Even the best tenants can fall into financial trouble. Some may have lost their job, making them unable to make ends meet until they can find a new one. Others may have gotten into an emergency that wiped out their savings. And others may have fallen prey to crimes that have taken most of their money.
Whatever the reason, your tenant now finds themselves unable to pay rent. If you’re relying on rent as your sole source of income, this can be a problem for you and your family. In case this does happen, here are your legal remedies.
Use the Security Deposit
Collecting security deposits before letting your tenant move into your property isn’t required by law, but situations like the ones mentioned earlier show why security deposits may be necessary. Your state has limits on how much security deposit you can get, but all states allow security deposits worth at least one month’s rent.
A security deposit is a refundable fee your tenant pays you before moving into the leased property. After they leave, you deduct money from that deposit to pay for the damages they caused before returning the rest of the deposit to them. If they leave without paying rent, you keep the entire deposit. You cannot use the deposit to pay for major repairs because it is your responsibility to handle it, not your tenant’s.
If your tenant cannot pay, use the security deposit as payment for their rent. However, since the security deposit exists for your financial protection, once they are able to pay rent again, they should re-pay the security deposit so that you have the full amount for your protection for the rest of your stay.
Delay Your Payment
If you’re the landlord, you don’t necessarily have to follow what’s stated in your contract if you know it’s currently impossible for your tenant to pay. As the owner of the property, if you and your tenant can agree to a delayed payment, you can hold off collecting rent for about a month or so until your tenant can pay. Once they’re in a capacity to pay, they’ll give you rent they missed from the previous month or months, depending on how long it takes them to get on their feet. Just make sure that you get it in writing to protect yourself.
However, if you’re a property manager, this can be tricky because you don’t own the property. While you are the acting landlord for the property owner, you may not necessarily have the power to tell a tenant that they can pay rent a month late. In this case, take it up with the property owner to see if they’re willing to delay rent collection for their tenant.
Negotiate a Partial Payment
Some landlords may have a wider income allowance and can allow a tenant to be late with the rent by a month. Unfortunately, landlords whose sole income is the rent may not have the same wiggle room and need to collect some rent regardless of their tenant’s situation or else they and their family don’t get income to fund their living needs.
In case your tenant really cannot pay the full amount, be open to negotiating a partial payment. You won’t get the full rent, but you’re getting income and your tenant is paying what they can. Once they’re on their feet, they’ll pay the full rent plus the rest of the partial payment. It’s not required, but you can also impose a late fee for the inconvenience their situation has caused. Be sure to get all of this in writing to protect yourself and your tenant.
End the Contract Early
If your tenant cannot pay rent in the foreseeable future and they want to end their contract early because they know they might not be able to pay, let them. It’s a lot more practical to cut your losses as soon as possible rather than drag out the process.
Most leasing contracts that have a security deposit stipulate that if the contract is terminated early, the security deposit is forfeited to pay for unpaid bills and damages. This is another situation where a security deposit can protect you financially.
Evicting Your Tenant
While this is an option, it’s usually the last one you should consider if all the other remedies don’t work. If this tenant has never been late before and suddenly can’t pay due to unfortunate circumstances, it’s in your best interests not to evict them. It’s difficult finding a good tenant to replace them, so you don’t want to lose them just because they’re facing hardships at the moment.
If you really insist on evicting your tenant, you will have to undergo legal proceedings to serve them notices of eviction. If you’re evicting them before the end of the contract, you need to prove to the court you have a good reason to evict them. Not paying rent is considered grounds for eviction.
But just because it’s a legal solution does not necessarily mean it’s the moral one. If your tenant has constantly been a good tenant paying their rent on time, it’s best to give them some leeway for their situation and try to come up with a solution that can benefit you both before serving them with eviction notices.
As a landlord and the property owner, you have plenty of remedies for tenants who can’t pay. While eviction is an option, if your tenant has never had an issue with paying rent on time in the past, this could just be a one-time fluke that won’t repeat itself, it’s more practical to negotiate rather than resorting immediately to evictions.