Have you noticed the rising prices lately? I have. Gas, food, just about everything seems to be getting more and more expensive. Rents have been following this trend, and while that may be good for us landlords, it is not so good for many tenants out there.
I have a feeling many tenants are getting squeezed more and more. Not only do they have to pay increased costs for housing, food and fuel, think about those student loans and other debt burdens many of them have. While we can debate the causes and solutions to all of these issues, the fact remains than a lot of people are living paycheck to paycheck and barely scraping by.
Tenants can therefore find themselves between a rock and a hard place. Their paychecks are just not going as far as they used to and this past winter was brutally cold in many areas causing higher utility bills. One step back, say a broken down car or an illness which causes lost work, can cause tenants to have to make tough choices. Should they fix the car, keep the heat on or pay the rent?
Let’s be honest here about this situation, paying the rent is likely to be dropped down the list after getting the car fixed and keeping the heat on. On the one hand they have to get to work to earn the money to pay the bills so the car will get fixed first. On the other hand you as the landlord also have bills to pay. There is nothing I can say to the bank for example that will allow me to delay my mortgage payment. So what should you do with a financially struggling tenant?
To answer that question, we have to back up a bit first. We have to go back to your lease signing and move in process. Hopefully at that time you set up a decent landlord/tenant relationship. You were firm but fair in noting when the rent is due and what the consequences would be regarding missed or late payments. Hopefully you also encouraged your tenants to discuss any future concerns or issues with you. You told them not to stick their head in the sand if they ran into trouble, but to communicate with you about the situation.
So let’s assume they are communicating with you, then what?
Be Nice – Being a jerk is not going to help the situation. Your goal is to ultimately get what is owed in the easiest way possible. It is much easier to do that at this point with kindness and understanding. You can reiterate your policies and concerns, but do it in a non-confrontational manner.
Determine the Nature of The Problem – Is the problem a onetime occurrence? Will the tenant be able to catch up rather quickly? Or have they lost their job with no immediate prospects. The nature of the problem should determine your next steps.
Move Quickly and Decisively – Once the nature of the problem has been determined, you need to move quickly to resolve it. If you think the tenant can get things worked out, perhaps setting up a payment plan is the way to go. At least get a verbal commitment, better yet get it in writing through an e-mail. Hopefully the issue is now resolved.
Move the Tenant Towards Action – If it appears the tenant is in a bad position with no end in sight; your best bet is to begin to cut your losses. After all, you are not going to get blood from a stone so to speak. Discuss with the tenant how they are going to resolve the situation. Ask the tenant if they have somewhere else to go. Ask if they can get a loan from their parents, friends or church. The point here is to get them thinking of alternatives with the understanding that they are not going to be allowed to stay without paying rent.
Let Them Go – If their situation is truly bad, your chance of getting paid is tiny. If the tenant can quickly find someplace to go, let them out of the lease. Again your goal now is to cut your losses and get you property back and cash flowing again as quickly as possible
If They Will Not Leave – Perhaps offering some cash for keys will be the motivation they need. Many times these folks are simply out of cash and cannot even afford a moving truck. Why not rent the truck for them? Why not give them a couple of hundred bucks to go? It is much cheaper than going to court and much less adversarial as well. If they take your offer, be sure to get a signed release to the rights of possession.
Still Won’t Go? Then Set a Deadline – Sometimes no matter what you do, the tenant will just stay in denial and decide not to decide. This tenant will need the ultimate push, a firm deadline after which you will file for eviction. Sometimes, the tenant will leave right before or after the eviction is filed.
If You Have To, Evict – I hate to do it. It is an absolute last resort for me as it is expensive, messy and confrontational. But sometimes there is just no other way. However, we have rarely had to use this route, as the steps I have outlined above will usually resolve things.
Unless there is a drastic change in the economy in the near future, I expect everyone to keep getting squeezed more and more (including me). I would bet therefore that dealing with financially struggling tenants is going to become a bigger part of the landlording business.
