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When Should a Landlord Send a Tenant to Collections?

As a landlord, it can often be difficult to decide when is the right time to take legal action against delinquent tenants. Unpaid rent can lead to financial hardship for landlords and their businesses, yet there are times when sending a tenant to collections may not be the best course of action.

In this blog post, we will explore some of the factors that should be weighed when considering whether or not to send a tenant to collections in order to arrive at the most financially beneficial decision. Let’s dive in by looking at some of the questions you’ll need to answer.

Are Your Terms Fair?

All landlord-tenant leases should abide by the Fair Debt Collection Practices Act (FDCPA), and this includes setting reasonable terms for delinquent payments. The FDCPA sets certain guidelines on what collections can, and cannot, do.

This includes how they communicate with tenants, how they report the debt to credit bureaus and other regulations that landlords must follow to stay compliant. This ensures that all parties are treated fairly in the event of any delinquencies or collection efforts.

Is Your Tenant Experiencing a Hardship Beyond Their Control?

Depending on the situation, it is important to consider if your tenant is facing a reasonable hardship such as job loss due to COVID-19 or another economic issue. It’s important for landlords to be understanding of their tenants’ situations and show empathy whenever possible.

In many cases, landlords are able to work with tenants to find a mutually beneficial solution that allows them to remain in the rental property without going through the collections process. This could include waiving late fees, offering an extended payment plan, or lower rent payments for a period of time.

How Well Do You Communicate Payment Terms?

Clear and frequent communication is key when it comes to discussing payment terms and options with tenants. Landlords should clearly outline payment amounts, due dates, penalties for delinquency, and other relevant information in rental agreements or lease contracts.

It is also important to provide multiple communication channels (such as email, telephone, text message, etc.) and be consistent in responding to inquiries from tenants regarding their payments. This will ensure that tenants have ample access to updated payment information as well as a reliable resource for questions or concerns.

Inconsistency can send a message of playing favorites. This opens the door to possible discrimination actions against you or your company.

Have You Followed an Eviction Process, or Do You Plan To?

Eviction laws vary by state, so it is important to check with local housing agencies or legal advisors for specific information. Generally speaking, landlords have the right to evict tenants in cases when the tenant has breached their lease agreement.

Evictions can be a lengthy process and involve significant costs such as court fees, attorney’s fees, and possibly damages if the tenant has caused property damage. Landlords may also be liable for costs associated with relocating the tenant as well as any losses suffered by the tenant due to an illegal eviction.

Ultimately, you may be able to recover monies owed through the court system if you have followed the eviction process to the letter of the law. Check with your county’s law enforcement officials before proceeding.

Are You Equipped for Landlord Tenant Collections?

Having an accounts receivable team in place is essential to proactively manage and pursue overdue rental payments. The team should be equipped with the right set of tools, processes, and procedures to effectively track and collect payments.

Utilizing automated reminder and follow-up systems as well as implementing collections strategies can help ensure that rent payments remain on schedule. It is also important to have an open line of communication with tenants so that are aware of their options in case of any payment issues.

You Have the Ultimate Partner for Landlord Tenant Collections

Running your own landlord-tenant collections operation can be expensive, time-consuming, and a legal headache if you’re unsure of what you’re doing. Fortunately, there is help through Southwest Recovery Services.

For many years, we’ve offered top-tier collections services for business owners with rental property. We know the legalities and have established a proven system to get you paid quickly. Contact us today to learn more or get started!

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