How to Send a Tenant to Collections

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’ve shared in previous videos, 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.  If in the unfortunate circumstances an eviction is required, you can see our other video and blog post about how to handle an eviction by following the link in the comments section below.

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?

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.  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

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.

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.  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 other videos and by subscribing to our channel.

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