Can Landlords Send Tenants to Collections?
Collecting past due rent from delinquent tenants can be one of the more onerous tasks in property management. While landlords do have the right to send tenants to collections, the process can be costly and time-consuming, leaving some landlords to wonder if it is worth it.
Evicting a Tenant
The most pressing issue when a landlord is facing late or missed rent payments is removing a tenant who is still occupying the unit. Unlike other creditors who simply can disconnect service to a delinquent customer, landlords must get permission from a landlord and tenant tribunal to reclaim possession of an occupied rental property.
To evict a tenant, the landlord must be able to prove that the eviction is warranted. For example, one late payment may not be enough to justify an eviction, and the landlord must endure further delinquent behaviour before filing a claim.
Once a landlord has sufficient grounds to evict, proper notice must be served on the tenant. Then, the wait begins for the notice period to expire and the case to be set before an adjudicator. At a hearing, the landlord must present evidence and overcome tenant defences such as partial rent was paid, the rent was paid just prior to the eviction hearing, or the tenant deserves a rent abatement due to the condition of the property.
If the eviction is successful, the tenant will be ordered to vacate, and the property can be placed back in service. This stops the income loss but does not compensate the landlord for lost rent.
In some provinces, the tribunal can issue a monetary award for past due rent if the landlord prevailed in the eviction. This may eliminate the need to file a second legal action to obtain a judgement against the former tenant for past due rent. However, because the tenant was occupying the property at the time of the order, it may not cover property damage that is discovered once the tenant moves out.
Options for Collecting Past Due Rent
Once the tenant has vacated, a new tenant can be brought in to prevent further income loss. At that point, the landlord must decide how to go about collecting the debt. The choices are to do nothing, attempt to collect the debt personally, or hire a professional debt collection company.
By doing nothing, the landlord emboldens a tenant to do the same thing to the next landlord, and the next. It also prolongs the bad feelings of being victimized. Unfortunately, this is a common choice because many landlords do not believe the collection process is worth the effort.
A landlord can attempt to collect the debt on their own. This usually involves sending written demand letters and attempting to negotiate for at least some of the money owed. Sadly, this method usually fails. The tenant didn’t respect the tenancy agreement, so it is unlikely the same person is going to spontaneously have a change of heart — not unless the landlord presents a compelling reason to pay.
Hiring a collection agency is another option. Professional collection agents are trained to locate delinquent tenants and their assets. Whether the collection is successful will be intimately tied to the accuracy of the contact information that the tenant provided when applying for the vacancy. The landlord also will need to substantiate the debt that is owed, typically with the tenancy agreement and any court orders or judgements.
Most collection agencies work on commission. That means that if the agent is unsuccessful, the landlord has lost nothing. If the collection is successful, however, the landlord will owe a percentage of the debt, typically 30-50%, to the collection agency.
Reporting Tenants to a Credit Bureau a Better Solution
Whether a landlord is attempting to collect the debt alone or hiring a collection agency, the likelihood of success is greatly enhanced if the tenant discovers the outstanding debt is going to be reported to a credit bureau.
Landlords do have the right to report tenants to a credit bureau for the purpose of collecting on a debt. Tenants are more likely to resolve a delinquency when faced with the reality that their past actions will be noted on their credit report and will follow them around for years to come.
Other credit bureaus have opted to not deal directly with landlords, but Landlord Credit Bureau does provide credit reporting services directly to landlords of all sizes. Landlords do not need to work through a collection agency or obtain a monetary judgement to report tenant debt through LCB.
By committing to reporting rent payments each month, landlords can reduce delinquencies and avoid the need to pursue rent collection. The ramifications of tracking monthly rent payments allow landlords to create an immediate consequence for tenants who otherwise would pay late or miss rent, without enduring weeks or months of spotty payments.
Good tenants see reporting rent payments as a valuable amenity because they can build a better credit report and earn a positive Tenant Record.
Positive and negative rent history is accessible to landlords at Landlord Credit Bureau, making the tenant selection process more effective while reducing the likelihood of income loss.
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.
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