STEP BY STEP GUIDE TO SEND A TENANT TO COLLECTONS
As a property owner, you did everything right. You checked credit, background, landlord references, and income; so why did the tenant end-up being terrible? Proper screening and avoiding the top red flags we shared in the video Top 7 Red Flags to Watch For When Screening Tenants for Rental Properties, will drastically improve your odds of getting a great tenant. However, when working with people there is never a guarantee that you won’t still have problems. You may have a tenant that lost their job, had unexpected medical expenses, death in the family, a sickness, or they just turned out to be unreliable and difficult to work with despite doing a thorough screening of their application. Most of the time people take responsibility for getting back on track with their bills or they move out of the rental and into a living situation they can better afford. Unfortunately some people walk away from their financial obligations and the owner suffers. Whatever the case, it’s important to move on the issue quickly in order to limit financial loss. Usually this means sending a tenant’s bill to collections. Follow our step by step guide to send a tenant to collections and hopefully you will be able to recuperate some of that loss. If in the unfortunate circumstances an eviction is required, you can see our video and blog Evictions: A Landlord’s Story, where you can learn how evictions are handled.
Lets fast forward to the point where a difficult tenant has left or has been required to vacate the property and you’ve processed their deposit. You can learn the correct way to process a security deposit in our video “Top 6 Common Mistakes Landlords Make When Handling a Tenant’s Security Deposit”. After using the tenant’s security deposit to cover expenses they have incurred, you will often find in these situations that the tenant still owes you money. You will need to send them a bill informing them that unpaid bills have been sent to collections. Now what do you do?
Step 1: Wait 30 days
Schedule a reminder 30 days from the time you sent them the bill to send them to collections if they haven’t paid by then. At Kasteel Property Management we make it easy for tenants to make payments in their online portal that they can access with an app on their phone.
Step 2: Prepare Documentation
If the 30 days comes and goes without payment, you will need to prepare the following documents for the collections agency:
The Lease
Tenant’s Ledger
Security Deposit Statement Letter
Invoices for each charge on the security deposit
Tenant’s Rental Application
Pertinent video or pictures
Any other pertinent information or communications
Step 3: Third Party
You will want a good attorney or collection firm. Our attorney handles all our collection needs. Having been in the industry for many decades and specializing in landlord tenant law, they have all the resources and tactics that give them the best chance of collecting.
Step 4: Limit Communication
At this point do not interfere or get involved with the tenants anymore. Leave that completely in the hands of the attorney or collection firm. If the tenant contacts you, do not engage in conversation and do not allow them to make payments to you. This compromises and complicates the collection process. Direct them to the attorney to handle all their needs and payments.
Step 5: Trust the process
How long should you expect to wait before money is collected? It’s hard to say. Every case is different. It could be a few days, it could be a few years, and it’s possible it will never get collected. The best thing to do at this point is to put it out of your mind. Trust the collection efforts that are being made and move on. When in the fortunate circumstances that it is collected, it will be a welcome surprise.
You can find more valuable landlord tips like these by watching our videos and by subscribing to our YouTube channel: Property Management Guru. At Kasteel Property Management we do more than just watch your rental property. We protect it, cultivate it, and help your investment grow.
