Recovering Back Rent From Tenant

Written on Tuesday April 16, 2019 by Bob Hinrichs

Here’s an all-too-familiar situation for anyone involved in property management… You have a tenant who is late on rent. They promise to pay you by a certain day, and that date rolls around. For some reason, you still don’t have their check, so you threaten to evict them and provide formal notice. They still don’t pay, so more time passes and they’re evicted; however, they still owe you for the missed rent payments and maybe some late fees. Oh, was the house damaged too? Now what? Is there any hope of recovering back rent or repair costs?

Various Actions to Take

If you find yourself in this situation, there are a couple of different actions you can take. In some cases, combining a few of these solutions will be necessary. 

Security Deposit

Use their security deposit to cover any missed rent up to that point. This is by far the quickest and most painless route to recover at least some of the lost money. Many times, however, the amount owed by the tenant will exceed the amount left in the security deposit. Also, be sure that your state or local laws allow for this. Many allow you to apply the security deposit to back rent. But some require some certain steps before you do.

Small Claims

You can take your tenant to small claims court. Before you dive into this step, know that in many jurisdictions the cost of going to court cannot be recovered from the tenant later (even if you win). Make sure it’s worth the cost compared to the amount owed to you before continuing. If they owe you a lot of money, this might be a great route to pursue!

Preparing for Court

To prepare for court, you’ll want to gather certain documents, which include:

  • All correspondence between you and your tenant. Things such as rent reminders, warnings, eviction notices/paperwork, etc.
  • Records of how much rent is past due as well as late fees associated with the late rent per your lease.
  • A copy of the lease for proof that the aforementioned late fees were agreed upon.

If you show up to your hearing with these documents proving back rent is owed, the good news is that you will more than likely win the case. I’ve got some ugly truth for you. The bad news is that winning the judgment doesn’t mean you’ll actually ever collect the money from your tenant. A judgement is a legal ruling saying you are entitled to a certain amount of money from the tenant. But it’s up to you and the legal routes you’ve got to work with to actually get the money collected. (The judge doesn’t necessarily do this for you)

Using the Judgement

Now that you’ve gotten a judgement, you’ve got a “legal right” to be paid by that person. This opens the doors to things like wage garnishment. You’ll first off find where the former tenant works. Then you’ll work with the courts and employer to collect a small amount of each of their paychecks. If you don’t know where they work, this can be really challenging!

To provide a little extra assurance that they’ll pay, you can pay a fee to extend the length of the judgment. However, before you get out your wallet, you’ll want to ask yourself whether or not that will actually make a difference to your tenant and help you recoup your money.

Collection Agencies

The other route you might consider taking is hiring a collection agency. These agencies specialize in finding people and collecting money owed in judgements. Of course, they charge a pretty hefty fee. But at least you’ll be able to collect a portion of the money. Some might be better than none! The collection agencies will take a certain percentage of collected money for their services. If you decide to pursue this option, be very careful about the agency you use and the terms you’re agreeing to!

Silver Lining and Future Tips

This situation seems pretty defeating, doesn’t it? On the flip side, remember that some tenants are actually good to work with. These are the ones you want to find next time! To avoid tenants who don’t pay from being a recurring theme for you in the future, here are a few tips:

  • If your tenant is delinquent on rent past the grace period (if applicable), don’t hesitate to give an eviction notice. Obviously be sure to check with your local and state laws to see what the minimum time frame required is. But the sooner you can get your non-paying tenant out, the sooner you can get someone else in the property. 
  • Better yet, avoid this awful situation altogether by pre-qualifying tenants before allowing them to move in. It is perfectly acceptable to require a minimum income level to rent your property. In most cases, this is 3-4 times the amount of annual rent. Don’t just ask them how much they’re making, also ask for verification through tax paperwork, pay stubs, etc. You can also ask for past rental references and call through them to make sure they paid their rent regularly and in a timely manner. Though these measures may not protect you 100% of the time, they will limit your risk substantially.

For more tips, take a look at another article we wrote!

Wrapping It All Up

In the end, there are steps you can take if you find yourself in the situation we described at the beginning of this article. However, just like we’ve said before, the best solution to this problem is preventing it in the first place. We hope this was helpful for you today. If you’re exploring options to get out of property management, please click the green box on the right side and we’ll reach out to within 48 hours to discuss how we can be able to help!

This content was created solely for informational purposes and should not be used as legal advice for any given scenario. Please refer to your state and local laws when making decisions.

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