The Casual Landlord: Dealing with the Non Paying Tenant
The non-paying tenant can be devastating to your financial plans for the property. In addition to the obvious issues of cash flow, a non-paying tenant in possession continues to have access rights, and can interfere with a landlord’s plans to market and sell a property. And eviction is also expensive and time-consuming. And typically the last thing a landlord needs from a non-paying tenant is 5 or 6 more months of non-payment while the process grinds through the court. So while some tenants withhold rent due to inability to pay, others are able, but are using the rent as their only leverage against a landlord to address concerns. Here are some tips on things to do before launching an eviction action.
Talk To The Tenant: This seems obvious, but it is amazing how many times a landlord commences an action for non-payment before picking up the phone and having a discussion with the tenant about what is going on. Just like a credit card company who calls their customer many times before suing on an outstanding and unpaid credit card bill, a landlord should try direct contact first. Once you sue a tenant, and they get a lawyer, that direct communication is going to be more difficult as the tenant uses the lawyer for communication. Sometimes the tenant is not paying because of an unresolved repair, or a loud neighbor. Moreover, if the tenant is having financial issues, set up a plan to get them current. This solves two problems. First, it gets them to admit that there are no issues other than their inability to pay. And second, it can sometimes get the tenant back on track to current rent without having to go through the courts.
Negotiate With Your Head, Not Your Heart: If your reason for not accepting a deal with your tenant is that you feel it is not fair, think again. The analysis is financial, not emotional. Take for example a tenant who loses his job, has no resources, and cannot continue to pay rent. You call the tenant and they explain that they can move in with their mother in New Jersey, but they cannot afford the cost of a mover. The tenant explains that if you, the landlord, will pay for the mover, they will move out next week and go live with their mother. It’s the 20th of the month, the rent is $1,200 per month, and a mover costs $1,000. Your first reaction might be outrage. But let’s be cold and calculating. If the tenant stays past the 1st of the following month, another $1,200 of rent is lost, and you continue with the same problem you had before (a tenant with no ability to pay). But if you cough up the $1,000 for the mover, the tenant is out, you get the place cleaned, and perhaps rented with a cash flow, before the next month begins.
Provide Customer Service: Many landlord/tenant relationships start out on a bad note. With the landlord looking at the tenant immediately as an adversary, rather than a client for whom they are providing a service. If a tenant has 10 creditors to pay, and one of them provides outstanding customer service, who do you think gets paid first? It’s easy to justify not paying someone you don’t like, so don’t be that landlord. Check in by email or a call every couple of months with the tenant to be sure things are acceptable. Kill them with service, and they will be less likely to walk away without paying or stiff you on the last month’s rent.