Phil Taylor is a Collection Attorney Practicing in Massachusetts
While no landlord enjoys being put in the position of having to collect unpaid rent, it does sometimes happen. In order to keep the situation from becoming a black hole from which you’ll never recover any money, attorney Phil A. Taylor says you should always remember the following points:
“Be sure to have good information about the tenant from the beginning of the tenancy and do not let the back rent get to be too much. Act quickly to keep arrears low. This does not mean you have to evict the tenant right away, just limit your exposure.”
Phil, in private practice in Massachusetts, has a long history with collections, both in his current practice and as a member of a corporate legal team. He says that the first month a tenant falls behind in the rent, you need to bring it to their attention.
Of course, how you approach the tenant is an integral part of the resolution. Phil says that unless you are on site and have a cordial relationship with the tenant, you want to avoid face-to-face contact because it could become a confrontation.
Instead, he recommends you send a letter to the tenant. It’s important to note that you don’t have to send the letter by certified mail. Legally, any letter that is properly addressed and has the correct postage is considered to have been received once it is mailed. Therefore, a politely worded letter asking the tenant to call you so that the matter can be resolved, and mailed by normal means is sufficient at this stage of the collections process.
Oftentimes, when the tenant does make contact they will tell you that due to their financial situation, they can only make a partial payment. Phil recommends that you accept it, and that you give them a receipt noting it’s a partial payment, and that accepting it doesn’t mean you’re relinquishing any of your rights to collect the remainder of the debt. You also need to ask the tenant what their intentions are regarding paying the rest of the overdue rent.
You may also feel that you should investigate in how serious a financial jam they are be checking to see if they’re still employed, and how much other debt they’re carrying. You can legally make these inquiries, says Phil. If your original rental agreement doesn’t contain any verbiage barring you from calling the employer listed, you can certainly do so now to verify your tenant is still working there. In addition, as long as the landlord-tenant relationship remains a debtor-creditor relationship, under the Fair Credit Reporting Act you can get a copy of the tenant’s credit report. Most rental applications have a release allowing the landlord to obtain it.
Although you do have access to this information, Phil says you need to ask yourself what you expect to gain from knowing this? It’s actually a question of diminishing returns, because even if the tenant is unemployed and is carrying crushing debt, as long as they pay the rent they cannot be evicted. The only value that information might have is if you weight it against the tenant’s payment history to see how far you are willing to work with them to resolve the issue.
The real problems arise when you’ve put off trying to collect back rent, and the tenant now owes you several months. The only course of action, notes Phil, is to start the eviction process.
The first step is to send your tenant a Notice To Quit. This is a warning letter before you actually start the eviction. In the notice, your tenant must be given a fixed period of time to pay the back rent. In most cases, this ranges from 3 to 14 days according to state law. If the tenant makes good on the debt, their tenancy is reinstated, but if they fail to pay what they owe, they must vacate the rental property.
It’s crucial that you’re aware that even though your notice specifically states that the tenant either pays the money or moves out, you cannot force them out by changing the locks or taking any action to prevent them from gaining access to the apartment if they refuse to leave. Your only course of action is to follow through with the eviction.
If, however, as a result of your sending the Notice To Quit, your tenant skips owing you back money, you’re forced to attempt to collect the debt through other means.
The first problem is to find a valid address/telephone number. Phil says there are subscription services that can help you do this. He recommended Accurint, a division of LexisNexis (see Resource Box below for link).
Once you have that information, and start to make collection efforts, are you subject to the Fair Debt Collections Practices Act (FDCPA), which protects consumers from abusive debt collection actions? As a landlord acting on your own behalf, you aren’t subject to the law because you aren’t considered a debt collector. However, your attempts to collect the money owed cannot include any of the prohibited actions specified in Section 806 of the Fair Debt Collections Practice Act (see Resource Box below for link).
Even property managers aren’t considered debt collectors under the FDCPA. In a letter ruling dated November 16, 1995 written on behalf of the Division of Credit Practices, Bureau of Consumer Protection of the Federal Trade Commission, Thomas E. Kane offered this explanation:
“If the property manager is an agent of the property owner, the property manager probably is a "creditor" and not a "debt collector" because the debt (the rental payments) would not be owed to "another."
Moreover, even property managers who are not agents of the property owner probably are not "debt collectors" for the following reason. It is my understanding that rental payments being collected by property managers are current when the property managers begin sending bills to renters. Because the debts (the rental payments) owed to another (the property owner) are not in default at the time the property managers obtain them, the property managers do not appear to be debt collectors for purposes of the FDCPA, even when they collect rental payments that were current when obtained but subsequently become delinquent.”
Keep in mind that even if you are a landlord/property manager, if at any time during the attempt to collect you mention any name other than your own, you indicate that a third person is collecting the debt, and you become a debt collector subject to the provisions of the FDCPA.
If all of your efforts fail, then the next logical step would be to sue for the amount owed under breech of contract. An attorney familiar with your state’s collection laws will be able to help you. Phil noted that most attorneys involved in collections work on a contingency basis.
Fair Debt Collections Practice Act -