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The Rent - When, Where and How for Landlords

So you want to be a landlord.  You obviously rent space to tenants so you can get paid.  Hey, she said she would pay me rent on time and she seemed nice enough.  I don't need to screen this tenant.  In that case your landlord philosophy must be: "Rent at the landlord's own risk, he will take his chances on this one."  We suggest you be proactive and take simple steps to protect yourself (including screening all tenants). Why else be a landlord but to collect the full rent due and owning in the form of a check tendered when promised, which clears the bank (the first time), as set forth in a written lease agreement?  

For your tenant, the "rent check" may be just another bill that could be put off because the Visa bill is more delinquent.  But for the landlord it could mean "cash flow" for mortgage payments or other rental projects that if missed or delayed mean additional fees and expenses for the landlord.  And hey, time is money.  

If you have been at this awhile, say as an experienced property manager, you already know that unless you clearly state in writing that the rent is to be paid: (1) stating exactly when, (2) precisely where, (3) and for how much together with (4) how to pay the how much, your tenant will easily take advantage of you and make every excuse to delay payment.  With the tenant in charge, the landlord will hear from the tenant exactly when the rent may be paid: (1) like whenever, (2) check is in the mail, (3) I cannot pay that much right now, and (4) how about next Tuesday?  "I promise."  

You may be a good first-time landlord, but the tenant may be a better "artful dodger."  As a landlord (and a good business decision-maker), whether you own 100 units or 1 unit, protect yourself and dictate the rental terms and conditions as to the when, where, and how you will get paid.  Otherwise you can refer to our "eviction section" to see how you can get rid of your pest known as the "non-paying" tenant.

The When


It is in your best interest to have an ironclad arrangement with your tenant.  It is for your own protection.  As the landlord, no matter in what state you reside, you have the absolute right to specify exactly when the rent is due and owing.  The landlord can make rent payable on the first of the month or any day of the month (even if that day is a Sunday).  The landlord typically does not care exactly what day she receives timely paid rent.  Just that she gets paid timely and does not have to chase the money down.  What should the landlord do?  

Speak with the tenant.  Find out what day is best for your tenant to pay the rent.  You can agree with your tenant to pay rent when the tenant gets his paycheck increasing the chances that you get paid your rent.  Understand the tenant's cash flow issues and you will have a healthier tenant/landlord relationship.  Be mindful that special rules apply if your tenant is on public assistance.  For example, in Hawaii, the landlord is required to make rent payable when the government pays the public assistance.  

What Do You Need To Know?


Make it clear when the rent is due.  It should be clearly stated in the written lease agreement.   Be accommodating.  Work within your tenant's budget by both mutually, if possible, agreeing when the rent will be due.  It will only save you money in the long run because you may avoid the costs of forcing a non-paying tenant out of the rental space, i.e., legal costs for eviction. 

The Where


Be perfectly clear, instruct your tenant as to where to pay the rent.  And don't just "tell" your tenant.  Write them a letter, an email or a text:  Just get it in writing.  The best business practice is to have it clearly stated in your written lease agreement.  If you do not instruct the tenant, the tenant will think for himself and end up instructing you.  And you don't want that.  You are in charge.  So act like it.  

Understand if you do not instruct where rent should be paid, state law may.  And state law often provides that the tenant only pay rent at the rental space.  You can, as landlord, go directly to the rental space and pick up the rent, but if this is inconvenient, you best instruct your tenant in writing an alternative delivery method. 

What is the best practice?  The best practice is to personally collect the rent.  But if this proves to burdensome (out of town landlord or the like), designate a management team.  If no management team, secure a PO Box.  Regardless of the method, make the delivery of rent perfectly clear and in writing.

The How


As the landlord, you can accept cash (though unadvisable), credit (Visa, MasterCard, American Express, Discovery, even the Dinner's Club (though unadvisable)), checks, bank checks, or other (e.g. the barter system like services rendered (though unadvisable). Believe me do not engage in collecting rent through the barter system.  You will just fight over the value of the services rendered.   

The best form of rental payment is cash.  But the landlord must protect herself.  Clearly document the cash received.  Record the payment with a written receipt.  Have the tenant sign the receipt stating that you were paid in cash and that you each agree as to the amount paid.  You need to establish a date of payment and amount.  In most jurisdictions, when rent is paid (absent a written agreement), triggers when you can commence the evict process.  If your tenant pays with a check on January 1st and then pays cash thereafter, you may find it difficult to prove in court when you can evict your tenant for non-payment.  Cash is King but protect the kingdom with documentation.  Understand the business risks.  

We would advise against payment of rent with a credit card.  The tenant could easily cause you headaches when using this method of payment.  There are additional fees the landlord would have to pay when accepting credit.  A business decision would require the landlord to decide whether to pass those added fees on to the tenant.  Under the terms and conditions of most merchant accounts, the cardholder can easily dispute the rental charge seeking a chargeback causing you additional administrative hassle.  You would have to respond and wait over 60 to 90 days to dispute and ultimately resolve the claim.  Avoid the hassle.  Accept no plastic.

Typically, landlords accept personal checks.  But accepting personal checks has risks.  The check could bounce as high as Tigger because of insufficient funds drawn on the bank account.  This too will cause additional headaches.  You could have been relying upon that check to meet cash flow.  Having the rent check bounce for insufficient funds could mean checks your checks may fail to clear your bank account.  How embarrassing for you?  State law does allow, however, the landlord to recoup costs associated with bounced checks.  But the law does not deem your embarrassment as a recoverable damage.  Want to know what the landlord can charge in each state for rent checks returned for insufficient funds or that fail to clear?  ...CLICK HERE.

In the event the tenant has a habit of bouncing checks, you should require money orders or bank checks from that point on.  However, unless this provision is in your written lease agreement, as we suggest it should be, you will have to "modify" your lease agreement and your tenant will have to agree to the modification.  You should simply incorporate this provision into your written lease agreement when it is not an issue, namely at the start of the tenancy.  That will simplify matters for you and is a better business decision.  We have already provided for this contingency in our lease agreement kits.

Some Other Matters To Consider


Should I accept partial payment?  A landlord is in the business of renting space.  Whether to accept partial payments from your tenant is a business decision.  Only the landlord can decide whether accepting partial payments is a good business decision.  Some factors to consider in making the decision:  How long have you known the tenant?  How open and honest has the tenant been with you about the reasons for not being able to pay his rent on time?  Have rental payments slowly but steadily been slipping?  Has the tenant lost his job?  An agreement where the tenant says "I will pay you when I can" is no business decision.  A business decision requires deadlines be met or consequences be had.  Instruct your tenant.  Demand that the tenant pay by a specific date and put this in writing.  Have the tenant sign the "modification" to the lease agreement.  This will protect you if and when you have to commence eviction proceedings.  You are not renting to your buddy.  Be fair but firm.  And always get it in writing.

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