Becoming a landlord is a goal for many people, and for good reason. It can be a solid way to build wealth, in the form of both ongoing ‘passive’ income as well as capital growth over time. The process of sourcing and purchasing a rental property for investment is costly and time consuming, but once a tenant is in place the hard work is done….right?
Well, that is what we would hope of course, and for the most part this is how it works. But, unfortunately, this is not always the case. Despite our most thorough screening, tenants do not always behave as we would like. The main issues tend to be refusal to pay rent, violations of the lease, damaging the property, breaking local noise laws, and causing health and safety hazards.
If you are faced with any of these as a landlord, what options are available to you?
Let’s take a look at how a landlord may deal with issues surrounding payment of rent.
Late Payment Of Rent
The first thing to establish is that late payment of rent is a serious issue. As a landlord, it is not unreasonable to consider this a serious breach of the rental lease. You likely have a mortgage to pay, so not receiving your rent payment will force you to pay from your own funds. In effect, not paying rent is therefore stealing from you.
It is advisable to have a system in place to deal with late payments right from the start. Be clear that any delay in receiving rent payments will automatically incur a fee. You must insist that this is paid if you want your tenants to take you seriously and respect your contract.
If this doesn’t help, or you are experiencing further breaches in the lease, or even outright refusal from the tenant to pay rent, then eviction may be your only course of action. It is important to be aware of the law surrounding tenant eviction as well as the fact that it can be a time-consuming and expensive process.
It can be daunting to start the legal process, so we have put together the following 6-step guide, which will suggest how to handle tenant eviction in the most fair and efficient way possible. The ideal outcome is of course to receive the rent owed and enforce the lease conditions, and, more often than not, the following steps help to achieve this.
Step 1 – Stay Calm and Start Communication
The first step when rent is not received on time should be a phone call, especially for a first-time offense. Speak calmly ? there is no sense in becoming angry but let your tenant know that the rent must be paid immediately, and that the late fee must also be included.
This is also a great opportunity to gather information to understand why the rent has not been paid. The following questions will give you an insight into the finances of your tenant, and also indicate if the pattern is likely to repeat.
- Why were they unable to pay on time?
- When are they receiving pay next?
- When were they last paid?
- Has there been any illness or job loss?
It may be that you need to speak to the tenant about prioritizing their finances and organizing their money around paydays. The ideal outcome at this point is to receive an apology for not paying on time, as well as a promise to pay by a set date along with the late fee.
If the tenant is not in a position to pay in the next two weeks, and they have a genuine reason (for example illness) then this is a trickier situation to navigate. Try to stay business minded regarding ‘sob stories’, as the rent still needs to be paid, and it is no fun if this has to come from your own pocket.
If you are unable to get hold of the tenant on the phone then make contact along the same lines via email.
If this first, soft step is unsuccessful in prompting a tenant to pay the rent that is due, consider putting together a letter explaining the seriousness of their actions, and the repercussions that eviction will have on them. Let them know that their credit score will be affected, and that you will sue them for the rent due. Be sure that you do not threaten the tenant at all.
Protect yourself by staying calm and acting within the law at all times. You should be aware that eviction rules vary from state to state, but there are actions which are illegal across the whole country. These are things that you should not do under any circumstances:
- Change the locks on the rental property
- Remove doors or windows
- Shut off utilities
- Touch the tenant’s possessions
You should not even enter the property without the prior consent of the tenant, as this will only cause legal complications further down the line.
If it seems that you are not able to solve the issue in a reasonable manner, there is another option that you can try prior to filing for eviction at court.
Step 2 – Pay The Tenant To Leave
This step is sure to roll a few eyes. Sure, it feels wrong. It feels that you are giving in, and why should you ever have to consider giving your hard-earned cash in exchange for the keys to the property that you own.
I hear you loud and clear! But this option is the equivalent of ripping a bandage from a graze, compared to opting for surgery (which is what going to court can feel like!).
The legal process of tenant eviction is expensive, stressful and time consuming, so paying tenants to leave, in an act known as ‘cash for keys’, could be a better option. These are the steps to doing this effectively:
- State the terms of the Cash for Keys agreement (eg the property must be empty and clean)
- Specify the date that the tenant must be ready to exchange (normally 4 days maximum)
- Give official notice to pay or vacate
- Meet the tenant at the property to check that it is clean
- Take somebody with you as a witness / safety precaution
- If you are satisfied, present a letter detailing the agreement to be signed
- Once you have both signed and dated the agreement, you hand over the agreed cash amount in exchange for the key.
The amount of cash is up to you, but it is usually around $500, which is far less than the cost of legal eviction.
Step 3 – Hire An Attorney
If ‘cash for keys’ is not for you, or the tenant still refuses, then you will need to begin the legal process for tenant eviction. An attorney is not essential, but it is advisable, as the process can feel like a real battle and become very complicated. A simple mistake with paperwork can cause the balance to shift in the favor of the tenant.
You, or the attorney, will start the process by drawing up the eviction notice.
Step 4 – Deliver Eviction Notice
The document gives notice to pay outstanding rent (or adhere to other breaches in the tenancy lease) or vacate by a specific date. Details must be clear, with an order to comply with terms. It is advisable to look into the state-specific laws when drawing this up.
Many landlords write a letter accompanying the eviction notice to soften the blow and keep lines of communication open.
At this point, the tenant may decide to pay what is owed, and eviction can be avoided. But if the date passes without action, the eviction must be filed at this point. You or your attorney will gather a copy of the lease, the eviction notice, and a summary of your situation, and these will be filed with the court administrator while you wait for a date to appear in court.
The order to appear in court will be served in person to the tenant.
Step 5 – Appearance In Court
Prior to appearance in court, all paperwork should be compiled, including communication around the non-payment of rent and the original tenancy application. Either you or your attorney will be required to stand up in court to discuss the situation.
Often the tenant doesn’t appear at the hearing, in which case they lose automatically. But if they do, the judge hears both sides and makes a decision. If you lose, that is very bad luck, and is usually due to issues with the paperwork you have produced, or unfavorable behavior on your part through the process.
If you win the case, the tenant will have to pay rent and back rent, the late fees, as well as your court costs. They will also be given a date by which they must vacate the premise. You will be provided with a ‘Writ of Restitution,’ which affords you with the legal right to remove the tenant.
You will then take the writ to the sheriff and schedule the date to remove the tenant. Unsurprisingly, you will be charged a fee for this.
Step 6 – Remove The Tenant
Once the day arrives, the sheriff will attend the property with you to supervise the ‘removal’ of the tenant from your property. Often, the tenant chooses to leave before the sheriff arrives. You may be left with a houseful of the tenant’s property, or a house in a poor state of repair. But you will have access once again.
So, as you can see, eviction can take months and prove to be very costly. The best outcome is to come to a settlement outside of court if at all possible. The best way to avoid these stresses is to build a robust screening process, but even that is not infallible. Being faced with a non-paying tenant is bad news for a landlord, but by staying calm and following the process, it can be rectified with minimal fuss.