If Your Tenants Pay You Late, It is YOUR Own Fault

Wait, before you jump off this page mumbling about how insensitive or cruel I am, you might want to read on.

There are so many options available to a landlord now to receive their rent there is no reason you should be waiting for a tenant to pay you.

Unless you only accept cash... which is foolish in my opinion.

Cost is usually a factor in how a landlord receives their rent payments. There are plenty of pay to play services that will do automated ACH drafts from your tenant's bank account and deposit the money, less those pesky fees, into your account. This is a great option and works very well for lots and lots of landlords and property managers across the country.

We don't use ACH transactions.

Yes, it is because of the cost.

Some landlords get a tenant to write a series of post-dated checks, one for each month of the lease when the lease is signed.

We don't do that either because the tenant can simply issue a stop payment on them.

But, we do require most of our tenants to pre-authorize the drafts from their account each month. They fill out a form, attach a voided check and we are set.

Then each month, they get an email or text notice of the amount and date of the upcoming draft. They are reminded the draft may post to their account the very same day it is submitted to our bank for deposit and they are reminded the rent is received subject to verification. In other words, the rent is not really received until the check has cleared their bank.

We print the drafts using a laser printer and MICR toner. We then deposit these drafts exactly the same way we do any other check. If the tenant's bank has any questions, we have the signed authorization AND the voided check to prove the tenant authorized the draft.

We have never had a successful challenge to a draft.

Our cost is minimal. The toner and paper cost is less than one and one-half cent per draft. The depreciation of the printer adds about a penny and the software is part of our integrated system using the FastDraft document assembly engine to generate the paper drafts.

We do this in our central office, meaning the front-line property manager does not have to mess around with generating the drafts or collecting the rents unless there is a problem.

What happens if the draft is returned due to a lack of funds?

Our lease details the consequences and remember, the rent is not received until the draft clears so the notice to pay or quit is immediately generated and delivered to the tenant.

What happens if a tenant contacts us after the notice and asks us to delay the draft a day or two? We often work with them and will even adjust the draft date on a permanent basis to fit the timing of their receipt of their paychecks. We will ONLY do this with pre-authoriuzed drafts which is another way we encourage them to use them.

So, as I said, if your tenant is late paying you the rent you are owed, it really is your own fault.