A critical indicator of a management company’s success is their effectiveness in controlling overdue rents. A well-run property should not have chronically delinquent tenants. However, when delinquency does occur, immediate action must be taken. A list of all delinquent rents must be prepared showing all tenants who have not paid, or for those who have partially paid rents and other monies due. In addition, a delinquency report recording the manner and date of all collection attempts should be prepared.
When initial notification of the delinquency does not help, the property manager should review the lease’s termination rights and consider possible legal action against the tenant. Should a delinquent tenant suddenly vacate the premises, late charges and legal fees should be deducted from the security deposit.
Finally, if repeated notices and personal visits by the property manager fail to remedy the delinquency, the manager should contact legal counsel, research relevant state and local laws, and prepare to file eviction proceedings for nonpayment of rent.
The Legal Action
Each month, the property manager should review the delinquency report outlining all telephone calls, personal visits, notices, and other actions taken in an effort to collect the rent. This report, along with the tenant ledger, will help determine what legal action, if any, should be taken against each delinquent tenant. Tenants who generally pay rent on time should be granted an extended grace period in which to pay. In many cases, the initiation of legal action will induce habitual late payers to remit rent monies owed; however, eviction procedures should begin immediately for tenants who are suspected of moving, as well as for those who continue to refuse to pay. Copies of the tenant’s lease and the tenant ledger should be forwarded to the attorney, who can then begin legal action.