It’s no secret that when a tenant is late with their rent payment that it will put a strain on the landlord and property owner to pay the bills associated with that rental property. Even so, unexpected issues arise, sometimes even with the best of tenants. A lost job, an unexpected medical bill, or any number of things could make it difficult for a tenant to pay the full rent amount by the time it’s due, and they may ask that you make an exception for them and accept a partial rent payment.
The question is: should you ever accept a partial payment? Let’s take a closer look.
A Case for Avoiding Partial Rent Payments
In general, accepting partial payments even once can create continual problems for you down the road. Here’s how:
It Sets Unreasonable Expectations
It can set a precedent that a tenant expects to be followed in the future. If they know that rent is more flexible than other debts that they owe, rent may quickly become the last payment made each month.
It May Open You Up to Legal Troubles
Having different policies for different tenants can put you in a legal quagmire. One tenant finds out and expects the same treatment, leaving you open to discrimination accusations if you don’t comply.
It Can Cause You to Fall Behind on Your Own Payments
Then there are the debts that you owe as the property owner. You will be expected to continue to pay your mortgage, vendors, and maintenance team in a timely fashion, even if you’re not paid on time or in full. Any and every time a tenant falls behind, your scheduled maintenance of the property is in jeopardy.
The more you accept partial rent payments, the longer you and they will be behind.
It Can Cause a Bookkeeping Headache
You cannot keep your books and accounts on point if you’re accepting rent in bits and pieces. If payments that should have been made in one lump sum once a month are suddenly paid in increments each week or each paycheck, the burden is on you to make sure that the payment is actually received in full by the end of the month.
It Puts a Pause on Evictions
The most common reason a landlord won’t accept partial payments is the practice resets the eviction clock every time you receive a partial payment. Some tenants will use the partial payment, (initially, a sign of kindness on the landlord’s part)‚ to hold onto their rental even if they cannot afford it. In court, even a few dollars toward the rent can restart the eviction process.
When You Might Consider Partial Payments
Like with everything, there may be exceptions to the norm. Here are a couple cases when you might consider partial payments:
Fees Prior to Move In
There are often many fees associated with applying for a rental, and those may begin to add up even for a tenant that earns enough to cover the monthly rent. If you have a hefty pet deposit, you may consider allowing that to be split between two pay periods. The caveat to that is that the full amount should be paid prior to move in.
Unexpected Hardship
Hardship can come from illness, family emergency, job loss, and other conditions. If your renter has proven to be a good tenant up until that point, you may be willing to work with them. As mentioned previously, keep in mind that an exception to the rules that you extend to one tenant may need to be extended to another to avoid the appearance of discrimination.
If you do decide to accept partial payments for either of the reasons listed above or another reason you come across during your time managing the property, be very clear with the tenant about the terms. If it is not already a part of your lease, make sure to put any exceptions into writing as an addendum and have the tenant sign it.
Accepting a Partial Payment
While it shouldn’t encourage the practice, your lease should have a clause for partial rent payments. Due dates should be specific, along with grace periods for missing the deadline (usually three to five days after the due date). You can even include a clause that prohibits partials after due dates alongside solutions or consequences. A few options are:
- Attach a one-time large and/or daily late fee
- Report the tenant to credit bureaus
- Start lease termination and eviction
- Implement collections and/or garnishment after eviction
Make sure to review your local laws to verify any fee or process limitation.
Eviction Should Be a Last Resort
Eviction isn’t an easy fix to the problem of nonpayment. While landlords have rights, many laws lean to the tenant’s advantage, making an eviction process long, tedious, and costly. You might find accepting a partial rent payment or a cash-for-keys agreement the more sensible option compared to eviction.
Conclusion
As with all property management, everything starts with the lease. A clear and steady rent collection process that includes details on the rent amount, rent due date, and grace period are paramount. Consequences for missing the mark on that process should be clearly spelled out in the lease. Be firm with your policies and be professional if declining a request. And, if you do choose to allow for an exception, make sure that you treat all tenants fairly and equally.
