.

As a landlord, you can report late rent payments to the Credit Bureaus.

To a responsible tenant, this is good news. It can help them build a good credit rating.

For those less responsible tenants, knowing they will be reported is usually a good enough reason to pay on time.

7. Failing to hire professional help.

Do you have experience handling tenants?

If you don’t, please consider hiring a qualified property management company.

Besides helping you collect rent; a good property management company can help you handle a myriad of other tasks like:

• Property advertising,
• Tenant screening,
• Property maintenance
• Repairs, and so on

If you’ve been a landlord for a while, chances are that you’ve come across a tenant who’s had rent problems.

I’m sure you’d agree that it can be a frustrating experience.

Hopefully, with these 7 tips, you’ll be able to avoid common mistakes landlords make during rent collection.

You also may be interested in protecting your rental income with rent default insurance.