The Property Management Shop

The Only Response to Late Rent Payments

by Marc Wilson

Q. I have a tenant who always pays her rent late. She typically calls on the fifth or sixth of the month and informs me when I can expect to receive her rent payment. Sometimes the rent checks even bounce. What can I do to fix this problem?

A. Timely rent payments are the Holy Grail of the property management business. Your relationship with your tenant is not complex: you provide habitable housing and your tenant makes timely rent payments. Late rent payments represent the complete and total collapse of your owner-tenant relationship. How in the world can you expect to enforce the other provisions of your rental agreement when you can’t even collect timely rent payments? I blame myself for habitually late rent payments; obviously I have either failed to enforce the rental agreement or to make the tenant understand that all aspects of her rental agreement will be strictly enforced.

The key lies in clear and concise written communication. Never have verbal dialogue with your tenants concerning anything material to their tenancy—and what could be more material than timely rent payments? Never call your tenants and inquire as to their failure to pay rent. Verbal communication regarding material breaches of your rental agreement is a complete waste of time and contributes to the further degradation of your written agreement. Verbal communication about late rent payments is not a first step, or for that matter a second, third or fourth step, toward fixing your problem. Calling a tenant and asking about a late rent payment is a sign of ignorance and a sign of weakness. It clearly demonstrates your lack of knowledge relative to the enforcement of your agreement and it can be construed by your tenant as an indication of possible flexibility as to the terms of your rental agreement. The truth is that you can talk about late rent payments with your tenant for 1,000 years and after all that time you will be no closer to fixing the problem.

You have an obligation as a property owner to become an expert in the preparation and service of the standard Three-Day Notice to Pay Rent or Quit. There are literally hundreds of necessary and useful property management forms in existence and most of these forms are available through SFAA and the California Apartment Association website. The reality is that an owner can effectively manage residential property without any of these forms—except for one. It is absolutely impossible to manage residential property without a Three-Day Notice to Pay Rent or Quit. The only first step in resolving timely rent payment problems is the proper service of this three-day notice. Nothing gets an errant tenant’s attention faster than this notice. Do not feel guilty about serving this notice. It is not heavy handed; it is the only acceptable response to a tenant’s failure to tender rent. Make a promise to yourself to become intimately familiar with the preparation and service of this notice. It should be your only response to late rent payments. Never call a tenant about rent payments again. If you are not familiar with the proper use of this form, call an attorney and have her prepare and serve the form. In this way, you will learn the process. You can handle the problem yourself the next time. If you are not inclined to learn this process, give your attorney a copy of the key to your property and have her handle all future three-day notice requirements. Do not be shy when it comes to your right to timely rent payments.

Furthermore, do not accept partial rent payments. If you receive a partial rent payment, immediately return it and serve the tenant a three-day notice for the total rent due and payable. Accepting partial rent payments is a guaranteed way to receive partial rent payments in the future. Do not deviate from the terms of your rental agreement. If your tenant’s check bounces, return the check with a three-day notice. Inform the tenant in writing that you will no longer accept personal checks for rent payments. Paragraph seven in the PPMA Lease clearly dictates your right to refuse payment by personal check if and when the tenant bounces her rent check. The best time to invoke this clause is the first time the tenant bounces a check. Your failure to enforce this clause will guarantee future bounced checks. Do not feel guilty about terminating your tenant’s right to pay with a personal check. Your refusal to accept personal checks in the future is not mean spirited—it’s good business. Do you think your corner grocery store would continue to accept your checks after you bounced one? No way.

Evictions in San Francisco are costly, time consuming and risky. Even well-executed evictions for nonpayment of rent can go awry. You need to lay the foundation for a successful nonpayment of rent or habitual late-rent payment eviction. Your tenant file needs to be full of historical three-day notices to pay rent, habitual late-rent payment warnings and other documentation admonishing the tenant for late rent payments. In an eviction, you will need to tender overwhelming evidence relative to your insistence on timely rent payments. Your historical communication with regard to late rents should be clear, concise and unrelenting. Be consistent, forceful and fair when it comes to late rent payments. Treat all tenants the same. Do yourself a favor and adopt an absolute zero-tolerance policy when it comes to timely rent payments. Life is too short for dysfunctional relationships, so do your best to avoid them.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Marc Wilson is the president of SFAA and has specialized in the brokerage of San Francisco apartment buildings for 20 years. He can be reached at 415-229-1275. Copyright � 2006 by the San Francisco Apartment Magazine. All rights reserved.