How to Deal with Late Paying Tenants

Dealing with Late Paying TenantsMy youngest brother is in the process of putting in a suite in his basement, and one of his biggest fears is getting a troublesome tenant. He’s not alone in having these fears … many of our newsletter readers are dealing with that exact problem right now. We received an assortment of questions about dealing with troublesome tenants in the past couple of weeks. Most of them specifically asked about what to do to get tenants to pay rent on time. A few weeks ago we also received a long email from a reader about property management, income producing property and tenants.

Why dealing with tenants is like dealing with a bad cold

Rather than share all the emails with you, let me just generally answer all of those questions and say that there isn’t a great cure for problem tenants once you’ve got them. I guess it’s kind of like a bad cold. There are things you can do to get better faster and there are pills to take to reduce the pain and suffering, but you still have a cold until you finally get rid of it. The best way to deal with colds is to avoid getting them in the first place. It’s the same for troublesome tenants – the best cure is prevention!

We’ve talked about this in the past, see 5 Steps to Rent out your Property, but let me add a few other points:

  1. Set clear tenant selection criteria that comply with regulations in your area. Good criteria could be, for example, someone that is financially responsible, shows respect for the property, and is likely to renew the lease after a year.
  2. Only show your property in good condition. Good tenants have options. Shabby looking units attract poor tenants. Sure, you may lose 2 weeks or a month of rent, but that may be MUCH LESS PAINFUL and MUCH CHEAPER than dealing with a troublesome tenant.
  3. Know the market where your property is located (is it by a University or a certain large business). Think about your ideal tenant that would be attracted to living in that area and write an ad that will appeal to that specific person. If you have a nice bright unit near a University and you know it would attract students, write your ad to attract quiet and peaceful people that will be doing a lot of studying at home and will appreciate the peacefulness. Then, price your unit slightly under market rates to help attract a wider variety of applicants.
  4. Hold an open house to show the property. An open house saves time, interrupts current residents less, and can increase the sense of demand for the property.
  5. Run detailed background checks on any applicants that you’re seriously considering. Confirm their identity, call their previous landlords, verify their employment (we like to call the company they work for AND get copies of their recent pay stubs) and check their credit and criminal history. There are several agencies in North America that will do these checks for a nominal fee. A quick online search will help you narrow down one that is suitable for you. Or if you belong to a property managers/landlord organization like ROMS BC, you may get a discount on these checks.

Using the criteria you’ve established and all of the information you’ve collected, select your new tenant! Then, if you still experience issues with your tenants, be sure to act immediately, consistently and if you can’t solve the problem, move them out!

Published March 2nd, 2009

Renting to Tenants – Preventing Tenant Turnover

Three months into owning two beautiful loft units at the Toy Factory Lofts in Toronto, we already were renting one of the units out for a second time. Despite being in one of Toronto’s most desirable neighbourhood for the under 40 downtown worker, and being awarded the highest rating and positive compliments from condo reviewer Christopher Hume, the building is still a construction zone. And it can be very tough renting to tenants when they have to deal with the developer’s workers fixing deficiencies and intruding on their space on a regular basis.

Preconstruction Property In an attempt to prevent tenant turnover, we made some concessions when renting to tenants. We offered rental concessions for the first six months to one tenant, and a lower first month rate to a second tenant.

But, for one unit, it wasn’t enough to prevent tenant turnover. After only 6 weeks the renter left, complaining of dust, noise, and deficiencies. We took special care renting to the the next tenant in the hopes that the next tenant would stay for much longer. One of the things we did differently was we wrote the Tenancy Agreement to ensure the tenant did not have an opportunity to plead ignorance to the construction issues and use that as an excuse to break the lease.

Some lessons for renting to tenants in new construction units (a big thanks to Lindsay Widsten, our Nanaimo-based Property Manager for suggesting some of these):

  • Ensure your prospective tenant visits the unit and building at least 2 times to experience the “construction zone”;
  • In your Tenancy Agreement note “the tenant is aware that the rental unit may be impacted by various construction issues including: noise, dust, and workers tending to deficiencies”;
  • Also note in your Agreement that the tenant agrees that they cannot break the Tenancy Agreement under grounds that they were unaware of such potential issues;
  • Clearly explain to your prospective tenant that there will be some challenges with the building and possibly their unit over the upcoming months; and
  • If necessary, make a deal with your tenant that you will reimburse them X dollars at the end of their lease to compensate them for no late rent payments and living thru the construction zone. Ideally don’t reduce their monthly rent, rather, reward them after a full lease term has been served.

The Tenancy Agreement is not something we’ve talked about much because it’s different in each province. Make sure you know the landlord tenant law in your province before you rent out your basement or buy a rental property. There are standard forms for tenancy agreements but they may not cover every situation (like renting out a new construction condo). Some things we have included in agreements for various reasons:

  • No-smoking policy,
  • No dogs or no cats,
  • No assignment or subletting of the unit without our prior and written consent,
  • No change of tenants without our prior and written consent (very important with student roommates – but that is a big story for another day),
  • Tenant’s obligations for things like snow removal, lawn care or other maintenance and care
  • Penalty for late payment of rent or penalty for cheques that bounce.

 PublishedJune 4, 2008

Article Archives: Property Managers, Real Estate Agents, and Tenants

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Tenant Screening Checklist

How to Deal with Tenants: Taming Tenant Turmoil

Succeed as a landlord

Property Management isn’t for everyone

Tenants, Toilets and Other Rental Property Repairs

Dealing with Late Paying Tenants

8 Ways to Know if You Should Hire a Property Manager

Five Steps to Rent Out Your Property

Real Estate Agents: Whose Side Are They On?

Preventing High Tenant Turnover in New Construction Condos

Five Ways to Protect Yourself from a Bad Property Manager

Playing the Real Estate Insurance Game

We Were Robbed

Manslaughter and a Crack House

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