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The Stages of Delinquent Rent (And How to Successfully Collect)

Nov 29, 2022 10:00:00 AM

Bill stamped with "Past Due"

The past few years have taught homeowners that renters may miss payments for various reasons, many of which are out of their control.

Although recovering unpaid rent from past-due tenants can be difficult, owners and property managers can adhere to a few best practices to pursue and collect the rent as soon as possible.

From contacting a local property manager in certain markets to pre-eviction warnings, landlords can go through up to four steps of rent recovery when they have unpaid tenants. Each stage may be resolved more quickly if it is dealt with more quickly.

4 Stages of Delinquent Rent Recovery

1. Pre-Eviction Warning

Homeowners will recover the most money at this point because it is when the first notice is sent out.

When and if notice is given, over half of overdue residents will catch up on their payments. The accounts are currently being assessed late fees, and most residents wish to avoid taking on any further debt.(Fees may be levied daily, as much as $60 or more). In addition to late payments, some people don't want to deal with the discomfort of the eviction procedure, which increases the incentive to pay as fast as possible.

Depending on where the community is located, the pre-eviction step has a distinct timeline. States, counties, and municipalities establish various grace periods for rent payments. Communities must provide legal notice to the residents, informing them that payment still needs to be received. The notice also indicates that the eviction process will continue unless the account is brought current. Typically, this period is between one and six days.

2. Notification and Eviction Filing 

Owners will observe a substantial portion of residents making things right after the eviction is filed. However, after receiving notice, the eviction procedure may start if a resident still needs to settle their bill or their moratorium on evictions ends.

Depending on local rules, evictions may be filed 3–7 days after the initial notice, and the resident has 7–10 days to reply. The advantage of this waiting period is that it provides the overdue renter with another reason to pay. Receiving a court summons and realizing they could lose their home if they don't act is frequently sparked by receiving a court summons.

3. Pre-Collection Stage

Property owners will eventually reach a point when some tenants flat-out refuse to pay. It could take up to seven days to decide whether to evict a renter if they reply to the eviction notice. If successful, it may take the court clerk up to three days to issue a writ of possession, and it may take another week for the order to be carried out. About 95% of occupants will give up control of the property before the sheriff arrives to carry out a forced eviction. People who stayed because they had no other options were typically the targets of forced evictions.

These stages of recovery are where there is a sharp decline in the number of successful resolutions. Another chance to provide a financial incentive for the debtor to pay is during the pre-collection phase when a resident vacates without resolving the issue. Still, the account needs to enter final collections. The former resident still has a chance to prevent a negative entry from being placed on their credit record because the account still needs to be fully collected. 12% to 15% of evicted renters who still owe money will pay during this period.

4. Collection of Debt

The final stage is full debt collection, with a success rate slightly higher than pre-collection. However, this is still the stage when the least number of accounts will be settled because the total number of unpaid accounts decreases with each step.

The final level of revenue recovery ranges from 13% to 16%. It is feasible to persuade some delinquent clients during this last stage. This prevents a negative mark on their credit report because collections companies typically wait 90 days before reporting the account to the credit bureaus.

Alternative Ways of Collecting Unpaid Rent

Man writing on formal document1. Introduce a different means of payment 

This makes it simpler for the tenant to pay, even if it may cost you a little bit more. This is a great way to encourage residents to pay as soon as possible. Consider providing Venmo, PayPal, or Zelle as an option if your tenants often pay by check or money order.

Although they are simple, many free services could come with additional costs. Look into each of these services to determine if any would suit you and your renters. Some will find these to be the simpler alternative, but some may be able to pay you more promptly if they can use these methods.

2. Set up payment reminders

You should try a new strategy if you frequently struggle with rent payments and are fed up with figuring out how to request money for rent politely. Asking before someone is running late is the most considerate method to request payment! You can be courteous if you send a reminder a few days before the rent is due.

It is preferable to provide a reminder regarding a future payment instead of requesting a late payment. When they sign their contract or when you put it in place, ask your tenant if they are okay with being on this type of reminder. Sending this kind of reminder is only appropriate if the recipient is open to it.

3. Have a Conversation

You should try a different strategy to collect the rent if your tenant has been past due for more than one month. For example, ask if you can sit down with the tenant rather than just contacting or texting them to demand payment immediately.

You can inform tenants who owe rent that you are waiting for payment by having an open dialogue with them. You and the renter will have the chance to settle their rent issues without resorting to eviction simultaneously.

Final Thoughts

Property owners and property managers are put in a challenging predicament when tenants fail to pay rent on time. Only some will be prepared to proceed immediately with an eviction. Still,  if you own a rental property you must must act quickly to prevent businesses or cash flow from suffering owing to unpaid rent.

It's always complex to recover bad debts. You must be diligent in your work and strictly adhere to the law and accepted collection procedures. You can be sure you'll come up with a workable answer by keeping these in mind while you create your debt collection procedure.

 

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