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Good Cop, Bad Cop: Rent Collection & Lease Enforcement

Chris Claflin - Tuesday, October 20, 2020

There are so many questions to ask when it comes to rent collection and lease enforcement. How do I collect rent? What do I do if a tenant doesn’t pay? How do I tell them I’m evicting them? This can be one of the most anxiety-ridden parts of being a property manager. No one wants to evict a tenant or inform them of a violation, but unfortunately that’s just part of the job.

Many property managers get bogged down or discouraged by legal processes and lease enforcement. But, always remember that property management is worth the struggle. Not only can it provide incredible financial opportunities and security, but you also have the opportunity to provide a great living experience for your tenants. 

Rent Collection

The first thing to consider about rent collection is how you will actually collect. Most property managers collect rent through a direct depositing system. If you decide to collect rent through checks, be sure to have them mailed to a P.O. box, not your home address. You should also be sure to tell the tenant—verbally and in the lease—that the rent will be documented as received when physically received at the office, not when it was postmarked. 

In the state of North Carolina, there is a five day grace period. For the sake of ease, we recommend collecting rent on the first of the month. If they pay within the first five days rent is due then you legally cannot assess a late fee, or begin the eviction process until the sixth day. In North Carolina, you cannot charge a late fee of more than 5% of the monthly rent. Even a cent more could cause a legal issue. 

Lease Enforcement

Other than rent collection, there are a few other sections of the lease that you need to enforce. You may own a property that falls within a homeowners association (HOA). Your tenant has to follow all of the Covenants, Codes and Restrictions (CC&Rs) that are outlined by the homeowners association. Remind your tenants that even things as simple as a vehicle parked on the side of a road or a trash can left out for too long can incur HOA fees. 

Be sure to have a process in place in case you do receive a violation. If it is the first or second time, give your tenants a friendly reminder. Cracking down on good tenants only causes indignation, so try to be kind and let them know that you are on their side. 

If you are completing an inspection or drive by a property and notice some damage, remember that you don’t have to wait until the end of the lease to fix it. This is especially important when it comes to really big damages. If you do fix it mid-term, take it out of the security deposit and charge it back to them. This sends the message that you are keeping an eye on them so that they know to be more careful in the future. 

Follow up with tenants to see if they have added any pets, brought in more roommates or have done anything else that violates the lease or is cause for an update. For example, if pets are allowed in the lease and the tenants do not have a pet upon move in, but later adopt a cat, you would ask them to pay the pet deposit and any monthly fees from that moment onward. 

Also, you must document any violations. Take photos if you can and file all evidence in a safe place. You will want this on-hand if you ever need clear evidence to evict someone due to a violation. Completing regular inspections will provide easy access to current photos or other documentation that may be needed at a later date. 

Legal Processes

There are many laws and legal processes to be aware of as a property manager. From the Fair Housing Act to late fee laws, it’s never a bad idea to consult a lawyer or state law handbook before you make a tricky decision. We spoke with Chris Loebsack of the Eviction Team of Loebsack and Brownlee, LLC to explain some of the legal processes of nonpayment of rent, eviction notices and other lease violations

When a Tenant Doesn’t Pay Rent

In the lease, you should include a clause explaining that after the five day grace period you may charge a late fee of up to 5% of the monthly rent. Be sure to only charge exactly 5%. If you charge even a penny more and you get caught, then you cannot charge a late fee for the rest of the lease. You do not have to send a notice that you will be charging a late fee, but if you do you cannot send it before the sixth of the month (assuming you charge rent on the first). 

Choose a timeframe that works for you. Some property managers like to send a notice right on the sixth, others give tenants at least two weeks. Whatever you do decide, it has to be consistent with all of your properties. If you allow one tenant two extra weeks and another only seven days, then a lawsuit could be filed against you on grounds of violation of the Fair Housing Act. 

The Eviction Process and Timeline

If the tenant still has not paid, you have to decide whether or not you want to go to court. It is not an incredibly complicated process, so you can do it yourself if you want to. While it’s not difficult, it can be a long process. 

Here is an illustration of the legal process and estimated timeline:

Day 1: The first thing that you will do is file a Complaint In Summary Ejectment with the small claims court. 

Day 10: In about nine to ten days, the hearing will be held in front of the magistrate. This is where you will present all evidence of a violation of lease. 

Day 10-20: If the judge rules in your favor, then there is a ten day appeal period. This gives the tenant time to appeal to the district court if they want to. Every tenant is allowed this right, no matter what they did to violate the lease. 

Day 20: If the tenant does not appeal to the court and the tenant still has not paid, then you will get a Writ of Possession. This allows you to inquire about scheduling a lock-out with the sheriff.

Day 27: Typically you will hear back from the sheriff in about one week. This is when you will schedule the actual lock-out, which is generally two weeks from the day that you schedule it. 

Day 41: The last step is the actual lock-out with the sheriff. It is expected that you schedule a locksmith to change the locks of the property. The sheriff is only there in the case of malfeasance. 

The whole process takes about six weeks to complete. So think long and hard before you decide you want to evict a tenant. 

Other Lease Violations

Tenants can be evicted for reasons other than nonpayment of rent. For example, substantial criminal activity is a reason why a property manager may evict a tenant. However, it is important to note that no matter how serious the crime was, there is no such thing as emergency or expedited eviction. 

The timeline is exactly the same as any other eviction. The only difference here is that you will be using different evidence for your case. In the case of eviction based on some other lease violation, send the notice right away so that you can begin the long legal process.

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While collecting rent for the first time as a property manager feels great, completing an eviction for the first time usually doesn’t. This podcast is a great resource to learn not just about the eviction process and timeline, but also about many of the other facets of property management.

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