Time and time again, property owners cite unpaid rent as one of their greatest fears in managing a rental property. This is an unsurprising fact, because if a tenant stops paying their rent, the outcome can lead to financial disaster for the landlord.
So, what can a landlord do about unpaid rent? Read on for effective strategies to deal with rent payment issues and tips to avoid the situation altogether.
Scenario 1: You haven’t received rent for more than a month
Most lease agreements require rent to be paid every month. If your tenant has ceased paying rent for more than one month, it’s more than reasonable for you to take action to collect the required amount. Here’s a breakdown of the overall process:
Step 1: Send an informal reminder
To start, email your tenant or give them a letter to let them know that their rent is past due. Keep your message brief and friendly. It’s a gentle reminder that rent is outstanding and that payment should be sent as soon as possible.
Your tenant may have simply forgotten to pay you. Or, their cheque could have bounced, and they didn’t know their payment failed to process. A quick message may prompt them into action to catch up on their payments.
However, it’s also acceptable to add in your message details about late charges you’ll be applying to their account and note the consequences if they fail to pay rent. You can reiterate key clauses regarding late rent payments from the lease agreement.
Step 2: Speak with your tenant
So, you’ve sent a written notice about the past-due rent. Wait briefly for the payment to arrive. If you still haven’t received the money, call the tenant or visit them at the property.
Remember to be respectful, calm, and diplomatic during the conversation. You can ask your tenant why they’ve stopped paying, when you can expect a payment, and if you can do anything to help with the situation. The goal is to work with your tenant to find a solution. In this way, you can both avoid a lengthy and costly eviction process.
Whatever the reason for the missed payment, it’s vital to work with the tenant to develop a payment plan to resolve the issue. Ensure that the arrangement is fair and reasonable for both of you, and remember to document the agreement in writing so it’s official and legally binding. You can use this document as evidence should you need to file a hearing with your local landlord-tenant tribunal.
In the agreement, include a clause stating the tenant must pay the required amount by the due date. If this requirement isn’t met, you’ll provide them with a written notice to issue payment immediately or move out.
Step 3: Give written notice to your tenant to move out
If your tenant has failed to fulfill the terms of the new payment arrangement, you’re legally entitled to break the lease agreement and ask them to leave your property. However, there are laws governing how exactly you can go about doing this.
You must give your tenant written notice to pay the rent by a specific due date or move out. The number of days the tenant has to pay the overdue rent varies from province to province. If they do so, the notice is cancelled, and they can resume their tenancy.
Each province has a particular form that landlords must fill out and submit to tenants for the notice to be valid. Check our local resources to find the right form.
Issuing your tenant a formal written notice may spur them to catch up with their past-due rent. As a result, you can avoid escalating the issue to the landlord-tenant tribunal.
Step 4: Submit an eviction application
Suppose the written notice has expired, and your tenant still hasn’t paid their outstanding rent. The next step is to file an eviction application with your local residential tenancy board.
During this process, you’ll have the opportunity to present your case before a tribunal. If you win your case, the tenant must leave your property or face legal repercussions.
Each province has a distinct form you must complete to kickstart the eviction procedure.
We’ll explore the eviction process from start to finish in our follow-up article, but in a nutshell, it works like this:
- Upon receiving your eviction application, the landlord-tenant tribunal will arrange a hearing date for your dispute, during which an adjudicator will review your case.
- During the hearing, you’ll have the chance to present evidence and dispute counterclaims by the tenant, should they have any.
- If you’re successful in your case, the adjudicator will issue an Order of Possession, which requires the tenant to vacate your property and repay the past-due rent.
- Should the tenant refuse to leave your property, you can hire a sheriff to enforce the eviction order.
What if the tenant still fails to repay the missed rent, even after leaving your property? In that case, you have one of two options:
- Obtain a garnishment order from the court to seize their wages.
- Hire a collection agency to recover the outstanding rent on your behalf.
Going through the eviction process can be painfully tedious, but it may be necessary to limit your financial losses. Once you successfully remove the non-paying tenant from your property, you can start a fresh lease with a new renter.
Remember that the goal isn’t to evict your tenant. You want to incentivize them to pay off their outstanding rent. A tenant still has the opportunity to pay you what they owe, usually up until the sheriff executes the Order of Possession. They can then file a motion to halt the eviction.
Scenario 2: You’re worried your tenant may stop paying rent
Let’s say you have a hunch that your tenant may soon default on their rent. Or, you’re simply worried about dealing with missed rent payments in the future. Here are a few tips for minimizing the potential risk of overdue rent.
Be open and transparent with your tenant
No matter how meticulous your screening process is, there’s always the possibility a tenant will suddenly stop paying their rent.
An unexpected job loss, hefty medical bill, or even a significant life event like a family member’s death can result in financial stress for anyone, causing them to fall behind on their rent.
If you’re concerned that your tenant will miss their upcoming rent payment, contact them immediately to inquire about the situation. While making a phone call and meeting in person is fine, make your initial outreach in writing so that you can track all your communications.
Create a new payment plan with your tenant that accommodates their current financial circumstances. Make sure to document the terms of the agreement in writing and address any questions and concerns they may have. You can avoid a costly and drawn-out eviction by communicating with your tenant openly and working together to resolve payment issues.
Report rent payments to credit bureaus
Reporting your tenant’s rent to a major credit bureau, like Equifax or TransUnion in Canada, can be an effective way to motivate them to stay current with their payments.
On-time rent payments will boost a tenant’s credit score, making qualifying for credit cards and lines of credit easier. On the other hand, late or missed rent payments will lower their credit score, making it more challenging to obtain various loans.
Reporting credit won’t help you recover past-due rent. However, most people will avoid damaging their credit standing, so there’s a greater chance they’ll make an effort to pay rent on time consistently if they’re incentivized.
Structure your rent increases wisely
Many tenants stop paying rent because they encounter unexpected financial hardship like a job loss. However, in some cases, they may struggle to keep pace with the rising cost of living, maybe because they haven’t received a pay raise for many years.
Rather than raising your rent once every few years by a huge percentage, opt to increase it slowly annually. That way, your tenant will have enough time to adjust their budget to your new fee. They’ll be far less likely to default on their rent if they can afford it.
Our final thoughts
If your tenant suddenly stops paying their rent, taking immediate action is vital. Communicate with your tenant openly and honestly to understand the reasons for the overdue rent and work together to create a payment plan to get them caught up. Be prepared to initiate an eviction if all other options fail, but always allow your tenant the chance to make their payments.
Of course, being proactive about minimizing the risk of unpaid rent is also wise. One way to protect your rental income is to sign up for a program like SingleKey’s Rent Guarantee, which will cover lost rent should your tenant default on their payments.
Finally, when in doubt about the legality of a particular action to recover unpaid rent, always seek advice from a lawyer.
