Late rent payments are among the most common issues every landlord has faced. It affects your rental income and you have to go through an entire process of convincing a tenant to pay one time. There are preventive measures to ensure timely rent payments, and here are a few.
Tips to Avoid Late Rent Payment from Tenants
Screen Tenants Effectively
Only accepting applicants with the right background will significantly reduce the chances of encountering delayed rent payments. You can do so by conducting a comprehensive screening process or hiring professionals to do the work for you.
For instance, Income Property Advisors conducts extensive screening services that look into a tenant's financial stability and other factors including:
- Credit History
- Unlawful Detainer Record
- Job Verification
- Previous Rental References
A comprehensive look at the overall applicant can determine whether they can provide rent on time once they occupy the rental unit and abide by all the rules stated in the lease agreement.
Clear Communication
Before a tenant signs the lease agreement, relay all the terms you have such as the rent amount, when it's due, and the consequences that come with violating them. Leave no room for miscommunications, provide a rent reminder, and explain how the late fees work.
If your current tenant is late with paying rent, immediately issue a late rent notice so they know that they are violating landlord rules. This will give them time to sort things out before you resort to more extreme consequences like eviction.
Online Payment Platforms
Provide your tenants with flexible payment arrangements, especially online platforms where convenience can encourage them to pay rent on time. There are already established rent collection systems, or you can hire a property management company that uses an in-house portal for quick and easy rent collection.
You can even use this to set up automatic rent payments since some banking and online payment apps have that feature. Transactions can be viewed within the system, so you'll have a way to monitor payment records as well.
Require Security Deposits or Rent Guarantee Insurance
Even with all these measures in place, a tenant may still fail to pay rent whether it's within their control or not, so it's a good move to have a contingency such as a security deposit to rent guarantee insurance.
You can deduct the rent payment you need from a deposit and even use it to pay for costs such as property damage, legal fees, unexpected medical expenses, and other eligible financial obligations. Rent insurance will protect you from losses in case a tenant defaults on their rent payments.
When the Tenant Still Fails to Pay Rent
Grace Periods
California law does not require landlords to provide tenants with a grace period, but it is something that a good landlord would do. Be sure to include the terms for the grace period in the lease agreement and remind the tenants about the terms.
Typically, landlords excuse when a tenant is past due rent for up to five days before issuing a late rent notice. After that, the property owner can charge a late fee following the rental agreement.
Late Fees
As for the late fees, there are state landlord-tenant laws to follow when issuing them. California law prohibits landlords from charging a late fee unless the tenant's rent is late for five days or more.
Despite paying late, the fee cannot exceed 6% of the monthly rent or the landlord may be subjected to legal fines. While this can help with avoiding late rent payments, it would be counterproductive to impose a significant financial burden on tenants who are already struggling.
Eviction
Evicting a tenant is the last option for landlords, not only because it is an extreme measure, but also because the task can be laborious. Other than having to attend court, there are certain costs you might have to cover in the process like an eviction lawyer.
You can benefit from hiring a property management company to oversee the process for you. Income Property Advisors will handle eviction proceedings and find new tenants for your rental property immediately to avoid prolonged vacancy.
Ways You Can Help Tenants Navigate Late Rent Payments
Helping tenants manage late rent payments is just as significant as preventive measures to maintain a positive landlord-tenant relationship. It will help with your reputation as a landlord and promote tenant retention.
Offering Flexible Payment Options
During the grace period, you can create a payment plan for the tenant such as partial rent payments when they cannot afford to pay fully at the moment. You may also extend the deadline to help with the financial stress or align the rent due with the tenant's income cycle when they have enough for monthly budgets.
Refer Them to Eviction Prevention Programs
There are assistive programs that can support tenants with financial difficulties regarding rent, provided that they are eligible for it. The City of San Diego Eviction Prevention Program is one example, as it offers help with unpaid rent.
The tenant must be a resident of San Diego, and they are required to have a low income at or below 80% of San Diego's Area Median Income. The program also offers legal assistance should the eviction call for legal action.[1][2]
Open Communication
The landlord should establish a good relationship with their tenants so they feel comfortable communicating why they can’t make timely payments. There's always a reason why a tenant stops paying rent, and the right thing to do is learn the reason behind the late payments.
Remember to talk to them professionally as an aggressive approach will make tenants feel unsafe. Simply inform them when the rent is due and do not hold factors that are out of a tenant's control against them.
Circumstances That Justify Late Rent Payments
Online Payment Errors
Although online payment platforms are convenient, they are still not completely reliable. It wouldn't be fair to impose a late rent fee when it's not their fault the rent payment hasn't gone through, and they can use that as grounds for legal action.
Unexpected Expenses
There are instances when a tenant is faced with unforeseen costs that put them in a financial strain such as sudden health crises. If there are no records of late payments prior, the appropriate move might be to provide them with a longer grace period just for the sake of understanding the situation.
Job Loss
When a tenant loses their source of income, you can already expect them to face financial hardship as the tenant's budget would be tight when the rent is due. You can excuse late payments and help them by providing options as mentioned above.
Hiring a Property Manager for Rent Collection
Rent collection can be a stressful responsibility, especially if some tenants fail to pay rent on time. It can be due to payment delays or tenants could withhold rent due to landlord-tenant disputes. Income Property Advisors can make those problems a thing of the past.
From enforcing rent obligations to handling late rent payments, we make sure that every tenant continues to follow the rules of your rental property. You can use our free rental analysis tool to determine whether you maximizing your rental investment, and consult us to learn how our company can help you get there.