Managing rental properties comes with its share of challenges, including handling tenants who make payments that bounce or get rejected. Whether it’s a check that bounces or an electronic payment that is declined, it’s essential to know how to address these issues promptly and efficiently.
Common Payment Issues
In today’s digital age, many property management companies, including ours, prefer electronic payments over physical checks. However, electronic payments can still fail due to various reasons such as insufficient funds, credit card disputes, or account changes. Here’s what to do when a payment issue arises.
Steps to Take When a Payment Bounces
1. Immediate Notification:
As soon as you notice a bounced check or a rejected payment, notify the tenant immediately. Clear communication is key. Inform them of the issue and request that they rectify the payment as soon as possible.
2. Assess Late Fees and NSF Charges:
Most leases include provisions for late fees and Non-Sufficient Funds (NSF) charges. Our management company will generally impose these fees as outlined in the lease agreement. Typically, these fees are designed to cover the inconvenience and administrative costs associated with handling failed payments.
3. Review Payment History:
If this is the tenant’s first offense and they have a good payment history, you might consider offering some leniency. For instance, you may choose not to disable their electronic payment privileges or waive the late fees as a one-time courtesy.
4. Restrict Payment Methods:
For repeat offenders or problematic tenants, it’s prudent to take stricter measures. Our management company will disable the tenant’s ability to make electronic payments if they have a history of bounced checks or rejected payments. We will require future rent payments to be made using certified funds such as money orders or cashier’s checks.
5. Enforce Lease Provisions:
It’s crucial to enforce the lease contract provisions strictly. This includes assessing all applicable late fees and NSF charges. Consistent enforcement helps maintain order and sets clear expectations for all tenants.
Why These Steps Matter
Taking prompt action when a payment fails protects your rental income stream and ensures that tenants understand the importance of timely and reliable payments. It also helps maintain a professional relationship with your tenants by setting clear boundaries and expectations. While occasional payment issues can happen, especially with electronic payments, having a clear process in place to address these issues can mitigate potential problems and maintain the financial health of your rental properties.