Like any other business, property management comes with its challenges. Among the common disputes faced by landlord and property managers is dealing with late and failed rent payments.
Unfortunately, regardless of how much time you spend screening your tenants before they occupy your property, there is always that one nuisance tenant who cannot pay rent on time or fails to settle altogether. Can landlords send tenants to collections? In this article, you will find information on how to send tenants to collections, and the best alternative to deal with the issue.
Whether or not landlords can send tenants to collections is among the most commonly asked questions by tenants that are unable to meet rent deadlines; as well as landlords consistently receiving late rent payments. The answer to this is yes. As a landlord, you have the right to seek the assistance of a collection agency to help you get what the tenant owes you. You also have the right to report your tenant rent payments to the credit bureau via the Landlord Credit Bureau. More on the LCB and how you can report your tenant rent payment below!
This is paramount after trying to collect the rent yourself, but the tenant shows no signs of paying. The renter is likely to take the collection agency and/or the LCB more seriously than they did with you, thus increasing the chances of payment.
It would be best if you took this action after evicting the tenant so you will create room for bringing a new tenant to the building. Collection agencies have what it takes to follow up on the tenant regardless of where they go and ensure that you get your money.
How to Send Tenant to Collections
Before you opt for a collection agency, you should try the following;
Try Collecting the Debt Yourself
Most landlords feel that attempting to collect past due payments takes a lot of time and effort, which is not worth it. After all, if the tenant is not paying you willingly, they might not pay you simply because you asked. Some landlords choose to let it go, especially if it was not a significant amount. Nonetheless, if you decide to give it a try, you should follow these steps.
• Sending notice telling the tenants that they are late on payments
• Making phone calls to inquire about the payments
• Filing claim for failed payment
If you are not sure of how to send tenant to collections, here is what you need to do.
Hire an agency
The first step is to look for a reliable debt collection agency for the job. Note that there are so many scammers out there, and you must be careful with whom you choose to entrust with such a sensitive issue.
You should then negotiate with the agency on the payment terms. You may agree to sell the debt to the agency directly such that the collectors will take a portion of the retrieved money as payment. Also, you may decide to pay the debt in installments.
Most collectors work on commissions. For example, they can take 25 or 50% of what the debtor owes you after collection. Some will ask for a flat-fee regardless of how much you want them to retrieve for you.
Present the Collectors With Lease Agreement
The collectors cannot approach the tenant without proof that the debtor failed to meet their part of the rental agreement. You must present the collectors with the contract and evidence of your collection attempt. This will show that indeed, you did your part, but the renter failed you.
You should then give the collectors detailed contact information of the tenant and references. If applicable, include the tenant’s social security numbers, Identification number, and driver’s license, making it easier for the agency to track them.
Is Sending Tenants to Collections Worth It?
As much as this seems like the only option when tenants fail to meet their part of the lease contract, it takes a lot of time and money. Sometimes, you may end up paying the agency an amount almost equal to what the tenant owes you.
The best way to go about this is by avoiding the issue from the-word-go. You should not wait until the tenant fails you completely so you can start running up and down trying to retrieve your money. You can easily access your renters’ database and determine their behaviors before they occupy your property and become problematic.
With reliable reporting rent software like Landlord Credit Bureau, you will have peace of mind knowing that your tenants are trustworthy and reliable. This is a better alternative to going through the hassle of sending your tenants to collections.
The software forces the tenants to pay on time as failure to do so will negatively affect their credit score and ruin their tenant record. This means that it will adversely affect their lives out of your property. Even if they chose to leave for a different property, their new landlord could view their record, and nobody will want to accommodate them.
Landlords who send reports on their tenants pay habits to Credit Bureaus do not have to send them to collections. It is a super easy and effective way to ensure renters pay their rents on time to avoid getting on the wrong side.
When getting new renters for your property, you can search for tenants’ records on Credit Bureaus so you can easily avoid annoying renters. From this, using the landlord reporting rent software is more efficient, money, and time-saving compared to sending tenants to collections. If you are a landlord or property manager looking for the best way to keep tenants on track, you should try this trick.
Post provided by:
This post is provided by the Landlord Credit Bureau to help landlords and property managers reduce the risks of rental income loss and avoid rent theft. The Landlord Credit Bureau provides articles on Reporting Tenant Rent Pay and Tenant Screening to ensure necessary information is readily available to all Landlord & Tenants.
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The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.