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What to Do When a Former Tenant Owes You Money

Your tenant left your rental apartment trashed, damaged and owing you money!  Your tenant lied and took advantage of you.  He may have skipped or you may have evicted him.  In either case, he damaged your rental and cost you money!  What do you do?

Your tenant left your rental apartment trashed, damaged and owing you money!  Your tenant lied and took advantage of you.  He may have skipped or you may have evicted him.  In either case, he damaged your rental and cost you money!  What do you do?

First, set your emotions aside and spend a few minutes getting your ducks lined up.  Organize your ex-tenants file.  Whether you own one unit or a thousand; whether you manage your rentals full time or part time, you are running a business.  Any successful business keeps well organized, complete records.

Keep copies of all receipts required to repair the unit, legal fees, unpaid rent, etc.  Complete a move out inspection checklist, preferably with the tenant, if possible.  Both of you sign it.  The move out inspection will help you document the condition of your unit and the debt he owes you.  If you are not completing move in inspection checklists now, begin doing so with you next move in.  This important step is often left out “because I didn’t have time”.  Take the time.  There is no excuse for not having a complete move in inspection signed by you and the tenant.

An emotionally charged issue with some landlords is charging through the lease.  He signed a twelve month lease and skipped or was evicted after only six months.  Does he owe you for the remaining six months?  The short answer is no, not yet.  In many states, if you can not re-rent the unit before the end of the lease he will owe you the lost rent.  But, he does not owe you the rent until the rent is actually due.  Only charge him now for lost rent, as of the date of the move out statement.  If you wish, you may update the amount he owes each month until the unit is re-rented or the lease expires.  Discuss this issue with your attorney.

Your lease includes termination and or no notice fees?  I often hear, “It is in my lease, he has to pay it.”  The thinking here is that if it is in the lease it is binding.  This is not necessarily true.  Termination and no notice fees may be legal in your state, and your tenant may be held responsible for them.  With various state laws and recent case law I highly recommend you have your lease periodically reviewed by an attorney to make sure you are complying with current law.  If legal in your state, termination and no notice fees may be a great way to calculate all charges at the time of move out, without having to add future rent as it comes due.  Again, talk with your attorney about this.

Take pictures.  A digital camera is important to your business.  Move in pictures are nice to have; move out pictures are a must have. The checklist and pictures not only help document the condition of the unit, they may be helpful later if the tenant gets creative with his description of the condition when he moved in and when he moved out.

Keep a log of all communications you have with your tenant, especially any communication regarding him moving or paying his rent.  If you do not have a log, begin using one immediately for all your present and future tenants.

Once you have your records together, complete a move out statement.  Most likely your management software will do this for you.  The move out statement should include the names of everyone who signed the lease, the unit address, move in/move out dates and a break down of the charges.  If a deposit was placed on the unit you will show the deposit subtracted from the total due.  Florida law is explicit on this point.  If you intend to impose a claim against the Security Deposit you must mail a special letter titled: "Notice of Intention to Impose Claim Against Security Deposit" within 30 days of the tenant's move out.  (Click Here to Download the letter) It must be sent via Certified Mail to the tenant's last known address, which very often is your rental.  Failure to do this will give your debtor the upper hand, and you may be required to repay his deposit even though he actually owes you money! Keep your certified mail receipt with your records.  You may need proof that you complied with the law.  If the letter is returned un-received, keep it in the file also.

A word of caution here: Some landlords are tempted to pile on, and exaggerate the charges.  While emotionally tempting, it will do you no good in the end, and it is not legal.  Being fair and reasonable in your charges will greatly increase your chances of recovering the debt.

Now that you have your documents organized, and have mailed the move out statement, do not just put the file away somewhere and forget it.  The money you are owed is an asset.  I can not tell you how many times I have heard the comment, ”That bum will never pay his bill!”  If you have a crystal ball that tells you he won’t pay his bill, maybe you should have put it to use before he moved in.  I can tell you with confidence that this way if thinking is costing landlords millions of dollars a year in lost profit.

With little effort on your part you may collect all or part of what you are owed.

In my next post I will cover your options.

The Collector