One of the reasons you hire a Portland property manager is to hand over the struggles and frustrations that often come with owning rental properties and working with tenants.
Rent collection can be a huge source of frustration.
When tenants don’t pay rent, you, as an owner, are left trying to manage your own financial responsibilities without the income you expected. It can be disruptive and stressful.
Bad tenants are a problem not only for you but also for your property. There are a lot of reckless and unqualified tenants who are willing to take advantage of rental property owners. They don’t pay rent on time and sometimes they don’t pay at all. They don’t take care of the property. Sometimes, they violate the lease agreement, moving in unauthorized pets and people or smoking marijuana inside the home despite your lease agreement prohibiting it.
But, what about when you have a good tenant who stops paying rent?
What can we do when a tenant who is otherwise responsible and respectful suddenly finds themselves unable to come up with the rent that’s due when it’s due?
Remember that you have to treat every tenant consistently. Otherwise, you can face some fair housing claims. However, when you have a good tenant in place and they’re struggling to get the rent in on time, there’s no need to head directly to eviction court. Take the necessary steps to keep that tenant in place, especially if you’ve established that this is simply a temporary setback for them, and you can expect on-time rental payments to pick up right away.
Sometimes, there will be a good tenant who is not having a temporary setback and is in fact looking for a way to manage a major life change; a job loss, an illness, or a divorce.
Let’s talk about what professional Portland property managers can do to help when a good tenant does not pay rent. We’ll also talk about how to avoid renting your home to residents who are unlikely to keep up with their rental payments.
Here are some ideas for what you can do when your bad tenants - or even your otherwise good tenants - fail to pay rent.
Set Rent Collection Policies and Expectations in the Lease Agreement
The first thing that a property manager will do when a tenant isn’t paying rent is enforcing the rent collection policy that needs to be in place.
If you’re not working with a management partner, make sure you have a strong rent collection policy in your lease agreement. Discuss it with your tenants before they move in.
Talk about when rent is due, how you expect it to be paid, and what the consequences are if it’s paid late. This will give you a starting point when rent does not show up on the date that it is expected. You need to enforce the lease consistently, and the rent collection policy is part of the lease.
While we’re on the topic of collecting rent, let’s think about how you collect it.
When you offer your tenants a variety of ways to pay rent, you’re more likely to get it in on time. Offer online or electronic rental payments. Accept checks or money orders. Let your tenants know if you have a grace period, and explain how the late fees work if rent isn’t paid on the day that it’s due.
If your tenants understand the rent collection policy, they won’t be surprised when it’s enforced.
Communicating with Tenants When Rent is Late
A rent collection policy is in place and a tenant who usually pays on time has not submitted their rent yet.
What should you do?
Luckily, if it’s a good tenant, you likely have a professional and respectful relationship in place already with this resident. Communication should not be difficult.
Communication is critical, especially when you’re trying to collect overdue rent.
When rent is officially late and any grace period has expired, you’ll want to get in touch with your resident in whatever way you know they prefer to be contacted. Property managers with online portals might take the opportunity to send a reminder notice via the online platform. You should know whether your tenants prefer a phone call or a text or an email. Putting your communication in writing might be a good idea so that you can refer back to it if the situation should escalate.
Send your tenant a reminder that rent has not been paid and the account needs to be brought up to date immediately to avoid further collection activities that may result in eviction.
And (this is important), invite them to contact you to discuss the matter.
When tenants feel like you’re angry or displeased, they might be less likely to reach out. They will potentially shy away from your phone calls and messages. But, if they feel like you’re compassionate and willing to work with them, they’re more likely to communicate.
That’s what you want - open and honest communication.
Talk about what’s happened and why the rent is late.
Sometimes, tenants will simply forget. Your reminder will trigger them into paying, and you won’t have to worry.
Or, there could be something going on that you have no idea about.
This is where good listening skills can help.
Active listening is important. Hear what your tenants have to say about what they’re dealing with and why rent is late. Be empathetic. It will make them feel better just to share their story.
Work with tenants willing to communicate with you. Perhaps they’re having a bad month financially and need a little extra time to come up with the rent. This isn’t ideal, but working out a payment arrangement and agreement is often better than eviction.
When tenants aren’t willing to communicate and you cannot seem to get an answer on when rent will be paid, you should not hesitate to take the next additional legal steps. However, if we’re talking about good tenants, communication should not be an issue.
Put Payment Arrangements in Writing
If your good tenant understands that rent is late and asks for some extra time to pay, that’s good news. You probably won’t have to worry about eviction. The eviction laws in Portland are stricter than ever, and the process can be time-consuming and expensive for property owners. You want to find another way through this problem if you can.
Talk about what your tenants can pay right away. You want to have at least part of the rent as soon as possible. Then, you can work out what is still owed and how your resident will approach paying that. Maybe it’s half now and half at the end of the month. Maybe you’ll split the payment up into three or four installments.
Whatever you decide, always protect yourself and hold your tenant accountable by requiring that a payment agreement be in writing and signed. The agreement should state how much is owed and when it will be paid and how it will be paid. Keep this on file in case the tenant doesn’t keep his or her promise and you need to take the next steps.
Once you get the late rent, reinforce with your tenant that the later payment does not change the date rent is actually due. For example, if your tenant can’t pay until the 10th or the 15th of this month, they may think they can pay on that date going forward. You need to let them know that the next month’s rent will still be due on the first.
Do not waive any late fees. Consistently enforce your lease and your rent collection policy.
Serve a Notice on Portland Tenants
Oregon and Portland have strict rules around eviction. You need just cause for evicting your tenants and regaining possession of your property. Fortunately, nonpayment of rent is just caused for eviction.
However, the process is not easy.
The law requires that you provide your tenants with 72 hours of notice before you take any steps towards eviction, and that’s after the rent has been late for seven days.
Serve your tenants with a 72 Hour's Notice to Pay or Quit. This notifies the tenants that they have three days to catch up with their rental payment or move out of the property. You have to allow for three full business days, and after that time period has passed, you’re permitted to file an unlawful detainer lawsuit in the court system.
You do not actually have to move forward with the eviction. And, you don’t intend to when you’re working with a good tenant who has agreed to a payment arrangement.
But, you want to protect the time period if the tenant does not come through. If your payment arrangement is ignored or violated, you might ultimately have to evict, and you want the process to have started already.
This is how a Portland property manager may deal with an otherwise good tenant who is suddenly not paying rent. If you’d like to talk about your property or your residents in particular, please contact us at PropM. We’re open 365 days a year and seven days a week, and we’re happy to help you.