How to manage unpaid rent as a landlord?

Oct 15, 2024

One of the major challenges landlords may face is managing unpaid rent. Not only does it affect your rental income, but it can also create tensions with tenants and incur additional costs.

Proactively and professionally managing this situation is essential to prevent the problem from worsening.

Here's a guide on how to effectively manage unpaid rent and avoid deadlock situations.

Preventing unpaid rent right from tenant selection

The best way to manage unpaid rent is to prevent it. A rigorous tenant selection process allows you to minimize the risks of non-payment.

Check the tenant's financial solvency

Before signing a rental contract, ensure that the tenant is financially capable of paying the rent. Ask for proof of income, such as payslips, employment contracts, or tax returns, and verify that their income covers at least three times the rent amount.

Also, ask for references from the former landlord to know if the tenant has had previous payment issues.

Require guarantees

To avoid unpaid rent, request a security deposit when signing the lease and consider subscribing to an unpaid rent guarantee (GLI). This insurance will cover you in case of tenant default, by paying the unpaid rents for a determined period.

An unpaid rent guarantee can cover several months of rent, allowing you to recover your income even if the tenant stops paying.

Act quickly at the first missed payment

If, despite precautions, your tenant stops paying, it's important to act quickly to prevent the situation from getting worse.

Contact the tenant as soon as the first delay occurs

The first step is to quickly communicate with the tenant as soon as you notice a payment delay. Sometimes the tenant may be facing temporary financial difficulties or may have simply forgotten to pay the rent. A phone call or courteous message can often be enough to resolve the situation.

Be respectful and avoid making threats. An open and kind approach can facilitate dialogue and problem resolution.

Send a written reminder

If the tenant does not respond to your first contact or if the situation persists, send a written reminder in the form of a letter or email. This document should remind the tenant of their obligation to pay the rent under the rental contract.

Example: "Dear tenant, we remind you that the rent for the month of [month] has not been paid. Please make the payment within 7 days to avoid any future inconvenience."

Negotiate an amicable arrangement

If your tenant is experiencing temporary financial difficulties, it might be wise to find an amicable solution rather than starting a costly legal procedure.

Propose a payment plan

If the tenant is going through a temporary difficult period (job loss, unexpected expenses), you might consider offering them a payment plan. This allows you to maintain a positive relationship with the tenant while recovering the due rent.

Put the payment agreement in writing to make it clear for both parties, specifying the amounts and dates of payments.

Allow an extension

In some cases, it may be useful to grant the tenant an extension to rectify their situation. If the tenant is generally reliable and the issue seems temporary, granting an additional month for rent payment can prevent the situation from worsening.

Send a formal notice

If despite your efforts to resolve the situation amicably, the tenant still does not pay their rent, it's time to send a formal notice. This formal letter reminds the tenant of their legal obligation to pay the rent and gives them a deadline to do so.

Draft an official notice

The formal notice is a legal document that must be drafted carefully. It should remind the tenant of the amount of unpaid rent, the payment deadline, and the consequences of non-payment. Send it by registered mail with acknowledgment of receipt so that it is officially received.

Example: "Hereby, we inform you that you must pay the sum of [amount] corresponding to unpaid rent for the months of [months]. In the absence of payment within [deadline in days], we will be forced to take legal action."

Inform the guarantor (if there is one)

If you requested a guarantor when signing the lease, you can also inform them of the situation after sending the formal notice. The guarantor can be called upon to settle the unpaid amounts on behalf of the defaulting tenant.

Initiate legal proceedings in case of persistent non-payment

If the tenant continues to fail to pay despite your reminders and formal notices, you have no choice but to initiate legal proceedings to recover the due rent.

Consult a bailiff

If the unpaid amounts persist after the formal notice, contact a bailiff to send a court summons to the tenant. The bailiff can also assist you in the eviction process if it becomes unavoidable.

Ensure that you comply with legal deadlines and procedures before resorting to justice to avoid any tenant recourse.

Initiate an eviction process

If the tenant continues not to pay and it has become impossible to find an amicable solution, you may need to initiate an eviction process. This procedure can take several months and must be carried out in strict compliance with local legal procedures.

During this process, it is essential to continue keeping track of all your correspondence, formal notices, and legal documents to have a solid file.

Prevent future unpaid rents

Once you have managed the overdue situation, it is important to implement preventive measures to avoid experiencing the same situation again.

Subscribe to insurance for unpaid rents

If you don't have one yet, consider subscribing to a rental insurance (GLI). This insurance will cover the rents in case of tenant default, providing you peace of mind.

Request solid guarantees

When renting your property to new tenants, be vigilant about the guarantees requested: security deposit, joint guarantee, and financial documents. The more rigorous your tenant selection, the less likely you are to face unpaid rents.

Conclusion: Handle unpaid rents with tact and professionalism

Unpaid rents are a reality many landlords may face, but with the right steps, you can limit damages and prevent the situation from worsening.

The key is to act quickly, prioritize communication and amicable solutions initially, while remaining firm and respectful of your rights as a landlord.

By taking the right precautions in advance and adopting a proactive management approach, you can minimize the risk of unpaid rents and ensure the profitability of your rental investment.

Do you have questions about rental management? Check out more tips on Housing Place for better property management and to maximize your rental income.