Issue the pay or quit
Do you know what the first step should be for you as a landlord if you did not receive payment from your tenant this month? The answer is: issue the pay or quit letter.
Landlords in our area typically have their residential leases set up so rent is due on the first and late after the fifth of each month. Our leases are not that way. In our contracts, rent is due on the first, and late on the second. This makes our rent collection and bookkeeping more streamlined.
We found that going the other way — you know, having a grace period — tended to encourage the idea of paying late. In other words, more rent came in on the fifth than on the first. And if we had to file for eviction, it meant more time before we could get our house back.
So to combat that issue, we decided to incentivize our tenants by offering them a discount if they paid on or before the first of each month. And we found that little nudge was enough to have them pay on time. And if not, we were already in motion on the second to start dispossessory and get our house back. Like I said, streamlined.
But whether or not you have a grace period, if the rent is not paid by the late date specified in your lease, then your first step is to issue a letter of demand that is often referred to as a “pay or quit” letter, and it should read something like this:
“Dear Mr. and Mrs. Tenant,
The purpose of the letter is to let you know that we did not receive your rental payment this month. This means you are in violation of your residential lease contract.
Your account is now delinquent in the amount of $1300.00 in unpaid rent. (This sum includes your late monthly payment of $1250.00 plus a $50.00 late fee.)
If we have not received your full delinquent payment in certified funds by 5p.m. today, you will need to move from the property. Otherwise, we will have no choice but to begin immediate eviction proceedings.
Please know that it is not our wish to evict. Eviction is a lose-lose proposition for both of us. You will have an eviction on your permanent record, and we will have to deal with an unexpected vacancy. This is why we hope you take immediate steps to remedy this problem.”
Tradition suggests that you use certified mail to have this letter delivered or tack it to the front door, but you can deliver the letter in any way that you and the tenant have agreed to in your lease. In our contracts, for instance, we can send it via mail, hand deliver it, email it and even text it. We love text and email because they are time and date stamps for when it was sent and received, which is great evidence to have should you have to go to court.
Now notice what our pay or quit says. First, it lets the tenant know what their violation was. (They didn’t pay.) It then lets them know how much they need to pay in order to bring their account current. It tells them how long they have to do so and then what happens if they do not comply. Finally, our last paragraph lets the tenant know that eviction is not something we want to do. Instead, we would prefer for them to fix the problem.
The reason this letter is called a “pay or quit” is because you are telling the tenant they have two options: pay what they owe or quit and move. And this letter is important to get issued just as soon as possible once the payment is late. That’s because you can’t move forward with filing for dispossessory until you have done this. And the sooner you get the ball rolling in that direction, the better.
And let me say this, just because you sent a pay or quit, doesn’t mean you have to evict your tenant. As a matter of fact, we had to send out two letters this month. And neither ended in eviction. But there should be a policy and procedure of issuing the pay or quit. And it should be methodical so that your tenants know what to expect.
Our tenants know they’ll get a letter on the second of the month if they are late. Sometimes this letter alerts the tenant to an issue with their bank account. Sometimes it opens the line of communication to other issues that have been going on. And other times the tenant has already called us because of an issue like their pay period not lining up with the first. In this case, we have made arrangements with them and adjusted our pay or quit accordingly, but they still receive the letter on the second day of the month like everyone else.
In any case, issuing the pay or quit letter quickly and methodically lets everyone know what to expect, holds everyone accountable, gets the ball rolling and cuts way down on the time it takes to get your property back if you have someone who’s trying to take advantage of the system.
Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.