By Gwen Fuszner, NCHM instructor
So you’ve made it to Property Manager! Congratulations! You probably love your job and all the responsibility and problem solving that comes with it – with one exception: Those Dreaded Collections. Chasing money isn't anyone’s favorite part of the job. In fact, it can be the one weak link in an otherwise stellar operation. Need some help? Let us introduce you to the Four Ps of Debt Collection.
If you are lucky enough to have a staff, maybe a leasing agent and/or an assistant manager, which of the three of you is better at being direct, handling difficult conversations, and getting notices out on time? This is the person who needs to be responsible for collections. The key is that you must assign this task to a specific individual and it is important that this person is someone whose skill set is well suited to take on the challenges we face when collecting debt. If you are the only person running your office, you will need to hone these skills within yourself.
Controlling property operations at every level hinges on ensuring that you are screening your tenants properly. Remember, HUD allows us to "establish and apply written reasonable screening criteria to determine whether applicants will be suitable tenants" (4350.3 Par. 4-7B1). This should be detailed in your Tenant Selection Plan (TSP). Make sure it contains specific, reasonable credit and rental reference requirements. Include a question about the tenant’s payment history. This alone will dramatically reduce your property’s incidence of tenant portion non-pay.
At the time of move-in, make sure you are going over your property’s Rent Collection Policy and what you expect the resident to do if they find themselves in a situation where they are going to be late or unable to pay their rent. Many tenants are afraid of discussing their situation with management because they do not know what to do and are afraid of what will happen.
Reviewing your Interim Recertification Policy and Procedures at move-in will alert the resident to the fact that a decrease in income can result in rent being reduced at the first of the next month if it is reported on time. In addition, they don’t always realize that we can help them get in contact with supportive service agencies that can offer emergency assistance if needed. Take the time at move-in to explain not only your collection and interim recertification procedures, but also the importance of staying in communication so that management can provide additional assistance if needed.
Keep a list of supportive service agencies and their local office contact information updated and on hand to provide to your tenants facing hardships. Organizations such as Cornerstone, Interfaith, St. Vincent De Paul, and Catholic Charities are often very helpful, and most utility companies also have hardship assistance programs. Food banks can assist with supplementing a household’s ability to get through financial shortages as well. Remember that many of our residents are not aware of the additional resources available to them, and we are in a unique position to be able to counsel and connect these individuals to receive additional help. Also, it is so much easier to be helpful instead of hard-nosed in these situations. Everyone understands you are doing a job, and that job includes collecting rent. Demanding rent is much easier when you can say, “It sounds like you’ve hit a rough patch. Here are some organizations that may be able to provide you some assistance with rent payment, utility payments, and food. I can help you get in contact with them. Hopefully this will make it easier for you to get caught up. In light of this information, how much can you put toward your outstanding balance today?”
Consistency is key! Ensuring that policies are consistently applied and enforced is critically important. If your Rent Collection Policy says that rent reminder notices will go out the morning of the 2nd, late notices the morning of the 6th, and demands for payment with consequences for non-payment the morning of the 10th, this is what you should be doing on a consistent basis! Follow your policy! Remember, your Rent Collection Policy must also reflect your local laws regarding eviction. The key here is that you should never delay your documentation or filings, or deviate from your policy, or you may find that a judge will rule in favor of your tenant for your failure to deliver proper or timely notices in accordance with your lease contract, policy, and local landlord tenant laws.
Also keep in mind that the HUD Model Lease for Subsidized Programs says that the rent is due on the first and that a late fee of $5 can be charged if rent is not paid by the end of the fifth day. An additional $1 per day can be added for each additional day the rent is late. Please note that this only applies to programs using the HUD Model Lease for Subsidized Programs. Several other programs do not allow late fees. Be sure you are using the correct lease for your program and that you know what it says.
Sending late notice and demands for payment won’t be enough. In some cases, you will also need to get out and knock on doors. (You can do this at the same time you deliver the notices, but remember to send them through the mail as well.) There is nothing that says you can’t call, text, and email your tenants as well, but be careful not to forego documentation of these communications, and do not fail to send notices just because you have spoken to the tenant verbally, or over text or email.
Be sure to do your door knocking at a time when it is likely the tenant will be home and able to discuss the rent with you. You may need to stay late to catch tenants when they get home from work. For safety reasons, have a member of maintenance or a courtesy officer stay late and walk with you if need be.
It is not surprising how many late rent payments are received at the management office on the same day an eviction takes place. For many residents, there is no better reminder of the need to make rental payments a priority than seeing another tenant’s belongings being set on the curb by the sheriff’s office. Of course most of us never want to see this happen, but there is a point where it becomes necessary. Remember that placing bad debt accounts for collection is also a part of enforcement. HUD wants to see a 1% or less bad debt write-off per year on affordable properties, so it will be necessary to ensure that you are doing all you can to get those bad debts collected as well.
In summary, having PEOPLE who follow sound POLICIES and PROCEDURES will lead to a better record of PAYMENTS.