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 10-day 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 in court.

But even after you file an eviction, there is no guarantee that you’ll get paid. Most nonpayment cases are settled with court-approved payment plans, sometimes with rental assistance the tenant receives. If not, then presumably the court will give you possession of the rental property. However, the court doesn’t have authority to award you a money judgment for rent except in certain cases where the tenant pays rent into court related to counterclaims they might assert.

What to do now? First look to your security deposit to cover unpaid rent. If you don’t have a security deposit, or if it is insufficient, you may need to file a small claims action in court. Even then, the best 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 manufactured home and floating home tenants). A 30-day notice is also the remedy for a security deposit that hasn’t been paid, rent that is at least one month past due, and any other charges the tenant has failed to pay (e.g., NSF fees, late charges, etc.). If a 30-day notice doesn’t work, the alternative is again filing 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 proactive remedy for every landlord is a security deposit. There is no statewide limit on what landlords can charge for a security deposit, although certain municipalities do impose limits (e.g., Portland, Eugene). I recommend that landlords require a security deposit equal to at least one month’s rent – if not more. You can also require a last month’s rent deposit in addition to a security deposit. These deposits are a cushion against losses for landlords.

The other thing you should do as a landlord is to be vigilant. Act on payment defaults right away and don’t let them linger for months. 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.)