How to Help Tenants who Fall Behind on their Rent Payments

For a landlord, there are few things worse than a good tenant falling behind on rent. Unfortunately, that scenario happens more often than is comfortable.

When a tenant that you believe to be a good and generally reliable person begins to fall behind on rent, deciding what to do next can be confusing. There are landlords that would move straight to eviction proceedings after the first offense, but not everyone wants to jump to that conclusion immediately.

In most cases, it will be more beneficial to you to find a way to keep the tenant in your property for the remainder of the lease period. Evictions are both expensive and time consuming, and choosing to keep a tenant that was previously reliable is likely to play out better in the end.

How can you help tenants who are falling behind on rent to catch up and stay on track? While you don't have an obligation to do so as a landlord, learning from these tips can help you become a more compassionate, well-liked, and even profitable landlord.

Important Notes

Before we get into these tips, however, we want to mention that it is imperative that you are smart and discerning about when you try to help tenants stay in one of your properties.

If a tenant has been a great tenant and suddenly fell on hardship through a family loss, lost job, or another emergency situation, that's a great time to step in and help and offer compassion. If, however, this is the fourth time that a tenant has been late with their rent for various reasons, it's probably time to stop trying to help them and move toward eviction.

Today, we're focusing on how to help the good tenants, the ones that you enjoy working with, who may have fallen on difficult times, and hope can get things turned around. Tenants that cause headaches and strife might not be worth the time investment, but that is up to you to decide.

1. Connect Them With Emergency Organizations

If your tenant isn't able to pay rent on time because of a sudden hardship like job loss, medical emergency, or another unique situation, there is a good chance that a charity or non-profit organization out there might be able to help them.

Share resources with your tenant that might help them to find one of these organizations. Typically, the tenant will need to gather up documentation such as their lease agreement, pay stubs, bank statements, and any assistance they research to show their situation.

With luck, an organization will be able to help them cover their back-payments so that they can begin paying you on time in the coming months. Some organizations can help cover food, medical, or transportation costs, leaving the tenant room in their budget for rent and utilities. Additionally, these resources might also be able to help them set up a better savings plan or budget for their future so that this issue will not repeat itself.

2. Reduced Payments

One way to help tenants catch up is to offer them a reduced rental schedule for a temporary amount of time. This option is something that only you can decide if you are able to financially handle, and it should only be used in particular, rare situations.

For example, let's say that a tenant lost their job, and they call you in advance to let you know that rent might be a struggle for them this month. They were able to find a new temporary job, but the pay is lower. They are willing to move out but would prefer to do so at the end of the lease term. In this situation, you could offer them a slight rental reduction for the remainder of the lease if it would make the price affordable to them.

The key here is that direct communication with the tenant is the only way for this type of situation to work smoothly. By understanding their situation, you can understand what you can feasibly offer. Remember, some rent is better than none in many cases where you want to avoid eviction. It would be better to collect slightly less rent, than to have the property empty for an undetermined amount of time.

3. Talk It Out

Another option is to simply talk it out with your tenant. If they're falling behind on rent and you haven't yet chosen to evict them, the tenant might not realize how serious the situation is until you sit down with them. Let them know clearly that you will move for eviction by a specific date unless some progress or attempt at payment is made.

Often, having this type of frank conversation with well-meaning but with irresponsible tenants will help them learn some maturity and budgeting skills. With the right encouragement, and a stern but understanding talk, they can find a way to adjust their budgeting and make their rent payments on time.

4. Repayment Deal

In some cases, a tenant is able to pay their rent going forward with no problem, but they fell behind and missed a previous payment that they just can't seem to catch up. In this case, setting up a repayment deal can be a great solution.

An example of a Repayment Deal is:

1. The tenant will continue to pay the full amount of rent on time.
2. Every month for a set period of time, they will pay a percentage of the amount of back rent owed.
3. A signed contract between both parties will outline the repayment plan.

This plan allows a struggling tenant to continue to pay their monthly rent on time while also working at decreasing the money they owe you in back rent. This is usually the best solution when it can be agreed upon, as it keeps all parties in a profitable yet comfortable situation.

5. Help Their Finances

One final thing that you can do is to set a struggling tenant up with a good financial advisor that you might know, particularly if you have a favor that you can call in for them.

While we don't recommend giving your tenants any direct financial advice, it can be beneficial for them to learn about the various ways to free up their cash flow that they might not know about:

1. Pausing student loan payments
2. Lowering credit card minimum monthly payments
3. Taking out a small, private loan
4. Consolidating loans to improve interest rates
5. Refinancing car loans for a lower monthly payment

All of these small changes can free up a lot of money each month, and a financial advisor would be able to help your tenant do just that. If an advisor isn't accessible, point them to online resources that may have this type of information available.

If All Else Fails

No landlord wants to see a well-liked tenant be evicted, and no landlord really likes to go through the eviction process, either. Turning around a property can be expensive and time-consuming, but it can also be necessary.

Sometimes tenants will never catch up, and they'll fall behind even after you've tried your best to be understanding and to help them. At that point, it will be time to move forward with standard eviction proceedings to ensure that you don't lose out on your investment anymore than you already have.