In your rental property business, you expect your tenants to be able to pay their rent on time fully. But what happens if you receive a partial rent payment from a tenant? Does it impact your ability to go through the eviction process? In short, yes, it can. For more information, here’s a comprehensive guide to help you navigate partial rent payments from tenants. Read below to learn more!
Key Takeaways
- Accepting a partial rent payment after serving a Notice to Vacate risks a court ruling that you have waived your right to evict.
- A strong lease with a specific non-waiver clause is your best protection against legal risks when accepting partial payments.
- Always document everything and use a consistent policy based on non-discriminatory business reasons to avoid potential Fair Housing Act violations.
What Is a Partial Rent Payment?
In our experience as a property services company, we’ve found that partial rent payments happen when a tenant provides an amount that only covers a fraction of the total rent cost. For example, your tenant gives you a partial payment of $1,000 for a $1,7000 monthly rent. Typically, tenants do this to avoid missing out on a rent payment completely.
What to Do When Offered a Partial Rent Payment?
As a landlord, it’s up to you to decide if you will accept partial payments from your tenants. But when you do, it’s critical that you understand what could happen in order to protect yourself and avoid being taken advantage of. So, here’s what we recommend you do when a tenant offers to pay a partial rent payment for the month.
- Communicate: Ask your tenant why they can’t make this month’s rent and why you should accept their offer for partial rent payment. Maybe they have an emergency, or their payroll is simply a couple of days late. Determine if the incomplete payment is justifiable and ask for proof of their situation. Here, you can also gauge how eager your tenant is to amend the situation immediately.
- Establish Conditions: When you decide to accept your tenant’s partial rent payment, you need to refer to your lease’s terms and conditions to guide your next steps. It should give you the timeline by which the tenant needs to pay the rest of their rent. If they fail to follow this deadline, you can then give them the lease-mandated late fee to penalize any further delinquencies.
- Document: To prevent any misunderstanding about the agreed-upon terms, put everything in writing. Keep a detailed record of the partial rent payments (with receipts) and your tenant’s outstanding balance.
Consequences of Accepting Partial Payment
Knowing how to safely navigate a partial rent payment from a tenant can help you avoid disputes. However, that doesn’t mean that there are no longer risks. As a landlord in Texas, you need to be aware of the potential consequences of accepting a partial rent payment.
You should be warned that accepting partial rent payment after serving a notice to vacate can void the notice. While there’s no TX property code that formally outright says so, courts generally see it as a waiver of your right to proceed with the eviction, and they may dismiss your case. This means you would need to serve a new Notice to Vacate and restart the entire eviction process. In turn, this could lead to delayed court dates, additional costs, and lost time.
Also, the most critical time to avoid accepting partial payments is after an eviction lawsuit has been filed with the court. While accepting payment after a Notice to Vacate is risky, doing so after a case is filed is almost a guaranteed way for the judge to dismiss the eviction. This will force you to start all over.
Then, there is the matter of rental income and cash flow. Any delay in payment in a rental property business can affect your cash flow. This can be a significant issue if you rely heavily on your monthly rental income to pay for mortgage, taxes, utilities, and more.
Next, there’s the possibility of a domino effect of more and more tenants coming forward to request partial rent payments once they know that you allowed another tenant to do so. Although it’s better than having to deal with no payments at all from them, it still could get out of hand quickly.
Importantly, if you don’t have a consistent, written policy for when you will or won’t accept partial rent payments, you make yourself vulnerable to Fair Housing Act (FHA) violation claims.
In other words, if a tenant claims you accepted or rejected their partial rent payments based on their protected characteristics (their race, color, religion, sex, national origin, familial status, or disability) you may be found to be non-FHA-compliant. So, you need to lay out concrete criteria for accepting or rejecting tenants’ partial rent payments based solely on legitimate, non-discriminatory business reasons, like a tenant’s payment history.
As a side note, Texas law specifies that landlords must give tenants at least three days’ written notice before they start the eviction process. The only exception to this minimum is if your lease enforces a shorter or longer notice period. So, that’s a critical note to keep in mind.
That said, as a critical disclaimer, we must note that this is not legal advice. You should always turn to a legal expert for their definitive say on these matters.
What to Do After Accepting Partial Payment
Given the possible risks of accepting partial payments, landlords need to take steps to protect themselves from lawsuits or liability. With that, here are some practical tips we recommend on what to do after you accept partial rent payment from a tenant:
- Use clear and concise language in your lease stating that you reserve your right as a landlord to collect the full balance from the tenant.
- If your legal counsel approves of it, your lease should state that accepting a partial payment does not waive your right to pursue the full balance and all remedies under the lease, including eviction. Also, it should specify how and when you’ll apply any partial payment (e.g., to late fees first, then to the oldest outstanding rent).
- Explicitly say that the partial rent payment is not an agreement to reduce the rent.
- Review the Texas Property Code on payment collection. Typically, succeeding payments are applied first to any outstanding balance to ensure that unpaid rent obligations preserve your right to file for eviction.
- If your current lease agreement does not have a clause on partial payments, consider adding one on the next renewal.
- Evaluate your tenant’s relationship and learn where to draw the line. If the partial rent payment has become a pattern, put your foot down and issue a notice to vacate for unpaid rent and the breach of the lease terms.
Partner with BMG For Your Property Management Needs
Having trouble enforcing payments in your rental property business? No need to look further than Bay Property Management Group. As experienced Austin property managers, we have an established process designed to streamline rent collection and avoid partial, late, and missed payments altogether. Interested? Contact us today to learn more!
