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Is it too late to collect what I'm owed?

Todd Ortscheid - Monday, August 28, 2017
Sometimes we take on a new client who had a bad experience with a previous tenant who left the property owing money for either rent or repairs, and wondering whether it's still possible to go after that money.

Generally, as long as too much time hasn't passed, and you have documentation of what was owed, you can still go to court to try to collect what you're owed. There are two things you need to consider:

1. How much time has passed? You will need to file your case against the tenant in court before the statute of limitations for contract disputes has passed. In Georgia, for written contracts, this is six years. We won't even discuss verbal contracts, because they're pretty much useless for all intents and purposes in real estate matters. So, if it's been less than six years from when the tenant incurred the charges that you're owed, you should be good to go on this item. If it's been longer than that, then you're probably out of luck, but can always consult with an attorney to see if there might be some sort of special circumstances that would apply.

2. Assuming you're within the statute of limitations, the next element is evidence. As the plaintiff, the burden of proof will be on you to show that the tenant owes you the money. Depending on what exactly the tenant owes for, that evidence could be different things. If he owes you rent or late fees, you would probably need to present a copy of the lease and your rent ledger to the judge at trial. If the tenant claims that he made payment, he would need to show receipts, bank records, or some other form of evidence to refute your ledger. If you don't have a copy of the lease and a detailed ledger, though, you're pretty much out of luck trying to collect rent. For repairs, you'll need to have evidence of what the condition of the property was on move-in, and what the condition was on move-out. This could be as simple as a signed form that both you and the tenant signed on move-in and move-out, or it could be more detailed, such as date stamped photos or videos. The judge will probably also want to see receipts, invoices, or some other form of proof showing that you actually did incur the expenses for the repairs.

If you have all of that, you'll probably be filing in magistrate court, as the balance is likely to be under $15k. If your balance exceeds that amount, you'll need to file in superior court, which means you'll need to hire a lawyer. In magistrate court, you can represent yourself, although we would always recommend seeking out the help of an attorney if the money you're owed is significant.

Better yet, hire us and we can take care of this all for you with our in-house experts and our attorneys we always have on retainer! Give us a call.

Remaining Rent from a Skipped/Evicted Tenant

Todd Ortscheid - Tuesday, August 1, 2017
We occasionally get asked by our clients if a tenant is responsible for rent after they’ve been evicted or skip out mid-lease. The simple answer is “yes.” However, as with most things where the law is involved, the simple answer doesn’t really give you the full story.

Let’s say you have a tenant with a one year lease. Six months into the lease, the tenant either abandons the property or is evicted for non-payment. The lease states that the tenant is responsible for the full year, so technically you could go after this tenant for that lost rent. But, a key exception is that the courts will not allow you to collect rent from two different tenants for the same property at the same time. Since it’s likely that you’re putting a new tenant in the property when the old one leaves, this means that you can only hold the old tenant responsible for the rent during the period of vacancy. As a practical matter, this means that you would have to wait until the property is re-rented to find out how much time of vacancy the old tenant was still responsible for, then file a civil action against the tenant or submit the debt to a debt collector.

The next question that comes up is whether you can hold the tenant responsible for the entire remainder of the lease if you don’t re-rent the property. The answer from most judges would be that it depends on the reason that the property was not re-rented. If the reason is that the market is awful and you can’t find a new tenant, then a judge is likely to award you the rent for the entire term of the lease. But if the reason is that you simply didn’t make any effort to get the property re-rented, the judge will likely say that you made no effort to mitigate your loss, and therefore can’t hold the tenant responsible This may seem unfair, as a contract was in place for a set period of time and a set amount of rent, but it is how the courts will generally view the matter.

As a practical matter, we rarely have evictions or abandonments from the tenants that we screen, and we are able to re-rent properties usually in only 2-3 weeks when they do occur. Therefore, actual lost rent is minimal when a tenant splits or is evicted. But whatever it is that you’re owed, we will submit to our collection agency for collection, and they will make every effort to collect using whatever legal means are available to them.

If you’ve experienced a bad tenant skipping out or having to be evicted and are looking for professional management and tenant placement, please give us a call.

Utility Bills

Todd Ortscheid - Wednesday, April 29, 2015
Utility bills can be a real nightmare if the lease doesn’t cover them correctly. We frequently take over the management of a property that the owner had been paying the utilities for and then billing the tenant. Usually, the owner is having us take over because the tenant didn’t pay them for the utilities, and they don’t know what to do.

There’s a very simple way to avoid this: don’t leave the utilities in your name. Unless absolutely necessary (meaning it’s physically impossible for the tenant to have the utilities in her/her name because of a shared meter), ALWAYS make the tenant put the utilities in his/her name. This should be a provision of your standard lease agreement, and you shouldn’t compromise on it. Tenants will come up with all sorts of excuses for why they want you to keep the utilities in your name. Don’t do it.

Our leases require the tenants to have the utilities switched into their name within 3 days of the start of the lease. We make no exceptions to this. If the utilities aren’t switched over, we shut them off. You should do the same.

So what do you do if you have a situation where it’s physically impossible to have the tenant responsible for the utilities, which is frequently the case with duplexes and other multi-family properties that share a meter? Here are a few pointers:

  1. Any payments that the tenant has to make to you for utilities need to be referred to in the lease as "additional rent." If they are a separate kind of charge, then some courts may not allow you to evict for non-payment of those bills or allow you to charge late fees for them.
  2. Always make sure to bill the tenant and notify them immediately after receiving the bill from the utility company. Don’t give the tenant an excuse for non-payment because you waited too long to bill them. It shouldn’t matter, but some courts may take sympathy on the tenant if they are getting late notice.
  3. Have the payment terms specifically listed in the lease. It should say something about how long the tenant has to pay after being notified, and it should say that an invoice from you is sufficient rather than requiring a copy of the utility bill itself.
  4. Take a utility deposit from the tenant at the beginning of the lease along with the normal security deposit. This should cover your best estimate of the total utility costs for a peak month of the year. This ensures that you have not only enough money to cover the rent if you have to evict them, but also the utility bills.
  5. Never do this unless it is physically impossible for the tenant to be responsible for the utility bills!

Give us a call and we can start taking care of all these headaches for you. Being a landlord is a lot more complicated than just taking rent checks. Let us do the hard part for you, and just watch the checks get deposited into your account.

When a tenant abandons the property

Todd Ortscheid - Tuesday, September 16, 2014

Thankfully this is a rarity if you are using a reputable management company like us that screens tenants thoroughly, but it's impossible to completely avoid. Sometimes there will be a tenant who abandons a property mid-lease. It usually happens after the tenant loses his job, or gets divorced, or has some other huge lifetime event that prevents him from paying the rent. In any case, no matter what the circumstance is for the tenant, what matters to you is how you deal with the abandoned property.

First, you need to be able to ascertain for sure that the tenant actually did abandon the property. The tenant simply not being there himself isn't enough, because there's always the possibility that he's in the hospital, out of the country, etc. That doesn't constitute abandonment. In those cases, the tenant still has legal possession of the property.  However, there are several key things to look for that would constitute abandonment:

1. Are the utilities off? Our leases require the tenant to keep all utilities on for the entire length of their occupancy, even if they are out of the country for a significant period of time.

2. Is there still large furniture in the property? Beds are the most important thing to look for. If a table and chairs is left, but there are no beds or mattresses, then that's an abandonment.

3. Did the tenant send written notice that they were abandoning? It doesn't have to be a legal document, just something in writing from the tenant.

 

It's important to not enter the property without attempting to provide reasonable notice to the tenant first. Until it's been confirmed that the tenant has abandoned, then they still have legal possession of the property. Even as the owner, you can't enter without providing reasonable notice. Some leases specify 24 hours to codify what reasonable notice is. If you try to provide notice and can't reach the tenant, then make sure to knock on the door prior to entry.

After you've verified that the tenant has abandoned the property, it is best to take date stamped pictures so that you have evidence in case the tenant tries to come back and say that they have possession, or that you stole their property. Pictures that show a disheveled condition of the house without large furniture will keep you on sound legal footing. Then it's time to send the move-out statement to the tenant. Since you don't know where they are, just send it to the property address, which is their last known address. Keep it when it gets returned so that you have record that you attempted to send them their required statement.

If you've dealt with tenants abandoning your rental property, you know how much it can cost you in both lost rent and repairs. Abandonment is far less likely when you have a reputable management company screening your tenants. Give us a call so that we can help you find a good tenant.

Wage Garnishment from Deadbeat Tenants

Todd Ortscheid - Saturday, June 14, 2014

Thankfully, the vast majority of our clients never have to worry about this situation. Very few tenants ever have to have an eviction filed against them, since we're so thorough with our tenant screening on the front-end, but no screening can ever completely eliminate evictions. So what happens when an eviction is filed and the tenant is removed or abandons the property while owing a lot of money?

First, we won't rent to anyone unless they pay a full month's rent for a security deposit up front. Some individual landlords (and even some inexperienced property managers) will allow a tenant to move in without a full security deposit, or even no security deposit at all, with the idea that the tenant will pay the security deposit in installments over the first couple of months. This is the worst idea imaginable for two reasons:

  1. A tenant who doesn't have enough cash to pay a security deposit and the first month's rent is almost certainly going to be a problem tenant. This tenant is invariably a tenant who pays late every month, or who has to be evicted almost immediately.
  2. Judges will generally not award you a monetary judgment for the unpaid security deposit payments when you go to evict the tenant. So if you setup a payment plan for the security deposit over the first two months of the lease, and the tenant doesn't make the payments and you file eviction, you don't have any money held to cover the unpaid rent, and you won't be able to collect it after the fact.

Don't ever let someone move into your house without getting a full month's rent for a security deposit up-front! No negotiation, no exceptions, period. If a property manager tries to tell you otherwise, run away as far as you can. He's just trying to get the property rented as soon as possible to collect the leasing fee, or he's completely inexperienced and will cause you a whole host of problems later.

So, now that we've established that a full month's rent is being held as a security deposit from the beginning, that already serves as some security against the tenant not paying. Rarely do we see damage to a property, even from bad tenants, that exceeds the security deposit. So at least some money should be available from the security deposit to cover unpaid rent when you evict a tenant.

But since the eviction process can take more than a month, the security deposit won't cover everything. That means that we'll have to go after the tenant for the money. There are several ways that we can collect money from a deadbeat tenant.

The most obvious way is wage garnishment. If a monetary judgment has been issued by the judge in the eviction case, then we can file a motion of continuing wage garnishment against the tenant. The court will send a Sheriff or other process server out to the tenant's place of employment ordering the employer to withhold money from the tenant's pay check and send it to the court. The court holds the money for 15 days to wait to see if the tenant files for bankruptcy or files to challenge the garnishment (very unusual), and then we can apply to "condemn" the funds, meaning have them sent to us to cover the tenant's outstanding balance. Generally, the employer is required to withhold 25% of the tenant's after-tax income from each pay check for 6 months. If the amount owed still isn't paid at that point, then we would have to file again for another 6 months, and so on until the debt is paid in full. Obviously, this requires the tenant to have a job, so if a tenant has been laid off or fired, then wage garnishment isn't an option. But this is a very powerful tool in many cases to collect unpaid rent.

A less well-known method of collecting unpaid rent is a bank account levy. If we know the tenant's banking information, then we can file to have the court issue a levy against the tenant's checking account. A Sheriff or other process server will serve the bank with a court order to take the money from the tenant's account and send to the court. The court will then hold the money temporarily as they do with a garnishment, and then we can apply to condemn the funds. If the tenant doesn't have enough money in the bank account, then the bank will empty the account and send what was available. Theoretically, we can file again to get more money when the account has more money deposited, but most tenants will close the bank account and open a new one once they realize that we're levying their bank account. At that point, it becomes difficult (if not impossible) to track down the tenant's new bank.

Another good way to pressure a tenant to pay is to file a report with the three major credit bureaus. When a tenant leaves a property without paying off his balance, we file a report with the three credit bureaus to put a red flag on the tenant's credit report. It shows up as a collection account, reduces the tenant's credit score, and will serve as a big warning to any legitimate landlord to not rent to that tenant. We have had tenants come crawling back to us over a year after abandoning a property and begging to be put on a payment plan to pay off their debt so that they can get the red flag removed from their credit report because they want to buy a house, lease a car, or rent a new property.

Finally, personal property, such as a car owned by the tenant, can be confiscated from the tenant to satisfy a court judgment. This is a very difficult way to collect debt, and we would normally refer this to an attorney if an owner wanted to go this route to collect the money.

Of course, there are special circumstances that can make any of these methods more complicated than they would seem on first glance. For example, if a tenant's only source of income is social security, then that money is untouchable. Child support payments are also out of bounds. Sometimes a tenant who doesn't have a particularly great job will quit his job as soon as a wage garnishment beings and find a new job. Etc. These are all complications that make collections more difficult, and in these cases we will typically hand the collections case over to a firm that we work with who handles more complicated collections cases. Obviously, they charge a hefty fee to collect the money, but getting back 60% of your money instead of 0% is definitely better.

Clearly, this is all pretty complicated, even in the simplest cases. This is just one of many reasons that it pays for you to have a professional property manager to handle your rental property instead of trying to do it yourself. Don't be one of the many owners who comes to us after the fact begging for help with a deadbeat tenant after you've already gone for months without rent income. Be pro-active and hire a property manager from the beginning so you don't have to deal with these problems. Give us a call or submit a request for information here on our web site and we'll get right back to you.


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120 Village Circle
Senoia, 30276

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