What To Do if Your Tenant Stops Paying Rent?
Tenants moving
Arguably, rent collection is one of the most important financial tasks of a property manager or landlord in Southern California.  As such, it’s critical that landlords and property managers stay on top of this aspect of real estate management to avoid a disruption in their property’s cash flow.

Below we will review the steps you should take if one or several of your tenants in Orange County or Los Angeles unexpectedly stops paying their rent.

Step 1: First, Refresh Yourself on What You Cannot Do When Evicting a Tenant in California

To evict a tenant in the state of California, you must formally evict them through the court. This means that you can’t lock them out of the apartment or turn off their utilities to force them to leave or otherwise use any other form of self-help to evict the tenant. Keep in mind that evictions in California can be lengthy. However, in the interim, you must ensure that the tenant’s apartment is habitable and in good repair.  If there are any outstanding repair issues, you should address them immediately before moving forward with an eviction proceeding.

Step 2: Review the Tenant’s Lease Agreement and Payment History

Throughout the state of California, rent is typically due on the first of the month. California landlords and property managers are not required to give tenants a grace period to pay their rent. However, it’s important to review the tenant’s lease agreement to see if they have a grace period, as it’s fairly common for lease agreements to have three to five-day grace periods. It is especially important to review the lease agreement if you’ve recently acquired the property and are otherwise unfamiliar with the lease agreement.

In any event, once the rent is late, landlords and property managers are permitted to charge a late fee that represents a “reasonable estimate of the amount that the lateness of the payment will cost the landlord.” In other words, while there is no clear monetary cap on the amount a landlord or property manager may charge tenants, the late fee must be reasonable. In general, 5% of the past due rent seems to be the amount that the court considers to be reasonable.

It’s also a good idea to review the tenant’s payment history. Specifically, look for patterns and see whether or not the tenant being late is normal. If your tenant has a history of being late with their rent every month, you should do your best and let them know that this will be unacceptable moving forward. Remember, it is your responsibility to teach your tenants how to pay their rent. If you allow them to be late, they will continue to be late every month if they can get away with it. You can use your property management software to keep track of when and how often the tenant is paying their rent late.

Step 3: Try to Call The Tenant

The next thing you should do is call the tenant personally. Specifically, your property manager should have a good relationship with all your tenants. As such, when the rent is late, especially if this is the first time, your property manager can discuss the situation with them. If all else fails, a phone call reminds the tenant that you are paying attention closely to their rent payments, and they may feel the pressure to make sure they make future payments on time.

Step 4: Mail the Tenant a Late Notice

It’s always a good idea to send a late notice to your tenants, even though this step is not technically required by California law. Typically, three or five days after the rent is due, you should send the tenant a late notice reminding them that their rent payment is now past due together with a current rent ledger. It is advisable that you send this notice every month so that it is clear that you are keeping track of the tenants’ payment history. In any event, while this notice is not typically required by law, it is a good reminder to tenants that they face legal action if they do not pay their rent.

Step 5: Serve a Three-Day Notice

In California, a three-day notice to pay rent is required to be served on the tenant(s), informing them that they have three days to pay their rent arrears or risk eviction. Be sure to know all current laws to ensure these requirements have not changed or are temporarily different due to Federal, State, or local policies.

If, after receiving the three-day rent demand, the tenant still fails to pay the rent or they do not contact you to make appropriate arrangements, then you have no choice but to proceed with legal action. In certain parts of California, the eviction process can take months.

Step 6: Talk to Your Attorney

Assuming that none of the foregoing steps works, then it is time to get an attorney involved. If you do not have in-house counsel to handle your eviction matters, you should speak with an experienced attorney in your area to make sure that you are proceeding properly against your tenant should you end up having to evict them. Overall, evictions can be tedious and complicated. There are strict rules that must be followed in order for tenants to be legally evicted in California. This is especially true during the coronavirus pandemic.

Your eviction attorney will review all the paperwork, including your rent demand to make sure everything is compliant with the law. Once all the paperwork is in place, your eviction attorney will file the eviction in the appropriate landlord-tenant court in your county to move forward with the eviction.

Step 7: Inspect the Apartment (Optional)

You may want to consider immediately inspecting the unit to ensure that there is no property damage. By law, you must obtain the tenant’s permission to enter the apartment; it is advisable that you give as much advance notice as possible from when you plan on entering the unit. Once you have access to the unit, you should take pictures and document any outstanding repair issues that you need to handle. Keep in mind that outstanding repairs can be in defense of not paying rent in California. As such, you want to make sure that the apartment is in good condition so that the tenant doesn’t have any viable defense against the eviction proceeding.  You could take this step in the beginning before filing any eviction paperwork.

Step 8: Follow Through with your Attorney’s Plan

Lastly, you will want to make sure to follow through with your attorney’s plan as was set forth earlier. Evictions can be complicated but it is important to follow all the steps required to ensure the smooth processing of the eviction as missing a step or incorrectly processing the eviction can lead to it being dismissed by the judge resulting in you having to start the process over again. It is important to have all your leases, documents, disclosures, and noticed organized and up to date as missing documents or having incorrect notices can also delay the eviction.

Final Thoughts

Being a landlord in Southern California is very difficult. Laws and requirements are constantly changing and there is no single good place to keep up to date with everything. Landlords are given the burden of having to know all the laws at all times without the support that tenants get. It is ever more important to work with an experienced property manager to ensure you and your properties are protected and also compliant with all current laws.
As a landlord, you want your property manager to act as quickly as possible when dealing with a delinquent tenant in Southern California. If they are firm and professional from the very beginning, your tenants will understand that it is unacceptable for them to be late paying their rent. To that point, you should avoid accepting partial rent. This is especially true if you are not interested in giving the tenant a payment plan and you’re ready to proceed in court. Accepting rent payments and partial rent payments without the court’s permission may jeopardize your eviction proceeding and force you to have to start over.
Also, make sure that everything is in writing from the very beginning. Even if you make a phone call to the tenant, you should document that in your property management software so there is a clear record of all dates and times that you had any contact with the tenant of record. This may seem tedious at first. However, this type of information is important should you have to proceed with a landlord-tenant eviction. Lastly, don’t forget that if there are any cosigners to the lease that they should be notified of all lawsuits in papers as well as there is a possibility you will have to recoup your money from them and not the tenant.

Give AllView A Call!

AllView Real Estate Management is Orange County’s premier property management and investment firm. We offer not only exceptional property management, but also real estate investment consulting and management. Call us at (949) 400-4275 or send us an email at info@allviewrealestate.com for real estate investment expertise.

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