Payment of Rent

Collection of rents is a continuous challenge for an apartment manager. Tenants do not live to pay the rent. Although payment of rent is a tenant's contractual obligation, it is prudent for an apartment manager to take actions to facilitate the process.

Tenants sometimes forget the rent payment is due. There are two notable conditions when that occurs. It occurs when the rent payment becomes due during a long holiday weekend. Tenants make travel plans and leave town forgetting that the rent will be overdue before they return. Tenants also tend to forget about the rent payment when they take business trips that overlap the rent payment due date.

Additionally, special events in a tenant's life such as graduations or weddings tend to obscure all memory of rent payment due dates.

The holiday weekends can be anticipated and the apartment manager can distribute courteous reminders requesting that tenants pay rent before they leave. That works well.

Money has a time value, and that is why interest is charged on loaned money. Overdue rent is a loan, an unauthorized loan. Most investors or apartment management companies impose penalties for late payment of rent. The primary purpose of the penalty is to discourage late payment and the secondary purpose is to obtain the interest due. The problem for apartment managers is that it can be very difficult to collect penalties for late rent payment. The apartment manager generally has no leverage except eviction, an action that can be difficult, costly, and counter-productive. Tenants who have good payment records but forget to make a rent payment will be incensed when the late penalty is imposed. Tenants who have marginal financial circumstances may be unable to pay the penalty and the rent.

An action that will reduce the severity of the rent payment problem is a no nonsense briefing of the tenant before the lease agreement is signed. The briefing might be as follows:

We do everything we reasonably can to make this an excellent place
to live. We expect rent payment in full, on time, every time. This
company takes the position that housing is a primary necessity, and
you have an obligation to pay rent in a timely manner. The company
has no sympathy; we evict if the rent is unpaid and we do it quickly.

Payment of rent with cash should be vigorously discouraged, even refused. Accumulations of cash present a tempting target for criminals. Accountability for cash requires stringent procedures. Any error or misunderstanding will cause suspicion of the apartment manager or staff.

Initial payment of deposit and rent for the first month should be made with a bank cashier's check or with a certified personal check. A bank cashier's check is purchased by the prospective tenant from a bank, and the bank is responsible for the check. That makes it a reliable monetary instrument. If the prospective tenant uses a certified personal check, the bank will set aside funds from the prospective tenant's account and certify the check thus making it a reliable instrument. If your company has the capability to process credit cards or debit cards, you may also accept those with confidence. A personal check may be acceptable if it is given well in advance of the move-in date unquestionably allowing sufficient time for the personal check to clear all banking processes. It is costly for the company and embarrassing for the apartment manager to move a tenant into an apartment and then discover there is no money.

Rent payments should not be accepted from a third party. The company and the tenant are two parties bound by the terms of the rental contract. Anyone else is a third party. It is not uncommon for a tenant or prospective tenant to ask an apartment manager to accept payment from a third party, perhaps a relative. If you accept a payment from a third party, and the check is returned by a bank because of insufficient funds (NSF), you have no legal recourse because you have no contract (lease agreement) with the third party.

An apartment manager or management company should have a policy regarding checks returned by a bank because of insufficient funds (NSF). Generally, if it happens, you should require that all future rent payments be made by one of the reliable instruments cited above, i.e. a bank cashier's check, certified personal check, or by debit or credit card.

A scenario: A tenant's rent payment is late. When the check (promise to pay) is finally received and presented to the bank, the bank returns the check because of insufficient funds (NSF). Rent for the succeeding month is due in a few days. You start eviction proceedings. By the time you regain possession of the apartment and do the necessary cleaning and repairs (turnover) work, two or three months will have elapsed-without rent!

Do not accept partial rent payments. The courts in some jurisdictions may hold that the amount you accept is all you get. If a tenant falls behind in rent payments, it becomes very difficult for the tenant to catch up. Whether to terminate the contract or attempt a work-out requires knowledge of the tenant's situation and a capability to judge character.

If my rent is due on the 1st of the month and I give you a personal check on the 1st which is post-dated to, say, the 5th because that is when my paycheck goes into my bank account, you have not collected the rent. The rent hasn't been paid.

A strictly enforced rent collection policy is essential. The author of this text collected 99.9996 percent of rents due from rented apartments over a ten year period. However, that degree of success involved many factors in addition to a strictly enforced rent collection policy.