Policies

It’s the holidays!  Peace on earth; good will towards…delinquents?! 

During the holiday season rent collections can be particularly difficult—especially considering our economic climate.  But in order to ensure effect collections over the holidays, the time to start is now.

Today:  Do you have chronically late people?  Take a moment to sit down and make a list of every resident who is typically late.  If you have been at your property for a while, this list will come very easily.  If you are new you will need to take a look at your receivables from prior months. 

Start the Process Early:  Take some time the week (before the first) to make positive personal contacts with everyone on your chronically late list.  It is a good idea to set up clear expectations right from the start (e.g. When will you be paying?  How many times will I have to hound you?  How much of my mental energy are you going to take?!)  Call and say, “Hey, I just wanted to call and thank you for paying your rent.  Next month’s rent is coming up—are we going to be okay?” Take time to briefly listen to the ‘story’.  Some may have fallen on hard times.  For cases like this, it is an excellent tool to assemble a list of local charities and houses of worship that provide emergency assistance.  Pass this list on.  Be compassionate and respectful but firm.  Remind your customer that rent is due on the first and that you will be looking for it at that time.

After 5 p.m. on the First:  Take a look at who has not yet paid.  Tackle the members of your chronically late list first.  You have already had a phone conversation with them so at this point, a quick e-mail or note under the door with a gentle reminder is good. 

“End-of-grace-period Eve”:  Twas the night before the late fees kick in—it’s time for another courtesy call.  At this point, call everyone on your delinquency list to let them know that any rent received after 5 p.m. on the next day (consult your site’s procedure to verify when this kicks in) will need to include your late fee.  Let each resident know what the total amount due will be if they are late.  At this point you will discover that some of your residents have just plain forgotten in the hustle and bustle of the season. They may be embarrassed so treat them kindly (as you do with all of your residents!)

The Morning After:  The day after your grace period ends, send your late letters out. At this point, you have given a gentle reminder to everyone on your list (personal calls and e-mails) so it is appropriate to write a professionally polite letter that includes the amount owed as well as consequences of continued non-payment.

48 Hours:  Within two days, send another, sterner letter out to anyone who still has not paid.

24 Hours Prior to Starting Legal Action:  Send a final letter out to anyone who has not paid rent.  Let them know that this is last call. Often the threat of legal action is enough to get someone to finally fork it over.  If there is anyone you have not been able to speak to personally, try again to have a conversation with them to determine what the situation is.

Start the Legal Process:  Be consistent.  Do what you said you would do.  At this point, if you bail on your policy and procedures you have violated Fair Housing and you have sent a message to the residents involved—as well as any other residents in their circle of influence that late rent is okay.

Starting over (or on a new property)

Perhaps you have taken over a property where rent collections have gotten sloppy or perhaps you have enabled residents to start slipping outside the bounds of your company collections policy.  Some tips:

1. Send a memo out to every resident letting them know that rent collection has gotten a little lax and reminding them of your policy.  Specify that you will be returning to your standard procedures in thirty days.  Place a copy in each resident file.  In many jurisdictions, if a resident can prove that rent has not really been due on the first a judge will often side with them.  In effect, you have rewritten your Lease based on your actions.  You need to draw the line in the sand again. 
2. Let new residents know your rent collection expectations (policy) from the very beginning.  This is an excellent item to underline and have them initial on the Lease during your Lease-signing meeting. 
3. When a resident is late, have a standard recap of your rent collections policy including time-line and give it to them. 
4. Still having problems?  Early in my career a resident told me that I was his last priority because our site’s late fee was lower than his truck late fee.  (It’s always good to know where you stand!)  After researching what others were charging in the market and what state law allowed, we increased late fees.  Make sure the penalty is fair but big enough to be felt.
5. Start weeding out chronic late-payers at renewal time.  There comes a time when you have to decide whether or not you want to keep a customer.  Sometimes it is okay to just say goodbye.

We would all like to be able to say, “Hey!  No pay no stay!”  But we are in a customer-service business. Rent collection is often one of our least favorite tasks because we feel like we are always chasing the painful few.  I hope you take some time to use these tips to create a proactive plan to motivate your customers to pay you on time.  And then, enjoy the holidays!

Cheers!  Jim Baumgartner | Rent Soda

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