Bill Gray – The Landlord Doctor

Insider Advice on Collecting Tenant Debt and Screening Tenants

Posts Tagged ‘Damages’

Failure to Comply With Tenant Deposit Notifications Could be Costly

Posted by Bill Gray on February 22, 2010

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A Landlord's Worst Nightmare

Imagine being forced to write a check to a previous tenant who still owes you money.  This is a very real possibility if you fail to comply with the law after the tenant moves out.  With the amounts and occurrences of tenant debt rising, having to pay a previous tenant who still owes you money only adds insult to injury.

In most states, landlords and property managers are required to notify their tenant if they do not intend to refund the tenants deposit after they move out.  States vary in the required timeframe and method of notification, but most do require it.  This notification is referred to in various terms such as SODA (Statement of Deposit Account), Deposit Disposition, Final Account Statement, etc.  Some states require the notice be sent via certified mail, while others accept First Class mail notification.  I advise landlords to mail this notice via Certified Mail, whether the state requires it or not.  Sending it Certified Mail provides you with a receipt proving you mailed it and complied with the law.

Failing to notify your previous tenant of how you intend to apply the deposit he paid you may end up costing yourself even more money!  Regardless of the unpaid rent, damages, eviction legal fees, etc., if you fail to notify the tenant as required by law in most states, the tenant can demand his deposit back.

Let’s say the tenant paid a $1,000 deposit on a twelve-month lease. Six months into the lease, the tenant skipped, leaving your rental trashed and owing you a month’s rent.  Once you calculate your losses, you determine that the tenant owes you $3,000.  After subtracting the $1,000 deposit, you are in the red $2,000.

If in this scenario you do not notify the tenant of how you intend to apply the $1,000 deposit toward the $3,000 loss, the tenant in many cases could demand his $1,000 back, regardless of what he owes you.  Yes, he may have to sue you to get the deposit back, but if you have violated the law, he most likely will win.

So, take a look at what your failure to comply with the law may cost you in addition to a big headache.  Immediately, you have cost yourself the $1,000 deposit plus any legal fees you paid to defend yourself in court.   A quick Google search will give you further proof, revealing a number of class action suits against landlords and property management companies who failed to notify past tenants of how the deposit was applied.

In many cases, you might not have a forwarding address to mail the notice to. Your only option is to mail the notice to the last known address, which is the address of your rental. Half or more of these notices will be returned to you as undeliverable or having a wrong address.  File the returned mail with the tenant’s file and save it.  You may need the returned mail as proof that you did attempt to send the notification.

Comply with your state’s deposit notification law.  Doing so may save you money.

The information contained in this article is provided for informational purposes only, and should not be construed to be legal advice.  Consult a local landlord-tenant attorney to discuss your specific situation.

Email me your tenant screening and tenant debt questions.

Bill Gray

Bill@thelandlorddoctor.com

www.thelandlorddoctor.com

Tenant Debt & Screening Forum www.theinformedlandlord.com

Copyright 2010 – Click here to reprint/re-post

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Non-Refundable Pet Deposits Can Actually Cost You Money

Posted by Bill Gray on January 31, 2010

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThe way in which you explain, or don’t explain pet deposits can cost you profit.  If landlords could spend just one day as a professional collector attempting to collect tenant debt, one of the top objections they would hear from previous tenants is about pets and pet deposits.

“The urine spots on the carpet are covered by my pet deposit” is one example of a tenant either intentionally or unintentionally misunderstanding the pet deposit.  Many pet deposits are non-refundable.  If this is not fully explained at lease signing, most likely the tenant will believe that the pet deposit is no different than the standard deposit he placed on the rental unit.

Most tenants understand that when they pay a rental deposit any damage they cause to the unit will be deducted at move out from their deposit.  If the non-refundable pet deposit is not fully explained, the tenant considers it the same as the rental deposit.

So when Fido has several accidents and soils the carpet, the tenant often will guesstimate that his pet deposit will cover the cost of cleaning it.  In reality the cleaning cost is deducted from his refundable deposit.  Imagine the difficulty a professional collector has on the telephone trying to explain the difference between a non-refundable pet deposit and refundable rental deposit.

This is not to say that a certain percentage of previous tenants have a convenient memory when it comes to the terms of the lease.  But I do believe that a good share of landlords do not take the time to fully explain the terms.  An initialed and signed pet addendum will go a long way in settling disputes after move out.

Use a clear, understandable pet addendum and explain it clearly before the new tenant initials and signs it.  Doing so will save you profit by reducing tenant debt when the tenant moves out.

Email me your tenant screening and tenant debt questions.

Bill Gray

www.thelandlorddoctor.com

Forum www.theinformedlandlord.com

Copyright 2010 Click here to reprint/re-post

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USA Today – The Landlord Doctor

Posted by Bill Gray on January 4, 2010

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DDecember 30th USA Today published an article titled “Apartment renters win as vacancy rate climbs”, when he wrote the article author Paul Davidson asked me what effect concessions are having on the tenant delinquency rate.  My quote is included in his article.  The bottom line is that concessions may help rent empty units, but tenant debt continues to rise.

Link to Article: “Apartment renters win as vacancy rate climbs”

Bill Gray

Bill@thelandlorddoctor.com

www.thelandlorddoctor.com

Tenant Debt & Screening Forum www.theinformedlandlord.com

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Posted in Evicted, Landlord, Landlord Tenant, Property Management, Tenant Debt Collections, Tenant Screening | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

Tough Economy Makes Tenant Debt Tough, but Not Impossible, to Collect

Posted by Bill Gray on December 28, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThe downturn in the economy has caused many landlords to lower their credit requirements for new tenants.  Of course, lowering credit requirements increases financial risk. Renting to a tenant with little or poor credit increases the likelihood that the tenant will at some point leave owing the landlord money.

This change in rental criteria is understandable, considering the need to keep all units rented.  But know that when you lower your standards and in turn incur debt, this debt will be tougher to collect than if you had rented to a tenant with good or great credit.  If you use a collection agency to collect the debt, you should also lower your expectations about how much you feel they should collect.

Collection agencies are reporting that they are receiving many more files than two years ago.  The average amount of debt in these files has also increased.  Relaxed rental standards, coupled with the high unemployment rate, have put collection agencies in a tough spot.

The American Collectors Association reports that the collection industry debt recovery rate is down 30-40% over last year.  Angi Pusateri, National Sales Manager for RentDebt Automated Collections, confirmed that her company is experiencing a similar decline in debt recovery.  However, RentDebt Automated is weathering the storm well and has added employees in the last year at their offices, which are located in Nashville, Tennessee and Dallas, Texas.

Jeff Cronrod, the President of Rent Recovery Service, a national collection agency specializing in the collection of tenant debt, estimates that nearly 40% of the debtors his company is trying to collect from are unemployed.  “It is not that these debtors do not care about the debt or their credit. They simply have no means to pay the bill,” Cronrod explained.

Saul Wertzer, President of Rent Recover Solutions in Atlanta, Georgia (not to be confused with Cronrod’s Rent Recovery Service), told me that his company has also seen an increase, not only in the number of collection files, but also an increase in the average amount of each file.  I have heard this from every company I have spoken with, in every corner of the country.  Wertzer went on to say that it is important for landlords and property managers to think long-term about debt they are owed by previous tenants.  Over time a good percentage of tenant debt is collectible.

If your collection agency has served you well in the past, stick with them, even though recent recoveries may have dropped.  Trust me, every agency is experiencing a tough time collecting debt.  Don’t jump ship and hire another agency, because eventually the economy will improve and many of these tenants who owe previous landlords will get back on their feet.  When they do, they will work to clean up their credit and pay their debt. But don’t wait until then to do something about it.  Now is the time to make sure the debt you are owed is reported to all three major credit bureaus. Whether your collection agency reports the debt or you report it via an automated service, make sure every dollar you are owed is reported.

Doing so will greatly increase the odds that you will get paid the debt your previous tenant owes you.

Email me your tenant screening and tenant debt questions.

Bill Gray

www.thelandlorddoctor.com

www.theinformedlandlord.com

Copyright 2009 Click here to reprint/re-post

Tenant Debt & Screening Forum www.theinformedlandlord.com

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End of Year Housekeeping – Old Tenant Debt

Posted by Bill Gray on December 18, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DWhile the end of the year is a very busy time of the year for most of us on a personal level, it is usually a slow period for landlords.  Many of us spend this time working on our taxes, cleaning out our desk drawers and preparing for the New Year.

One often overlooked piece of housekeeping that impacts your profit is old tenant files which still have balances due.  All too often, landlords simply file them away and forget them.  By storing these files without taking any action, you are literally throwing money away. You may think it’s impossible—that you’ll never see a dime of the monies owed, but some percentage of the debt you are owed is collectible.  It may not be collectible today, but over the next seven years, some of that money most likely will be paid.

Take the time to do some end-of-the-year housekeeping.  Start by separating old tenant files which have no balance due from the ones that owe.  One by one, go through the files with balances to make sure each contains a signed lease; then, make a breakdown of what is owed.

There are three different options to select from when collecting your lost profit.   Each has its pros and cons.

  1. Got to court and sue the previous tenant for the balance owed.  This option can be expensive and time consuming, but with the proper outcome, it can be an effective way to collect tenant debt.
  2. Hire a collection agency that specializes in collecting tenant debt.  If you do not have an agency, spend an hour online and find one.  If you don’t know what to look for in an agency, read my blog article on how to hire a collection agency to collect tenant debt. How do I Hire a Collection Agency to Collect my Tenant Debt?”
  3. Report the debt to the three major credit bureaus, Experian, Equifax and TransUnion, as a collection account.  The ding on your previous tenant’s credit report should remain there for seven years after they move out.  There are several online resources for reporting tenant debt to the credit bureaus.  It’s worth your time and effort to research them.

Too often, I hear landlords advising other landlords to forget any debt they are owed and move on because it is not collectible.  From experience, I can tell you this is not true.  While all of it may not be collectible, a percentage of it is, maybe not immediately, but over time, you can recoup some of your profit.

There’s only one way to ensure that you won’t collect any of the debt, and that’s to do nothing, storing the files away and resigning yourself to accept the loss.   Trust me when I tell you that doing nothing will cost you profit.

Email me with your tenant screening and tenant debt questions.

Bill. Gray

The Landlord Doctor

www.thelandlorddoctor.com

www.theinformed.com

Bill@thelandlorddoctor.com

Copyright 2009

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New Landlord Forum – Tenant Debt and Tenant Screening

Posted by Bill Gray on November 25, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DThanks for reading my blog.  I try hard to respond to every email I receive, but I receive more and more every week.  It is getting hard to keep up.  I started a forum that will address tenant debt and tenant screening issues to help answer the commonly asked questions.  Please help me get the forum off the ground by registering and posting your questions.

The forum url is: www.theinformedlandlord.com

Thanks,

Bill Gray

Bill@thelandlorddoctor.com

www.thelandlordoctor.com

Copyright 2009

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Don’t Miss an Important Component to Screening New Tenants!

Posted by Bill Gray on October 7, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DA vital part of tenant screening requires more than learning about applicants, their employment and credit history—it’s learning everything you can about theirtele-interview2 previous rental history. Yes, former landlords who have rented to this tenant before have a wealth of information which should be weighed carefully before you approve an application.

Think about it. For six months or six years, former landlords have received or not received payments from your applicant. They know how the tenant left the property and about any complaints made when they leased it.  Their file and recollection can provide you with more insight than you’ll find by calling employers or ordering a credit report.

Start with the end in mind and weed out any applicants who might not treat your property with a gentle, kind, and caring hand. Was their former landlord impressed with the condition and cleanliness of the property when the tenant moved out?  Or were they overwhelmed and disappointed with the lack of attention and personal consideration they showed by leaving the unit a mess?

Screening former landlords can reveal much more, though, and the information you gain is worthy of your time. Does the tenant have a history of short-term housing, indicating problems with payment or other terms of the lease? Was the tenant a nuisance to other tenants? Did the tenant honestly disclose past information to previous landlords, and did that information hold true?

I should note here that all applicants are not Honest Abe.  Dishonest applicants know that telling the truth on applications could hurt their chances of being

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Landlords Who do Not Screen are Shooting Themselves in the Foot

Posted by Bill Gray on September 23, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DemailOf the 20 to 30 emails I receive per day from landlords with tenants who owe them money, 5 or 6 are from landlords who did not screen their tenants before they rented to them and are now upset that the tenant burned them.  I shake my head when I read these requests for help.

For whatever reason, the landlord rented to someone who “looked okay” and then got upset when the tenant burned them.  Would these landlords buy a used car sight unseen?  Or show up at a dog shelter and say, “give me any dog, I don’t need to see it or know anything about it.”?  Of course they wouldn’t.  As absurd as this sounds, it is basically how they run their rental business.

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I’ve been having all kinds of trouble collecting the rent from my current tenants

Posted by Bill Gray on September 9, 2009

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“Hi Bill,  I own a house in North Texas and I’ve been having all kinds of trouble collecting the rent from my current tenants.  They skipped 2 months of rent  back in May & June and started paying again in July & Aug but then, now they don’t have money to pay for this month(September), I am getting ready to file Eviction on them.

Do you have any advice for me with this kind of situation?  Thanks for your help, I’m looking forward to hearing from you,”.   Sincerely, Teresa S.

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Hi Teresa,

It sounds like your tenants are running over you like a Mack truck.  They are costing you money! If I woke up in your shoes this morning I would begin the eviction process immediately.  Don’t change your mind, or listen to any sob stories.  Put them out and find some good tenants that will pay their rent.   Start fresh and be firm with your new tenants.  If you haven’t already, sign up for a free account with the American Apartment Owners Association.  You can find a link on my blog.  I recommend you take advantage of the discount and join as a premium member so you may screen future tenants.

Keep track of all the rent they owe and your out of pocket costs to ready and re-rent the unit.  After they are gone, let me know and I will try to help you with the debt.

Don’t let tenants like this run over you!

Keep your chin up and press forward.  Good luck, and let me know if I can be of any help.

Regards, Bill Gray

Bill@thelandlorddoctor.com

www.thelandlorddoctor.com

Copyright 2009

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Tenant Surety Bonds: Do They Affect How Previous Tenants Pay After They Move Out?

Posted by Bill Gray on August 31, 2009

[tweetmeme source=”your_twitter_name” only_single=false http://www.URL.com%5DAs with all of my articles, this one is from the perspective of a landlord collecting tenant debt.  Remember, I am on the back end of the deal,quesion5 looking at damaged rental units and unpaid rent.  I will limit my comments about tenant surety bonds to my experience and how they affect debt collection after a tenant moves out.

What is a surety bond?

A bond is not a deposit.  A surety bond is a product that a prospective tenant can purchase in lieu of a traditional security deposit.  The bond is normally nonrefundable and costs significantly less than a security deposit, thus reducing the tenant’s Read the rest of this entry »

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