When you and your tenant signed the lease agreement, and they moved into your rental property, there was a certain amount of trepidation on both sides. They wondered how approachable and reliable you would be when there were maintenance issues or disruptive neighbors, etc. They knew inspections were part of the scene, but frankly, they were hoping you didn‘t do it so often that it was an invasion of their space. You were wondering how well they would treat your property, whether you would be getting complaints about them from neighbors, how careful they would be with utilities, and, at the top of the list, would they pay on time?
It has been more than five years since they moved in, and both sides are happy on all accounts. Well, except there is one little issue. In the last couple of years, there have been a few times that they paid late. No notice ahead – just sent their payment in a couple of days after the due date. You‘ve let it slide, but honestly, it is bugging you, and you are considering taking some action. You have even contemplated making an ultimatum, but on the other hand, you do not want them to take you up on it and move. So, what should you do? Be lenient, or not?
Before we answer the big question, we will remind you of some pertinent information.
Tenant turnover is costly –
Before you can move a new tenant in, you will need to:
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- Give the rental a deep cleaning, from carpets to ceilings, windows, lights, appliances, etc. Even if they left it clean, prudence calls for deep cleaning to happen. If you don‘t have the time, you will have to hire a professional.
- Make any repairs that may be needed to ensure everything is in tip-top shape.
- Possibly paint the walls and ceilings.
Then there is the paperwork:
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- There‘s the move out inspection, returning deposits, or documenting why you are not.
- Re-evaluating your standard lease (if the tenant has been there for more than five years, your lease probably needs updating).
- New tenants mean processing applications, doing background checks, reference checks, and general screening.
Don‘t forget the time and cost of marketing and advertising your property.
Finally, instead of collecting rent, you will be spending time showing your property to potential tenants. And who knows how long it will take to find another long-term renter.
OK, you probably are getting an idea of where this is heading, but don‘t make a judgment call too quick.
Yes, we recommend a little leniency with an excellent long-term tenant, but it doesn‘t all rest on your shoulders. As much as they might deserve a little leniency, you deserve respect and commitment to the lease.
So, here are some potential answers.
Begin by addressing the issue. Written notices work best. It documents the process and gives them time to think about it before responding.
The notice should include:
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- A beginning statement of appreciation for their business. Mention the highlights of why you want to continue the relationship. For example, maybe they always have a tidy home or keep the landscape in great shape.
- Point out that you‘ve noticed that they have been late a few times. Express your understanding that things happen, but explain that it’s important that they notify you if rent will be late.
- Point out the late fee in the lease they signed. Let them know that while you may have not charged them a late fee up to this point, you will be on future late payments.
- You might want to consider giving them notice that starting with the next month, you will be raising the rent X amount, but that every month they pay on the due date or before, you will record a $10 credit. Credits accumulated in a given year can be applied to December‘s rent – providing it is paid on time. (Note: there are other creative ways you can make it all about the positiveness of timely payments rather than the negativity of paying late).
Bottom-line is finding a balance. It is a business arrangement, and you have a right to insist on full rent being paid on time. But a long-term tenant with a solid track record is good for your investment, so a little leniency from time to time can reap a high ROI.
