Last week, we went over some of the situations that occur during the first month of tenancy. Today, we will review a few aspects of rent collection. This is another part of the tenant cycle that a property owner should have a decent grasp on.
If every one of your tenants paid on time every month, there wouldn’t be much to review. However, even when this occurs, we still see many landlords that will accept cash or personal checks.
Taking cash from a tenant that consistently pays on time seems innocent enough. However, if the tenant can’t pay and taking cash has been the precedent during the lease, this innocent procedure will really cloud up facts during court proceedings to evict the tenants.
We have seen instances where the tenants say they gave the owner cash (never did) to buy themselves more time at the property when they can’t pay. The worst thing is that some of the courts will side with the tenants in this situation even though they can’t come up with a receipt.
Accepting personal checks is a bad idea. Also, surprisingly, most bank’s online auto pays are not guaranteed.
As an owner, it is best to insist on a money order or cashier’s check. Yes, it will put the tenants out a bit but this type of required payment is a condition of a lease that a good tenant will completely understand.
Another thing that is a critical regarding rent collection is to have a clearly defined process regarding late payments and when the rent is due.
If you have a grace period of a couple days, make sure during the lease signing that the tenants know that this is a grace period and not
when the rent is due. We hear the following all the time on the 5th
(when the rent is due on the 1st
with a three day grace period): “I’m only one day late, what’s the deal with the late charge??” If you cover this, you can gently remind them with a “remember at the lease signing we said…….”
Also, stick to your policies regarding late fees. Waiving late fees is a bad precedent to set to the late paying tenants and it is not fair to other tenants you have (with the same policies) that do pay on time.
Next week, we will review rent collection a bit more and feature situational advice and knowledge from RPM’s West Valley’s tenant relations guru.