You Didn’t Receive Rent This Month. Now What?

Your monthly rent collection day has come and gone, but you still haven’t received a payment. Your bills are due soon, and you may be worried about making ends meet.

This situation scares newer landlords and makes industry veterans wince. Bearing in mind that your tenant more than likely wants to pay rent, knowing how to move forward without that money in hand can be complicated. You might feel frustrated, scared, angry, or all of the above.

In this article, we’ll share five steps you need to take to move through the uncertainty of a missed rent payment without compromising your business.

1. Evaluate the Situation
2. Send an Informal Notice
3. Share Rent Relief Resources
4. Seek Eviction Alternatives
5. Send a Pay or Quit Notice

Before delving in, let’s discuss what you can do to set yourself up for less stress from the beginning of your lease agreement.

Before Rent is Late

The best time to strategize about what to do when rent is late is before your lease is signed. You should:

1. Evaluate your emergency fund. Nerdwallet recommends saving three to six months’ worth of living expenses in your emergency fund. Be sure to factor in your monthly mortgage payment and any other bills you plan on paying with rental income.
2. Add a rent payments expectation addendum to your lease agreement. While a typical lease outlines the consequences of not paying rent, having a dedicated addendum detailing everything your tenant needs to know about your rent payment expectations, from what constitutes a “late” payment to the consequences of paying rent late, can help keep you in the green.
3. Communicate with prospective tenants. The best thing for your rental property business is to establish clear and compassionate communication. While evaluating potential tenants, let them know that you’re looking to form a relationship in which they would feel comfortable telling you if any major problems popped up, including losing their job or needing to break the lease. You won’t be encouraging bad behavior; you’ll be setting the stage to take quick action as needed, thanks to your tenant’s transparency.

If you can implement these steps before rent is late, wonderful! You’ll save yourself significant stress.

If you’re finding this article after an issue has arisen, no worries – we have advice for you, too.

What to Do After a Missed Rent Payment

When determining next steps after a missed rent payment, it’s important to stay calm and organized. Also, document everything you do in relation to resolving a nonpayment issue, from when you first contacted the renter about the problem to finding a resolution. With that in mind, you should…

1) Evaluate the Situation

Consider your history with the tenant – is this their first time missing a payment, or are they chronically late? Did they let you know that paying next month’s rent would be an issue beforehand?

Understanding whether this nonpayment of rent is a one-off situation or a recurring pattern will help you hone in on the best strategy to resolve the issue.

2) Send an Informal Notice

If your renter typically pays rent in full and on time (or if this is the first payment missed by your tenant), start by checking in and providing an informal notice reminding them to pay rent. The notice should outline:

• The original rent due date
• How much is owed
• The grace period to make a payment without penalty
• Your late fee policy
• Your contact information for questions and concerns

We recommend reaching out via email, in person, or by placing the notification on their front door.

Remember to lead with compassion and ask how they’re doing before talking about money. You may learn that their family member is sick, they’ve been let go, or are otherwise struggling. Or you may discover that they simply forgot to pay rent, much to their embarrassment! If it’s the latter, then your reminder should be enough to get them back on track.

If it’s the former and your tenant is having a hard time, consider what you can do to help. This doesn’t mean letting your renters run all over you. But, if you can afford to work out a repayment plan, accept a partial payment, or allow them to skip a month of rent, you could make a huge impact during a rough chapter of your tenant’s life.

The Consumer Financial Protection Bureau recommends the following repayment agreement options to help you avoid a long and expensive eviction process:

• “Adjust due dates: Rent due dates are changed to align better with payday, or split into multiple payments over the month.
  • Good option for: Renters who are juggling multiple bills and struggle to come up with the full rent payment on the first of the month.
• Waive late fee: Late fees and interest are forgiven as long as some payment is made.
  • Good option for: Landlords who are willing to skip the usual penalties as long as renters keep up with paying an amount agreed upon by both parties.
• Agree to lower rent payments: A smaller rent payment is accepted as long as some amount is paid each month.
  • Good option for: Landlords who can accept a smaller payment for a few months as long as renters pay the agreed-on amount each month; can be combined with a rent repayment plan.
• Repayment plan: Back rent is repaid over a period of time, like six months to a year. A portion of the amount. owed is added to each month’s rent payment.
  • Good option for: Renters who can rework their budget to pay off what is owed.”

Pro Tip:

Should you pursue any of these options, be sure to put your plan in writing and have your renter sign off on it.

But what if your renter ignores your notice or doesn’t make a payment?

3) Share Rent Relief Resources

You may be scratching your head, trying to figure out why we would suggest providing rent relief resources to your tenant at this stage – but at the end of the day, the answer is simple. As noted above, evictions are costly. If you can recoup the money owed to you without entering a courtroom, wonderful!

There are several organizations that could help your tenant afford to pay rent, most of which operate on a one-time basis. MyMove compiled the following list of organizations that renters should contact – feel free to pass it along to your tenant:

• “The Salvation Army offers special one-time assistance to help pay rent, as well as food, clothing, and funds for paying utility and heating bills. All requests for assistance should be directed to your local office, which you can locate here.
• Catholic Charities USA (CCUSA) offers several programs to work with families and individuals at risk of eviction by helping provide funds for short-term financial assistance with overdue bills. Find your local Catholic Charity here.
• The U.S. Department of Housing and Urban Development provides rental assistance through its Housing Choice Voucher Program (Section 8). A housing subsidy is paid to the landlord directly by the public housing agency (PHA) on the tenant’s behalf. The renter is then responsible for paying the difference between the actual rent charged by the landlord and the amount subsidized by the program. Phone: 800-955-2232
• Modest Needs offers Self Sufficiency Grants of up to $1,000 to cover one emergency expense. Phone: 844-667-3776 or contact via email.
• The USDA Rural Development Program helps people in rural areas with their mortgage or rent. Contact your local RD office.”

4) Seek Eviction Alternatives

If your tenant doesn’t or can’t utilize the rent relief options above and you’re still missing out on rent, it’s time to consider a more permanent solution. Book an appointment with your real estate attorney if you have one to go over the best solutions for your area to ensure that you’re compliant with local landlord-tenant laws.

According to Rocket Lawyer, common eviction alternatives include:

• Pursuing arbitration or mediation to create a pay-and-stay plan
• Engaging in a cash-for-keys arrangement

A pay-and-stay plan is a formalized repayment plan that also protects your right to evict the tenant if their rent payment lapses in the future; the latter option allows the tenant to release the keys and break their lease in exchange for a lump sum of money from the landlord.

You may bristle at the thought of paying your past-due tenant to leave your property, but again, this lump sum will be less than what you’d owe the court if you pursue an eviction, and once you pay it you’re done with the problematic renter and can move on with finding a new, great tenant.

5) Send a Pay or Quit Notice

Sending a pay or quit notice is the first step of the eviction process. While no one relishes in going to court, it may be your only option when you’ve exhausted all other avenues.

For more details on this process, including what to expect, check out our complete guide to evictions.

Nonpayment of Rent FAQs