You own a rental property. You agree to rent it to tenants who’ve passed a background check and seem like a good fit for the place and the neighborhood. They pay you rent each month, and they take care of their own utilities, mow the lawn, and alert you to any issues with the property. That’s how it’s supposed to work, anyway. But what happens when your tenants stop paying their rent?
As a landlord, you may be lucky. You may never experience this problem, but – at one point or another – if you continue investing in rental properties, you are going to have to handle tenants who are always late with their rent, who completely stop paying at all, or who vacate in the middle of the night after incurring a lot of missed payments and late fees.
While you can hope and pray that this never happens to you, it’s better to just be prepared for it. To understand what you can do, when you can evict, and how to recoup at least some of your losses, you need to be familiar with landlord and tenants’ rights, especially those that are unique to your particular state.
Based on this information and your end goal with your tenants, you can move to either rectify the situation and return to regular monthly payments or move to evict. Before you evict, though, you’ll have to make sure that you go through all of the necessary legal proceedings, as well. To get a better understanding of all of this and how to go about it, let’s start by looking at property laws and your rights.
Legalities of Default Tenants – Know Your Rights
First, read through your lease on the property. What provisions did you and your attorney include for this kind of situation? For example, you most likely have a clause that indicates that the landlord may not enter the tenant’s property while they are not present and/or that you may not show up at the property without giving proper notice.
It can be difficult to give proper notice if you cannot track your tenants down, though. That’s why it’s important to have another clause in your lease contract that allows you to enter the property if there’s been a breach of contract (e.g., if the rent hasn’t been paid in a few months).
Even if you do not have a clause allowing you to enter the property without notice upon breach of contract or distress to the property, you should be able to move forward with eviction proceedings if you cannot get in touch with the tenant or if they refuse to pay you.
What Is Your End Goal?
That said, the end goal isn’t always eviction. The economy has been on really shaky ground for a few years, and people lose jobs and change employers more than you might think. If your tenants have just barely fallen into default, you might want to call them or go speak with them in person about their situation. It may be possible to work out a payment plan and/or a timeline for recouping your lost rent.
If the tenants won’t cooperate with you and/or it looks to you like they’re abusing the property, you should work to get them out as quickly as possible. Of course, that’s going to depend a lot on your state’s rental property laws. In some states, you must give 30 days’ notice before eviction, but in other states, you have to give a full 60 days’ notice. Be sure to check on your local laws to ensure you’re not violating your tenants’ rights before you move them out.
To prepare for this kind of event, though you hope you’ll never have to use it, I recommend having a pre-eviction checklist on hand. Here’s the one I’ve used for my rental properties to keep myself on the right track with the law and with my finances. Remember, the longer your default tenants stay in your house without paying, the more money you’re losing.
- Establish a paper trail – Do you have all of the documentation that proves your tenants are in default? Make sure to keep copies of all notices and any other written communication.
- Draw up a legal eviction notice – You might want to discuss this with your real estate attorney. You want to make sure that your eviction notice is in keeping with local and state laws. If not, you won’t be able to proceed with the eviction.
- Determine whether police need to be present when you serve notice – You’re going to need to serve your notice to an of-age tenant or representative of your tenants, so you should keep your safety in mind. If you’ve been threatened by your tenants previously or the situation otherwise makes you fear for your safety, make sure to bring the police with you.
- Know how long you have to wait – After you’ve served your tenants an eviction notice, you can’t just go in the next day and haul their belongings to the curb. You’ll need to wait the appropriate amount of time according to your state’s laws to allow them to vacate on their own.
“Possession is 9/10ths of the Law”
So what if your tenants won’t leave after they’ve been evicted? If they’re squatting at your property, and you’ve gone through the legal proceedings to evict them, you can have them forcibly removed. You’ll just need to call the sheriff’s office and have them escorted from the property. Then you can change the locks and hire a waste removal company to empty the house.
Recouping Your Losses
After your tenants have left, you’ll need to walk through and assess damages to the property. Subtracting their deposit, you can then add up all of the costs you’re owed. You may attempt to recoup your losses in small claims court or through a civil suit, depending on how much you are owed.
You may be able to recoup some costs by selling property left in the house, such as televisions and furniture, but most tenants will have removed these items before leaving. Unfortunately, evictions tend to come with a lot of property damage and expensive repairs. It can often be a better deal to put the house on the market and/or sell it to a flipper or wholesaler if you want to get your money back. After all, most tenants who default on their leases don’t do it because they have a lot of money sitting in their savings accounts.
Evictions are not incredibly common, and you can often work something out with your tenants if they’ve fallen on temporary hard times. These things do happen, though, so be prepared so you can avoid losing money.