Debt collection is a delicate business, and landlords must exercise caution in recovering their rental arrears. The Consumer Financial Protection Bureau (CFPB), on the other hand, has developed a set of best practices for dealing with tenant debt.
Our article explains the rules and offers advice on how to make the most out of your rental property’s rent collections.
Collecting on The Previous Tenant Past the Due Date
- Collecting on The Previous Tenant Past the Due Date
- Dealing with a Tenant with Delinquent Rent
- What Happens if You Win at the Eviction Hearing?
- What if You Lose The Eviction Hearing?
- Rental Debt Collection for Landlords Summary
When it comes to new tenants, the lease agreement serves as a contract between the tenant and the landlord that spells out what is expected of them during their stay. Furthermore, rent is usually due on the first of each month.
If payment is not received by the fifth day of the month, it is considered past due. Depending on state law, landlords may be able to start charging interest or penalties on late payments after this point. In addition, in 2020, CFPB implemented , a law that helps protect consumers from predatory practices by debt collectors. The law limits the time a creditor or collector can spend collecting on a past-due debt.
As a landlord, you must understand how the law works in order to do your best to follow it.
When a renter fails to pay rent, the debt collection process begins with the following steps:
Send a Demand Letter
The first step would be to collect rent on the premises. It is possible to do so by issuing a demand letter to the tenant, usually within five days of the rent due date. The following items should be included in the demand letter:
- The amount owed in rent
- It was originally due on this date.
- A notice stating that if the rent is not paid within a specific number of days (typically seven), legal action will be initiated.
If the rent payment is not paid within the monthly due date, landlords can report the debt to a credit bureau. It will negatively impact the tenant’s and may make it more difficult for them to borrow money in the future.
Hire a Collections Company
If all other options have failed, landlords can use a collection agency to try to recoup the unpaid rent. Because the collection agency will normally charge a portion of the amount collected, it’s critical to conduct your homework before selecting one.
Filing a Small Claim Lawsuit
If the collections company is unable to retrieve the rent owing, a small claim action may be filed. If a tenant is being evicted for non-payment of rent and still owes past due amounts after receiving an eviction judgment, landlords can employ this alternative.
Dealing with a Tenant with Delinquent Rent
A tenant has broken the lease agreement if they pay less than the agreed-upon amount or fail to pay by the due date. If a tenant fails to pay their rent, the landlord has a few choices, including:
If the renter has been obeying the due dates but not paying the agreed-upon amount, the landlord can give an incentive. To encourage tenants to fulfill their commitments, the landlord can, for example, offer rent rebates and other incentives.
Let’s say they’ve already met their deadlines but haven’t followed through on their payment responsibilities. In that instance, the landlord can talk to the tenant about what’s keeping them from paying. Lack of finances can be likened to car problems or other financial difficulties. Providing assistance may also enable you to recover rent payments without having to file a lawsuit in small claims court against the tenant.
The landlord has the option of continuing to accommodate the renter. They don’t have to change the lease agreement if they pay their rent late. The only requirement is that payment be accepted as soon as possible, even if it is days or weeks after the due date.
Landlords should be aware that by doing so, tenants would have little incentive to fulfill their commitments because they already have lodging from their landlord. But, once again, it depends on who you are and how much money your rental property brings in each month.
Failure to comply with the rental agreement has ramifications. It’s required when the tenant fails to fulfill their obligations. The following are the steps in the eviction procedure:
Notice of Termination
Before pursuing an eviction lawsuit, a landlord must first give a notice of termination. The written notice usually informs the renter that they have violated the lease and must quit the premises as soon as feasible. Otherwise, you’ll have to go to your local court and file for eviction.
File for Eviction
If the tenant does not comply with your notice, landlords can . The notice is usually done through your state or county court system and costs a filing fee. You will also need to have the service of the process completed, which means giving the tenant notice of the lawsuit by having them served in person or through certified mail.
Wait for Hearing
The next step is to wait for a hearing date, which could take weeks or months depending on your jurisdiction’s backlog. At this time, it’s advisable to keep in touch with the tenant and try to reach an arrangement. It’s perfect because it means you won’t have to evict them from their home.
What Happens if You Win at the Eviction Hearing?
If you win the hearing, the renter will be required to remove the property and will most likely be responsible for back rent, court expenses, and other damages. Also, the process can be stressful for landlords, so work out a payment plan or an incentive with your tenants to prevent it.
What if You Lose The Eviction Hearing?
If you lose the hearing, however, the renter has the right to remain in the property until the court issues a possession order. As a landlord, this implies you’ll have to go ahead and evict them from their home. Eviction is a time-consuming and expensive process.
Rental Debt Collection for Landlords Summary
For landlords, collecting rental debt can be a difficult task. To ensure that you obtain the money owed to you, you must follow a number of measures. Yet, by following our suggestions, you can make the procedure go more smoothly.
If you’re stuck or unsure where to start, it’s advisable to contact a debt collection service that specializes in rental debt. The debt collection agency will supply you with all of the necessary information and assistance.