Tenant late, bounced checks and tenant wants to renew lease!

[zoltani]

I have a tenant that has been late multiple times during the 1 year lease term. The lease is up and I am unsure what to do.

The situation:

This tenant has been late a few times, but it got worse the past couple of months. They have been about a month late the past two months (with a bounced check thrown in there). A pay or quit notice was sent. From speaking with the tenant it is obvious that something has happened in the last couple of months that caused them financial trouble. They claim that they are getting caught up and this should not be a problem in the future. We talked about things to do that can help them pay on time, such as moving the due date.

We did an inspection this month and the place is super clean and taken care of. The tenant loves the house and they take good care of it.

The lease is up at the end of next month and i need to decide if I want to continue with this tenant. Would you renew a lease with a tenant that takes care of your property but is late on rent?

In regards to failure to pay rent and notices the law states:
"If substantially the same act or omission which constituted a prior noncompliance of which notice was
given recurs within six (6) months, the landlord may terminate the rental agreement upon at least
fourteen (14) days' written notice specifying the breach and the date of termination of the rental
agreement."

That means if we sign a new lease with the tenant but this continues I can simply send a 14 day notice that i am terminating the lease. Of course, things get rough if they do not get out.

I'm leaning towards renewing the lease, although I have some major reservations, hence this post.

[Bobberth]

What about renewing but with a month to month lease?  That might help get their priorities in check.  I'm not sure about your state, but MO allows for 2x rent if you give notice and they stay longer.  Make it abundantly clear that if they don't pay they get a 30 day notice (or whatever your state is) along with the pay or quit notice.

[RH]

I'm OK with a tenant paying late because then I get to collect a nice late fee that is specified clearly in the terms of the lease! Woo-hoo!

[arebelspy]

Before I answer... Did you charge them (and did they pay) a late fee each time?

(Late isn't necessarily a deal breaker, but a bounced check may be.)

What's your rental market like?

[zoltani]

Yes I am charging late fee every time (that they pay). Also charging bounced check fee when that happens. I agree that late is acceptable, but the bounced check is not.

Sticky thing is that I stupidly added an automatic lease renewal clause to my lease with this tenant, and if i want them out I have to send notice today. I was hoping to wait until Oct. 1 to see if the rent shows up on time like they said it would. I need to make a decision, but I keep going back and forth on it.

Month-to-Month lease is an option, but I will likely still have to send notice due to the automatic renewal clause.

[zoltani]

Another point - this is an out of state rental for me a long way away. never had to do an eviction, but I am guessing that i would need to show in court if it ever came down to that. I am slowly moving towards hiring property managers, but i figured a tenant is already in this property so why pay someone else the management fee. If i do not renew lease with this tenant i will hire a manager. The other property i have in the area is under management.

[arebelspy]

Way to wait until the last minute. :P

Communication is key to good landlord-tenant relationships.

Talk to them, tell them you're worried about the financial troubles. See what their situation is.

It may be beneficial to collect an extra security deposit that is refunded after 3-6 months of on-time payments, or something like that.

[johnhenry]

I'm OK with a tenant paying late because then I get to collect a nice late fee that is specified clearly in the terms of the lease! Woo-hoo!

+1.  It usually means trouble when tenants start paying late.  But I've had more than one tenant who often paid hefty late fees, but was a great tenant as far as giving notice that the rent would be late and keeping the place in great shape.

If they have always paid the late fees and take great care of the place, I wouldn't hesitate to allow them a new lease.  Especially if you trust their story that the incident that cause them trouble is behind them.

[zoltani]

Yes, I did communicate and we had a nice conversation about the situation. We worked out that paying mid-month is better for them, so I would go that route. The rent will also increase $20/month as the lease states.

Another idea i had was to add the $20 rent increase, but give a $20 "discount" if paid on or before due date. Charge current rent + the rent increase of $20 if paid within grace period, and current rate + $20 increase + 10% late fee if paid after grace period. I would hope that would be incentive enough, but as most of us on this board know, a lot of people out there just have poor money management and decision making skills.

[Northerly]

I would send the notice, then go month-to-month. Changing the pay date to the middle of the month is a bad idea (been there, done that), unless you are also careful to move the rental period begin/end to the middle of the month. Otherwise, they are into you for two weeks of free rent before the rent is even due. Then if they are a couple weeks late, it is suddenly the next month. Now they are into you for a free month's rent, but are only two weeks late...it's downhill from there.

In my experience, tenants are like children: they behave best with firm boundaries and discipline.