When It Goes Sour

You might rent to a really nice person that seems like they could become a friend. Inevitably, a once decent tenant will turn into a bad tenant at some point. Remember, the home that you lease to a tenant is your investment, and every dollar that a tenant does not pay is a loss for you. You must be careful to always preserve your rights as the owner of the building that they occupy.

The first warning sign of a problem with a tenant is slow payment. If your tenant is consistently a few days late with the rent, do not let it go. I highly recommend building in a late payment fee into your lease. Each state will limit the maximum that you are allowed to charge. A late payment charge dissuades tenants from paying their rent when they want to and instead force them to pay when it is due. You might be reluctant to charge this fee, however, if your tenant paid any of their other bills late they would have to pay a fee. I recommend sending out a rent demand letter very day after the tenant is late with their rent. The demand for rent should lay out when the payment was due and when they must pay the rent in addition to late fees. It should also relay consequences if the tenant does not pay in time.

If the tenant pays on time, the rent check might bounce like a rubber ball. Tenants should immediately be sent a notice of returned payment when their checks do not clear. Be sure to include the returned check free, and if paid after the late payment date, a late payment fee. Do not accept sob stories for returned check since this will affect your bottom line.

If a tenant consistently breaks the terms of a lease you may need to evict them. The eviction process differs from state-to-state but generally, the only lawful way to evict a tenant is for the landlord to obtain a court order signed by the circuit court or magistrate judge.  Typically, after giving a three-day notice, a landlord can sue to tenant to secure a court order to have a tenant evicted if either:

  • The tenant is in unlawful possession of the landlord’s property (by remaining on the property after the expiration of a rental agreement or failing to pay rent for more than three days after it is due);
  • The tenant substantially damages the premises; or
  • The tenant does or fails to do something which, under the terms of the lease, is identical to cancellation.