My Tenant Owes Me Money!

Predictably, one of the most common questions my clients ask is “how do I collect money that my tenant owes?” If the rent is past-due for the current month, the answer is a 72-hour rent nonpayment notice. Assuming the notice is properly prepared and served, the tenant has until the deadline in the notice to pay the rent in full. If the tenant doesn’t pay, you can file an eviction case. But even after you file an eviction, there is no guarantee that you’ll get paid. While most nonpayment eviction cases are settled with a court-approved payment plan, if not, then presumably the court will give you possession of the rental property. However, in most cases the court doesn’t have authority to award you a money judgment for the rent.

What to do now? Look first to your security deposit to cover any unpaid rents. If you don’t have a security deposit, or if it is insufficient, you may need to file a small claims action. Even then,the best that you can do is get a money judgment that still needs to be collected. Bank accounts and wages can be garnished, but this whole process might be more trouble than it’s worth to most landlords. (Hint: Consider turning over cases to a collection company. They will typically charge a high percentage fee, but recovering debts is their business.)

Another common scenario is a tenant who has paid the rent, but hasn’t paid utility charges. Since utility charges are not “rent,” they must be handled separately. The solution is a 30-day, for-cause notice giving the tenant a limited amount of time to pay the utility charges (14 days for most tenants, 30 days for mobile home park tenants). A 30-day notice is also the remedy for security deposits that haven’t been paid, rents that are over 2 months old, and any other charges the tenant might fail to pay (e.g., NSF fees, late charges, pet fees). If a 30-day notice doesn’t work, the alternative is again an eviction case, followed by a small claims action if necessary.

But all of this still begs the question of “how do I get paid” when a tenant defaults. The best remedy for every landlord is a security deposit. There is no limit on the amount of a security deposit in Oregon, so I recommend that landlords get as much of a security deposit as they can for each rental unit. The security deposit is a cushion against losses for landlords.

The other thing you should do as a landlord is be vigilant. Take action on payment defaults right away and don’t let them linger for months – or longer. The longer you wait, the more you stand to lose as the unpaid charges accumulate. (Note: There is a one-year statute of limitations to recover unpaid amounts from the date the tenant fails to pay.)