There have been some thought-provoking posts over the last few weeks about what is the 'correct' course of action when confronted with tenants who are chronically late or non-payers I have responded in my usual way--no pay, no stay. I thought it would be useful to also talk about when and how we as land lords approach the three topics of Mercy, Charity, and Business.

I do not tolerate late payers. The many reasons given are immaterial. Divorce, job loss, disorganized, deadbeat, medical bills, death in the family, long-term tenant is a little short this month... I DON'T CARE. Actually, I DO care...I'm not heartless, but neither am I a fool. I realize that "life happens" to people all the time. The difference to me is how does the person react. Do they approach it as a challenge they can help overcome, or do they throw up their hands in despair and expect someone else to take over and fix their problem?

We could probably argue all day about doing the moral thing vs. the business thing, but I believe that the business thing IS the moral thing to do.

The business relationship--while not perfect--is the best we've got. When people follow the agreements they make, we reach the optimal outcome for the most people. I am willing to alter agreements when it is reasonable to do so and we both come up with something agreeable. What I am NOT willing to do it allow tenants to unilaterally decide to stop paying me rent while they remain in my houses.

I have allowed folks to move out, in a few occasional forgiving around 50% of what they owed, because of the way they handled the decision, notified me, and were prompt in following the altered agreement we reached. This is an act of Mercy on my part, and it is understood that I don't owe it to anyone. I choose to do it because I know it will be best for all involved.

When a tenant tries to force me into being a charity to them, that's when all heck breaks loose and I go into full-on "kick 'em out" mode. There is a sharp difference in attitude between someone requesting an act of mercy vs. someone copping an attitude, being passive-aggressive and stealing from me.

We as land lords get what we tolerate. Anyone who allows tenants to run the show sets up a false expectation in the tenants' mind of what the next land lord will do and what he should tolerate. This is bad for the industry and bad for the tenant who might get a no-nonsense land lord next time.

I am not strict. But I do draw the line at the lease. If you can't pay: move out. If you don't move out after 7 days of picking my pocket, I evict you. Period. If you don't plan on living up to this agreement, then don't live in my house. Go live with a friend, a relative, or apply for Govt housing.

Charity occurs when I feel called to share some of the many blessing I manage with those I deem will best benefit from it. Charity is "selfless giving." I expect nothing in return and often do it anonymously so the recipient doesn't even know who did it so there is no sense of being beholden to me. Therefore, when a tenant lays a sob story on me about why they cannot pay, there is no charity involved. They are trying to force my decision thru a guilt-trip, often after being late on several occasions, and breaking their word about moving out if they cannot pay. They're already picking my pocket: now they're trying to tell me why I am obliged to tolerate it. Nuh-uh! I politely inform them they need to do the following:

1) Pay up 50% of balance owed within 3 days and have a realistic plan to catch up within a month. OR

2) Move out.

They can choose to do either one, but if they fail to choose then I choose # 2 for them. Letting non-payers stay is not Charity, it's poor stewardship. I don't feel one ounce of guilt about having to make their decisions for them. When someone turns over the responsibility for making life decisions to me, don't expect it to be a bed of roses.

It is my duty as a steward to manage the blessing I've been trusted with as best I can. Allowing someone to sit around not paying rent not only robs me of income, but also robs the non-payer of their dignity, and it destroys the good I could do with that income. Often, the lost income is irreplaceable because income is generated from productive activity somewhere: either the tenants' effort via a job or from a tax payer who was counting on providing a service to an indigent for their benefit to keep them from spiraling downward into destitute status where only the most inefficient, expensive means of support become necessary. Think of folks who fail to get medical insurance then run to the ER after a $100 problem balloons into a $10,000 problem. Same problem: in my town taxpayers end up housing deadbeats in hotels at $75 a night when they should be in low-income rental housing at $15 per night. All because the deadbeats didn't take the proper action and just sat their waiting for someone else to fix their life.

So those are my thoughts on Mercy: forgiving some or part of what is owed according to mutual agreement when it cannot be paid, Charity: a selfless giving according to what my heart says is right, and Business stewardship: managing the assets I've been trusted with properly.

What do you guys/gals think?

I think you are right! In our early landlording years we listened to our hearts and took every excuse a tenant gave for being late....what we got was stress and financial loss....and the tenant ususally didn't appreciate it.

There was a great line in the movie The Fugitive, where Harrison Ford is insisting he is innocent.

Tommy Lee Jones says "I DON'T CARE".

Wow. It hits hard to the viewer because we all want to believe that Ford is innocent, the good guy.

But bottom line, Jones has a job to do, and that job is to catch and bring in the fugitive, dead or alive. Jones is not there to be the judge or the jury. He must do his job!

Likewise, landlords have a job to do. Run the business, collect the rent, kick out those that do not pay or cause other problems.

It is not FAIR to the other good tenants , when you allow someone to live free and rack up huge arrears. Especially in a multi unit.

SID, Good stuff!

I think much of this falls in the realm of ACCOUNTABILITY.

No one likes to be held accountable.

No one likes to make hard decisions.

No one likes to admit they cannot keep up.

No one likes to admit it's time to make a change.

No one likes to admit that sometimes, when we are forced to make a change, looking back, it was a good thing.

I was fired once. That fueled my burn for FREEDOM!!!

It hurt when the banks stopped making investor loans but that forced me to learn better ways. Now I don't need bank loans and LOVE it!

The Bible has 2370 references to proper handling of money. It consistently says "Pay your bills".

If I truly LOVE the person, I will help them from falling deeper into debt.

I see it the same as denying an applicant because they do not qualify. Critics say "You should give them a break" but the LLs say "they cannot afford the house. Giving them a break will not solve their problem."

People and situations change. They no longer qualify for the house.

As I study the people who owe us great sums of money, the trend I see is that their life changed (split, divorce, job loss...) but they did not change their housing.

We thought we were helping by granting extra time. All that did was let their total grow to the point of court eviction. Now it's on their record forever.

Business is business and we are bound by certain economic laws. If we don't receive money then we lose money and cannot support our family. Just like we can't legally go into walmart and take $500 in groceries just because we are hungry.

I know there are reasons people get in a rough spot and can't pay, there are also a lot of excuses thrown around by tenants that are purely due to their own actions or lack of action. I don't know anyone that can filter out the true hard cases from the garbage excuses so the only logical thing we can do is say "no pay no stay". Even if it is a legit reason they get my sympathy and I pray for them but they still will have to move out.

If someone has paid great for a year or two and has one rough spot and they need to pay a week or two late I can handle that but when it happens every month there are problems.

IMO, if I knew for a fact something like a divorce happen I would be more lenient on helping them move on (out) but still, they have to pay or leave.

As a Christian I think one thing that is really important is to not ask someone to move out or evict them out of anger or malice, do it because it's a business and these are the rules they agreed to, this can be hard to do I know from my own experience.

Good stuff Sid. I agree completely. Sweetie and I believe in charitable giving...but we don't want someone ELSE telling us who to give it to or how much (tenants and gubmint!).

We don't have much control over the gubmint, but we do have some control over our tenants.

It's not being mean to enforce your contract... it's being FAIR and HONEST.

The large majority of our tenants, past and present, have great respect for us. Even the very few we have had to evict remain friendly with us (it's a small town).

Recently had an email exchange with a tenant (I think I posted about this, forgive me if I repeat myself, I'm getting old...) who asked us to reduce our rent about $200.

NOTE: Turns out she had found a cheaper space - but it didn't have a kitchen, was only a studio instead of a two bedroom and was much further away from her work.)

I told her if I did reduce her rent (for no good reason except that she asked) that was in essence lending her $200 a month - and that if I wanted to lend money to people (and I don't) I would be lending it to my own kids, who are her age and also in need of a break.

She agreed, and said thanks for explaining. THEN she said, "well I can't get to the bank because it's closed on weekends." I said, "Well there is always lunch hour." She said, "Okay I get it. Rent in tomorrow." And it was.

My saying is I'm in business to make money not friends. Pay or get out, same with my spec house business, I charge for upgrades.

"If I truly LOVE the person, I will help them from falling deeper into debt."

Yes. But if you love your self more than you love the person, you will want to cut them a break to keep your self from being hurt.

Then, what seems like helping is actually deeply selfish.

Thanks for helping me figure this out, Brad. Now if I can just convince my spouse.

In my city, there are churches that will help with rent. We know who they are. There are criteria that must be met. One of them is help people with rent is "ONE TIME" next month, sorry, you will have to make other arrangements!

This is loving help from a large ethnic church! REALLY!

How many times do you "help"?

bet reminds me: our autodraft residents SELDOM ask for delays.

Autodraft changes the whole mindset of paying the LL. They no longer have to DECIDE IF or WHO they are going to pay - the mindset is now "I need to cover that draft."

Or it's already taken out by them time they think about it.

I would love to do autodraft, but I've got at least 50 tenants that don't have bank accounts so that won't work for me.

Sid, I totally agree with you, and we manage our business likewise.

I will never forget a sermon I heard years ago that described Justice as getting what you deserve, and Mercy as getting what you don't deserve (something better).

Thanks to everyone for some great responses. The overall topic seems to have struck a chord with many on here. For those who use auto-draft, I am guessing you still occasionally run across problems when there aren't funds available. The scenario is the same as with my tenants: where there is no money there's no money. Maybe you get lucky most of the time and get your money first, but it's by no means fail safe. Also, I have many tenants like Dan[MA] who don't have bank accounts: so auto-draft isn't an option. Probably works well for the average lower-middle class better than the real lower class, which is a significant part of my market. Plus if you are getting paid and the utilities aren't, odds are I think you will end up where my non-auto-draft tenants are soon anyway as utility disconnects and late fees pile up for other bills. Maybe auto-draft gets you paid another 2-3 months before their world just caves in. So it's a good strategy to a point.

Bottom line is rent has to be paid or the tenant has to leave. I say in my lease there is no grace-period, but in reality I give 7 days before filing. That may not seem very gracious to a tenant who is used to paying every other bill 15-30 days late, but what they do not realize (or choose to ignore) is the fact that those other billers have much quicker and cheaper means of discontinuing the service. Utilities can cut the line or turn off the flow in a day with no court order. Also, since deadbeats have to get utility service turned on elsewhere at SOME point, odds are if they stay in the same town the bill will get paid eventually. In contrast, a land lord's recourse is lengthy (3-6 weeks), costly, and the potential for damages to our property is greater. So we must act quicker. Seven extra days is plenty: they already had 30 days since the last payment to come up with the next one. And they know they didn't have enough and still decided to sit put and milk the situation as long as possible. Sympathy level = zero.

Anyway, good discussion all around. Thanks to everyone who responded.

My husband and I bought a poorly managed 6 plex in March which was fully rented. Before April 1, we had one tenant approach us asking if we could "work with him" as he had just lost his job, etc. I referred him to local churches, unemployment, St. Vincent de Paul, etc. I knew from previous land lording experience, that in my community resources were available for short term rental assistance. However, it required that the tenant actually go to the social services agencies and ask for help. He would have to DO something to help himself.

My intent was not to cruel, but I knew that as a new owner, the tenants would be watching how we handled this, and that if we weren't firm, we would be setting ourselves up for future trouble.

His rent was paid, by a local church, after we posted a 3 day notice. Rent came directly from the church to us. We waived the late fee. The next month the tenant self evicted (left without notice), which was fine with us. The tenant made a comment to us that he had never been so ashamed that he had to go to a church to ask for help. Funny - he had no problem asking US for charity! We did not understand why an unemployed single man needed a two bedroom apartment in any case. We have had no further instances of late rent from any of the tenants.

I do not feel bad in the least taking the rent money from a social services organization or church. I donate every month to my church, which also has a community ministry. Hopefully he received some counseling along with the rent money.

Jody

Dan(MA), I hear that often that many or most of my tenants do not have bank accounts. And their logic that follows is, "so I don't offer it to anyone."

I agree, I am responsible for managing the gifts God has given me, which includes mercy in a responsible way, not in a non healthy codependent way (doing for others what they can do for themselves).

We don't have a grace period at all either. If they cannot pay, I point them to resources, if they don't feel their situation is legitimate enough to ask for help, that means they are spending their money elsewhere and it's not a legitimate need such as temporary job loss. I usually send them a list of resources they can reach out to like Salvation Army, churches etc.

One tenant recently had a severe burn and has not been working for the last month and I gave him this list, he was able to get assistance for 2 months of rent from Salvation Army. They do not pay his late fees, so I will still apply his rent to late fees first when his rent payment in August from him (not Salavation Army) is due.

The other wonderful part is that our contract is worded that his rent is $949 and he receives a $100 discount for on time payments, in this case he "lost his discount" so Salvation Army paid the $949 for 2 months because it's considered rent per the contract, not just the discounted $849 that he normally pays, beautiful!

This was a legitimate need in that case and it was great that he was able to get the assistance needed. This only helps if they contact you ahead of being late otherwise this delays things quite far out while waiting for their approvals etc. He was still late and I still sent him all of the notices for eviction if he does not pay etc so that in the event he is not approved we don't delay the eviction process further (if his case was not legitimate).

One of the many benefits of auto draft is you know right away if their rent payment fails, way before they would tell you, also when they are planing on leaving because they will unenroll.

We tell them to pay us first so they will have a place to stay for the next month. But it is real hard when they do not have the rent and the have cable tv, new laptop, etc. Wwe even told them to pawn something, borrow money friends, family, etc. If they do not have the rent and the rent they get a notice from me. If I do not get the rent my mortgage company does not get their payment from me and it is due on the first too.

I have auto deposit for my tenants I love it. It changes the whole mindset of paying the LL. They no longer have to DECIDE IF they are going to pay me its done the day after they get paid.

Recently I had a tenant ask for a reduction from 1350 to 1200 ugh!!! I posed this question ( do I do it?) to MLL and got some great come back on it.

What I did is made up the difference with them and they don't even realize it happened. What kills me is he is a LL too. Anyway what I did is:

1)The 150 from last months rent was moved to the pet fee I get to keep it

2) They signed a 2 year lease this saved me the clean up costs (after a Tenant moves out) about 200

3) I uped the you pay first 50 of repairs to 75 Don't know what this will save yet

4) I was going to hire a monthly yard care and gutter clean up this year (just getting to hard to climb a ladder these days) about 75 a month.

Good morning LL friends!

Not sure I understand Patti? I am in my 20's and don't have unlimited funds by any means, both my husband and I are immigrants, I moved here when I was 3 with my family and my husband from Canada has only been in the States for less than 5 years, he had no credit score and no job when he moved here and I was fresh out of University when we started investing. We got full time jobs and started investing when we were still working full time... We have created opportunities for ourselves through constant education, using our "free" time to educate ourselves further, spending money only on necessities and investing as much as we can in our education. Through education and joint ventures not having a stack of cash to draw upon.

Many years ago before I got into the rental business, my husband left me and our three girls, ages 7,5 and 4. I did not know of any food stamps programs or public assistance, I just had to manage to make it on my own, I didn't live FREE.

Fast forward, now that I own many rental houses I had a renter tell me that I didn't know what it was like to be a single mom. That of course did not go over well with me.

That was my first eviction.