Landlords risk suffering losses due to unpaid rent and the destruction of property. In order to prevent them from bearing a large portion of the costs of non-payment and property damages, security deposits are charged.
When tenants move out, some may try to escape and evade their obligations. In this instance, a security deposit aids in mitigating potential financial losses and averting similar circumstances.
What should you do if this situation arises and the deposit is insufficient to cover the cost of unpaid rent? Using security deposits to pay late rent is not intended, yet it can happen. Below are some actions you can take in this situation.
Talk to the Tenant
A letter detailing the amount of the security deposit you are withholding and your reasoning is required when a tenant moves out and you decide to withhold their security deposit.
You can approach a negotiation by learning the tenant's justifications for not paying the rent. An itemized list of security deposit deductions can also be sent to the tenant.
The goal is to understand the specifics surrounding the security deposit's non-refund. It's also best to attach any additional payments that are owed to you.
Be specific when providing the tenant with a list of costs, such as those for fixing property damage. In this situation, you must also be familiar with the security deposit law to adhere to the rules correctly.
Send a Letter of Demand
The next step is to send the tenant a letter of demand if you still need payment for outstanding rent. Your letter should include your phone number and the payment date so that you’re easily accessible.
Keep lines of communication open in case you need to arrange payment options. You might even need to schedule a face-to-face meeting with a tenant to do so.
Consider Filing a Lawsuit
Your last option would be to file a lawsuit if your tenant ignores your letter. Legal disputes can be resolved using a streamlined process in a small claims court. However, there is a cap on the amount you can seek in damages.
Small claims court may seem like the ideal choice, but there are some drawbacks. Your tenant can possibly be short on cash, so even if the judge rules in your favor you might not be able to get the money from them.
Always weigh the benefits and drawbacks before acting, as well as the amount of money that is owed to you.
Another issue is if you don't have enough supporting evidence in your case. When it comes to a court hearing, evidence is everything. Your case may suffer if the required documentation is missing.
The possibility of the tenant counter suing is another potential drawback. This is a possibility that you should always be aware of, even if you follow all the rules.
Hire a Collection Agency to Help You
You may also decide to use a third-party collector if you're too busy to handle collecting rent on your own. They’ll assist in pursuing collection for a predetermined fee.
Since collection companies have the tools and know-how to recover the rent, they can be more successful. To guarantee that you'll always be in compliance with the law, be sure to choose a trustworthy one.
How to Avoid Unpaid Rent
Tenant Selection
Perform a thorough background check on potential tenants before leasing to them. Verify a tenant's financial standing by looking at their employment, credit, bankruptcy, criminal, or eviction histories.
Even though it could take some time, it's worthwhile to be selective to protect against potential losses. You can request that the tenant provide bank statements and proof of income in order to prevent receiving unpaid rent.
You can also get further information by contacting references, such as a past landlord. In this manner, you may be sure that the tenant will be able to pay the rent on time each month.
Walk-Throughs a Month Before Move-Out
Before or right after the tenant vacates the property, it’s customary to conduct a walk-through. You should make note of any damage to the unit that will necessitate deducting money from the security deposit.
If you'd like, you can conduct a walk-through a month before your tenant vacates. At that point, you can discuss with your tenant any issues that require fixing. Before they leave, they’ll have the chance to address any issues raised in order to receive a full refund of their security deposit.
Recruit a Reputable Property Management Firm
Purchasing a rental property can yield a profit, however, you must properly manage your investment if you want to reap the rewards.
Self-management of a rental property requires a lot of time and energy. You must also be aware of numerous laws and rules and ensure that you’re following them accordingly. We advise working with a reputable property management firm such as Limestone Country Properties!
Rent collection is something that Limestone Country Properties can take care of for you. We have tried-and-true tactics that are quick and effective. Additionally, we handle the eviction process for you in a successful and legal manner if a tenant doesn't pay their rent on time.
Conclusion
A security deposit is a crucial piece of money management equipment. You can ask for a deposit to guard against the possibility of losing money. To cover the expense of property damage and unpaid rent, you can take a deduction from your tenant's security deposit.
You can hire a collection company if your tenant’s security deposit is insufficient to cover the unpaid rent amount. This will also report the outstanding balance to their credit.
This helps alert potential landlords and motivates them to settle the balance prior to making any significant, upcoming purchases.
To avoid any legal problems, be sure to adhere to the regulations governing deposits. To help you through this, seek the advice of a qualified property management business, such as Limestone Country Properties. Contact us today to get started!
