As a landlord, it’s never a desirable situation to accept partial payments from your tenants. However, with the current economic climate, the unpredictable nature of jobs, health issues, and various other factors beyond your control, some landlords may find themselves faced with the decision to accept partial rent payments. The COVID-19 pandemic has heightened this scenario as more landlords have had to consider this option due to financial struggles faced by many renters across the nation as well as eviction moratoriums.
It’s crucial to have a clear understanding of the proper ways to accept partial payments so that you can safeguard your business and rental properties while also offering some flexibility for your tenants. In this guide, we will explore the concept of partial payments, provide guidance on how to handle them, and also discuss what to do if you ultimately decide against accepting partial payments.
What’s a Partial Rent?
As a seasoned landlord or property manager, you’ve likely encountered the infamous statement, “I’ll pay you the rest of the amount later. Can you just accept half of the rent now?” This type of situation is never a favorable one for landlords, as it puts them in a challenging and often uncomfortable position. The desire to be accommodating and helpful to your tenants is understandable, but accepting partial payments can set a dangerous precedent that may have long-term consequences for your rental business.
While it may seem like a small act of kindness to accept partial payments, the reality is that this decision can have far-reaching implications. Allowing one tenant to pay partial rent may mean that you’ll have to accept partial payments from all tenants in the future, which can negatively impact your cash flow and financial stability. As a landlord, it’s crucial to establish clear guidelines and standards for rent payments that all tenants are expected to follow.
Why do Tenants Request Partial Rent Payments?
There are several reasons why tenants might ask their landlord to accept a partial rent payment. Some of the most common reasons include the following:
- Financial shortfalls: When rent is due, tenants may not have enough money in their bank account to pay the full amount. They might ask their renter to allow them to pay a portion upfront and the remainder later.
- Unforeseen financial difficulties: Even the most responsible tenants can encounter financial problems from time to time, such as unexpected car repairs, medical bills, or other expenses. When this happens, paying rent in full can be a challenge.
- Rent dissatisfaction: The cost of rent can be overwhelming for some tenants, and they might request partial payments as a form of protest.
- Property improvements or renovations: In some cases, tenants might arrive at a property only to find that repairs or renovations are still underway. They might ask to pay partial rent until the work is completed.
- Inhabitability concerns: If a tenant believes a property to be uninhabitable, they might withhold full payment until the necessary changes are made to bring the property up to code.
Why You Should Avoid Accepting Partial Rent Payments
As a landlord, it’s natural to want to accommodate your tenants and maintain a positive relationship with them. However, accepting partial rent payments may seem like a generous gesture, but it can have severe legal and financial ramifications. Below are some reasons why you should reconsider accepting partial payments:
Impairs the Eviction Process
One of the most significant disadvantages of accepting partial rent payments is that it halts the eviction process. If you accept a partial payment, you can’t file for eviction as you have not received the full amount. It also makes it difficult to collect the full cost, as the tenant may keep taking advantage of your generosity and asking for more time. Eventually, the eviction process will restart from the beginning if the tenant pays a partial amount towards rent before the lock-out date.
By accepting partial rent payments from one tenant, you won’t be able to deny it to others, which can result in discrimination. If you do, you risk facing a discrimination lawsuit under the Fair Housing Act, causing damage to your reputation and finances. As a landlord, it’s essential to treat all tenants fairly, and avoiding partial payments helps maintain fairness.
Accepting partial payments can lead to disorganized bookkeeping, making it hard to keep track of the rental payment and late fees. This can cause problems when calculating priority debts, leading to a nightmare situation. One way to maintain your books in order is to accept payments in full and on time.
Late Fees and Unwanted Disputes
Accepting partial rent payments can also lead to arguments with tenants over late fees. They may expect you to accommodate their partial payments but may not agree to pay the late fees. To avoid this, clearly mention in the lease agreement that if the rent is not paid in full by the conclusion of the grace period, they’ll need to pay a late fee. However, even with this in place, landlords often face difficulty in court as judges tend to side with tenants.
As a landlord, it’s crucial to set clear boundaries and stick to them. Clearly state in the lease agreement that when the tenant misses to pay the rent on time, they will receive an eviction notice. When tenants see that you are serious about the rules, they are more likely to pay on time. However, mishaps can still happen, and it’s essential to be firm when it comes to drawing the line.
When is it Appropriate to Consider Partial Rent Payments?
There may be times when it’s acceptable to entertain the idea of partial rent payments. For example, when the entire rent balance is paid in full by the due date, allowing for partial payments beforehand is generally considered alright. It’s common in the case of shared apartments, where multiple tenants contribute to the total rent amount. If the rent balance is not fully paid by the due date, the late fee policy should be implemented. If a tenant is consistently behind on rent payments, it’s advisable to issue a notice to pay or vacate. Utilizing rent payment tools like Apartments.com can also assist in ensuring timely rent payments each month.
It’s understandable that life can present financial difficulties, and even the most responsible tenants may face unexpected challenges such as job loss or illness. While it’s not the preferred method, in some cases, accepting a partial payment on or before the due date might be worth considering to retain a good tenant relationship. The decision to allow partial payments should be made based on individual circumstances and use discretion.
Managing Partial Rent Payments
If you have made the decision to allow partial rent payments, here are a few steps to consider:
Understand the tenant’s situation
Communication is key. Talk to your tenant and attempt to figure out why they are requesting partial payments. It will help you make an informed decision and be more understanding of their circumstances.
Know the laws
Before accepting partial payments, familiarize yourself with the laws in your local and state area. Some laws may prohibit partial payments and interfere with eviction proceedings.
Establish a policy
Consistency is crucial. Develop a clear policy for partial payments and outline the specific circumstances under which you will allow them. This policy should be the same for all tenants if you have multiple units.
Put it in writing
To protect your investment, it’s crucial to have a written agreement for partial payments. Draft an addendum or a contract for Postponed or Partial Rent Payments, have both parties sign it, and ensure that it clearly outlines the terms and conditions of the agreement. This will help avoid any misunderstandings or conflicts in the future.
Refusing to Take Partial Rent Payments
Like a property owner, the choice to accept partial rent payments is yours to make. After careful consideration and communication with your tenants, if you have decided against partial payments, it’s important to stick to the terms outlined in the lease agreement. This agreement already specifies the amount of rent due and the due date, making it unnecessary to add a separate clause for partial payments.
It’s essential to have open and honest communication with your tenants if they approach you about partial payments. Explain your policies clearly and remind them of the due date for rent as specified in the lease agreement. If they are facing financial difficulties, consider alternative options such as paying rent using a credit card, a cash-for-keys deal if they know they cannot make rent, or adjusting the rent due date to correspond with their pay schedule.
In the event a tenant does not make the total rent payment on time, make sure to enforce your late fee policy. If they offer a partial payment in cash or check, refuse it and stick to your established policies.
Accepting partial rent payments from tenants is a delicate issue for landlords or property managers. Although it may seem like a generous gesture, it can have serious legal and financial consequences, such as impairing the eviction process, leading to discrimination issues, messy bookkeeping, unwanted disputes, and setting a dangerous precedent.
It’s crucial for landlords to have a clear understanding of the proper ways to handle partial payments and to establish clear guidelines and standards for rent payments that all tenants need to follow. However, there may be times when it’s appropriate to consider partial rent payments, such as when the entire rent balance is paid in full by the due date. Landlords must weigh the risks and benefits before deciding on accepting partial rent payments.