Hey everybody. Matthew Whitaker back here with another Questions Owners Ask.
Today’s question is, what do I do if a tenant leaves owing me a balance?
As a rental property owner, collecting unpaid rent from former tenants is an incredibly burdensome task. Whatever the reason the tenant is no longer living in your property, once they have moved out, it is likely their interest in paying you will quickly diminish.
So what steps can you take as a landlord to collect the money you are rightfully owed? Let’s take a closer look.
Tracking down a previous tenant to pay you owed money is never an easy task. Thankfully, landlords have legal remedies that protect them in these circumstances. Here are a few different tactics to getting your money:
Whatever the reason may be behind a tenant moving out if they owe you money, you are likely in a sticky situation. Whether or not you had to evict him or her, at the end of the day, if they leave owing you a balance, they owe you money.
Thankfully, you have legal rights as a rental property owner. Here are a few different steps you can follow when determining how to get your money.
One of the simplest ways to get the money you are owed, whether due to property damages, unpaid rent, or eviction costs, is by withholding money from the former tenant’s deposits. Technically, this money is legally allowable money.
When you write your rental agreements, be sure to write out the details of any security, cleaning, and any other deposits. That way, once the tenant vacates, as long as you comply with the state regulation regarding holding of the funds and listing the costs of repairs, you are in the clear.
You can detail an extensive list of costs associated with back rent, excessive cleaning, or any repairs in your rental property. Send this back with whatever remaining balance the tenant might have.
Unfortunately, if the deposits don’t cover the damages or if you have already returned this money to your previous tenant, things might be a bit trickier for you. Not to worry, you still have legal protections on your side.
You can file a suit with the court clerk and pay the appropriate filing fee. Not only can you ask for the money owed, but you can include any costs associated with the suit as well. Be sure to provide any personal information you may have about the tenant, including:
The more details you can provide, the better. This is another reason why you want to make sure you thoroughly vet your applicants in the first place. You’ll never know when all of this information will come in handy.
On your hearing date, you will present your side of the story to the judge. You’ll want to bring with you as much evidence as you can get your hands on, including:
Should the judge agree with you, they will order a judgment ordering the former tenant to pay you the amount owed as you have detailed in the suit. Depending on your local laws, the tenant may have the option to pay you at that moment or a later date.
Once you’ve received the judgment, you can take it to the court clerk to request a levy of execution against the tenant’s assets if they do not pay in a reasonable amount of time. During your application process, you should have requested a blank check from your previous tenant. Use this information to target their bank account during this process.
You can give their bank information to the court clerk with a request to have a sheriff serve an account levy of execution order on the bank. If this request is granted, the account will be frozen and a judgment sent to you. If the tenant does not have enough money to cover the debts, the bank must empty the funds and give them to you.
If you are still missing funds, you can file a new levy for the future on the account, so long as the previous tenant does not close out the account entirely.
If the bank information is no longer valid or you did not obtain bank information during the application process, there are still other methods of collecting funds. You can file a levy execution against the tenant’s other assets. For example, if the tenant owns their vehicle outright, you can order for it to be seized and turned over to cover the judgment.
During this process, any seized assets must be equal to or less than the judgment amount. Otherwise, you will have to sell the asset and give the tenant the remaining balance owed from the sale.
You can opt to garnish wages in most states but are limited to collecting 25% of the previous tenant’s paycheck until your judgment amount has been reached. If the tenant quits the job or there is a court order stopping the garnishment, you might not receive all of your money.
In these situations, you can file the request with the court and provide all of the information you have available about the former tenant and their current employment status.
As frustrating as a process collecting unpaid rent from former tenants can be, it’s good to know that as a property owner, you have legal protections on your side. By following these different steps, you can ensure that you are rightfully paid the money you are due. And, hopefully, you will not have to deal with a situation like this again in the future.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.