Real Estate

Help: Tenants not paying rent

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  • Jun 21st, 2016 7:00 pm
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[OP]
Jr. Member
Aug 6, 2008
149 posts
149 upvotes

Help: Tenants not paying rent

My tenants signed a one year lease starting Feb 1, 2016. I did a credit check on the tenants and they had very bad credit. But the tenants had a compelling story about a dispute with a gym that destroyed their credit rating, but to assure me, they suggested to me to leave an extra month's of rent as deposit. So before they moved in, they paid the equivalent of three months rent (first and last two months rent).

For the last four months, only one post dated cheque went through. The cheque for March bounced, but the tenant paid by cash a few days after March 1. The April cheque was good, but the May, June cheque all bounced. I served a N4 notice on June 1st for a move out date of June 15 unless they pay the May, June and July's rent. The tenants met with me on June 14 and paid the rent for May only.

My questions are
a) Am I screwed because the lease agreement states that the landlord collected a deposit equivalent to the first and last two month's rent? I only realize that now it's illegal to collect more than first and last month rent as deposit. But I did not force this on the tenants. It was the tenants who offered.
b) Am I also screwed because in the N4 form with a termination date of June 15 that I asked the tenant to pay for July's rent as well? Technically I haven't cashed the July cheque yet so it's not due as of June 15th.

It's such a shitty situation. As landlords, we invested significant money in the property hoping to have tenants who pay their rent on time. We honestly did everything to protect our investment but this happens. Now I realized what a painful process it is to terminate a lease and get an eviction even if tenants don't pay their rent.

Any suggestions or advice would be appreciated.
62 replies
Deal Addict
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Nov 21, 2015
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Toronto, ON
My advice to you will be to consult a good real estate lawyer. Any suggestions you find on this forum may cause further damage.

That being said, be careful with taking this to court. I heard majority of the times, the court rules in favor of tenants.
Deal Addict
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Nov 23, 2008
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You put yourself in a bad situation. Cheapest thing to do is buy them out, to get them to leave.
Penalty Box
Dec 27, 2013
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Toronto
wow you bought the sob story for the ***** credit? lol
Deal Addict
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Sep 23, 2014
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It is not illegal to collect more than the first and last month of rent IF the TENANT offered it first. In fact tenant can offer the entire year of rent if they wish and it is not illegal. As for the N4, I am not sure about that but if you need eviction help you can PM me as my property manager has access to the right resource. Next time treat your rental as a business without emotion and do not listen to any personal stories if so and but as it will just cause further grief. I reject any tenant that has a sub 750 credit score.
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Penalty Box
Dec 27, 2013
8003 posts
3989 upvotes
Toronto
traderjay wrote: It is not illegal to collect more than the first and last month of rent IF the TENANT offered it first. In fact tenant can offer the entire year of rent if they wish and it is not illegal. As for the N4, I am not sure about that but if you need eviction help you can PM me as my property manager has access to the right resource. Next time treat your rental as a business without emotion and do not listen to any personal stories if so and but as it will just cause further grief. I reject any tenant that has a sub 750 credit score.

you should change your credit score to 680 or less That's a better cut off.. There is virtually no difference. You could potentially losing access to tenants because they recently applied for a credit card, or went to a new service provider.
Sr. Member
Apr 2, 2009
851 posts
231 upvotes
traderjay wrote: It is not illegal to collect more than the first and last month of rent IF the TENANT offered it first. In fact tenant can offer the entire year of rent if they wish and it is not illegal. As for the N4, I am not sure about that but if you need eviction help you can PM me as my property manager has access to the right resource. Next time treat your rental as a business without emotion and do not listen to any personal stories if so and but as it will just cause further grief. I reject any tenant that has a sub 750 credit score.
Agree with most of the above. It is not illegal to get more than first/last if it is offered by the tenant, key is you need to have proof that it was offered by the tenant and not demanded by you.

This entire situation could have been avoided if you treated your rental as a business and not let emotions rule your decisions

As for the 750 credit score, disagree with that completely. I don't even think my score is currently that high and I've never had a late payment on anything in my life and own multiple rentals (not sure on my score though but I doubt it's that high as 300k heloc is sitting at about 95% utilization rate due to investing that money elsewhere currently
Deal Addict
Jun 20, 2011
2004 posts
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Never believe a sob story :(
Deal Addict
Aug 31, 2014
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buy them out to leave - I agree its the cheapest option and cut your losses with a lesson learned
Deal Addict
Jan 26, 2016
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Toronto, ON
traderjay wrote: It is not illegal to collect more than the first and last month of rent IF the TENANT offered it first. In fact tenant can offer the entire year of rent if they wish and it is not illegal. As for the N4, I am not sure about that but if you need eviction help you can PM me as my property manager has access to the right resource. Next time treat your rental as a business without emotion and do not listen to any personal stories if so and but as it will just cause further grief. I reject any tenant that has a sub 750 credit score.
How does good credit protect you? I have 800+ credit, but if I don't pay you my rent can you actually ruin my credit?
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Sep 19, 2002
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WinterSleep wrote: How does good credit protect you? I have 800+ credit, but if I don't pay you my rent can you actually ruin my credit?
Landlord files in small claims court. Tenant loses and landlord obtains a judgement. This judgement shows up on your credit report.
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Sep 8, 2007
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I think it's reasonable that different landlords have different credit score requirements based on the property. But it's good advice to keep requirements high and never waiver on the credit check requirement even if they offer a year payment up front. It's not just about getting the cash in your pocket, it's one of few great indicators as to the long term responsibility of the tenant.

I've heard many sob stories even prior to running it such as "oh my ex was supposed to pay my cell phone bill but didn't and it screwed up my credit. I was so mad." Ok..so the phone is in your name but you didn't make sure it was taken care of. Got it. Bye. Or we are very private so we don't like to share our credit with anyone. Oh.. so you will for that new truck you just financed..but to come live in my property worth a few hundred thousand..you aren't comfortable with that? Ok bye.

But this is for next time. I guess the key matter is how to get them out now. They used the high deposit trick to distract you from the credit issue which might suggest professional renters. Therefore you need pro advice.
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Nov 2, 2013
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cartfan123 wrote: I've heard many sob stories even prior to running it such as "oh my ex was supposed to pay my cell phone bill but didn't and it screwed up my credit.
I have first hand experience with this. Women nowadays are morons and date the biggest idiots with no basic financial literacy or management skills, not to mention some who you'd wonder if they can even tie their shoes. You can usually tell after a while what kind of person fits this description by a brief casual conversation or two with them. Dating or even socializing experiences often trickle down to your financial decisions and in the future can result in a financial loss or profit in the tens of thousands. Sometimes social experience trumps financial in this case, as even if her credit is perfect doesn't mean in the future it will be. Knowing this I would not let one of these idiots into my rental property.

I recently acquired 1 female tenant and she seemed alright, but we agreed on a shorter than usual lease in case things didn't work out. In my mind I was thinking if I get an idiot, I only lose some x months of rent and then she goes.

The gym probably destroyed their credit because most of them do contracts, and lots of people hardly know what a contract entails. So they thought they could probably walk away from the $20-30 bi-weekly payment and collections went after them for the amount of: gym fees multiplied by x periods remaining in contract.
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FirstGear wrote: I have first hand experience with this. Women nowadays are morons and date the biggest idiots with no basic financial literacy or management skills, not to mention some who you'd wonder if they can even tie their shoes. You can usually tell after a while what kind of person fits this description by a brief casual conversation or two with them. Dating or even socializing experiences often trickle down to your financial decisions and in the future can result in a financial loss or profit in the tens of thousands. Knowing this I would not let one of these idiots into my rental property.

The gym probably destroyed their credit because most of them do contracts, and lots of people hardly know what a contract entails. So they thought they could probably walk away from the $20-30 bi-weekly payment and collections went after them for the amount of: gym fees multiplied by x periods remaining in contract.
I look at the gym situation differently. For 1 it was only the potential tenants side of the story that was heard. 2 whatever the cause was, it ended up on the report and most importantly was the most accurate predictor of these tenants and what was to come.

When looking for tenants it is important for a landlord to approach it as I'm willing for the unit to go vacant a month or two to get the best tenant. The initial screening is one of the only tools you have to help protect your property. You want to ensure that the tenant views this as a two way street as in good tenant, good landlord. There's many that view landlords as scum, but expect any landlord to turn over the keys. I'll let others rent to those with excuses. For me if there's issues paying a $50 month fee and not being able to take care of it...a property that requires much larger payments plus upkeep is not likely to happen.

Unlike a vehicle which a bank can repo for non payment, or a commercial property where you can lock the door...the eviction process is difficult. Many landlords wrongly assume that buying an investment property and then managing it is a simple process. If you do the hard work at the tenant screening process, you can reduce work down the road.

In this case the tenants apparently had "very bad credit" which would suggest perhaps more than the gym issue. Landlords need to realize someone giving an extra months rent to gloss over red flags does not work. Even if you get a year prepaid it's irrelevant. Red flags remain red flags.
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Sep 8, 2007
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traderjay wrote: It is not illegal to collect more than the first and last month of rent IF the TENANT offered it first. In fact tenant can offer the entire year of rent if they wish and it is not illegal. As for the N4, I am not sure about that but if you need eviction help you can PM me as my property manager has access to the right resource. Next time treat your rental as a business without emotion and do not listen to any personal stories if so and but as it will just cause further grief. I reject any tenant that has a sub 750 credit score.
I think what professional renters do is offer up the extra months payment to a) distract from red flags and b) since it's verbal can claim and the landlord tenant board that it was the mean landlord that demanded it. And becomes a he said - she said type issue. I maintain the extra payments as security does not reduce the risk profile of a tenant, in fact it tends to increase the risk because a good risk tenant would not need to offer such surety. Completely agree on looking for strong credit scores.

If I can ask how much does your property manager take as a % of rent. What services do they provide for you? Would you ever go it on your own?
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cartfan123 wrote: I look at the gym situation differently. For 1 it was only the potential tenants side of the story that was heard. 2 whatever the cause was, it ended up on the report and most importantly was the most accurate predictor of these tenants and what was to come.

When looking for tenants it is important for a landlord to approach it as I'm willing for the unit to go vacant a month or two to get the best tenant. The initial screening is one of the only tools you have to help protect your property. You want to ensure that the tenant views this as a two way street as in good tenant, good landlord. There's many that view landlords as scum, but expect any landlord to turn over the keys. I'll let others rent to those with excuses. For me if there's issues paying a $50 month fee and not being able to take care of it...a property that requires much larger payments plus upkeep is not likely to happen.

Unlike a vehicle which a bank can repo for non payment, or a commercial property where you can lock the door...the eviction process is difficult. Many landlords wrongly assume that buying an investment property and then managing it is a simple process. If you do the hard work at the tenant screening process, you can reduce work down the road.

In this case the tenants apparently had "very bad credit" which would suggest perhaps more than the gym issue. Landlords need to realize someone giving an extra months rent to gloss over red flags does not work. Even if you get a year prepaid it's irrelevant. Red flags remain red flags.
It's also the vibe of the people you get that you have to note. You can usually get a pretty general idea. Based on my previous description, women who get themselves into trouble, especially those who constantly look to involve themselves with and rely on questionable men, can translate to problems collecting rent or keeping your place in a good condition. Someone who looks for an idiot is likely not going to have the basic common sense to pay your rent on time. Not to mention the people they attract to party at your property, resulting in wear and tear.

I took an additional approach to just being nice or allowing vacancy- to charge just slightly below market for the right person. This results in a longer term customer, so in the long run you in fact lose less money.
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The gym story should have been your first clue. After getting burned twice in a row many years ago because I bought sob stories I stopped renting to anyone with bad credit. Never had a problem after that. Go figure...
[OP]
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Aug 6, 2008
149 posts
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It's a lesson learned for sure. My thinking was, people with pristine credit scores would most likely be able to buy instead of rent, and some people have legitimate reasons for not having bad credits, such as a dispute with a gym. The extra month of rent as security deposit did make me feel better about this because I figured if they bounce a cheque, I could evict them. But I'm only discovering now it's such a lengthy and uncertain process to get an eviction. Even if you get an eviction order, you could be out several months rent already along with significant legal fees.

The laws in Ontario does tilt towards the tenants, but the ultimate cost is shared by all landlord and tenants. The risk of having deadbeat tenants and the difficulty in evicting deadbeats make investors less willing to invest in investment properties, or increase the rent for all their tenants to cover the risk and costs of these deadbeats. In the end, everyone pays.

I will contact a professional who help landlords and evict these tenants. And yes, you can't get emotional in this business. That was my mistake.
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Oct 9, 2008
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Looks like you just leased out to "sub-prime" renters. The 1 extra months rent you collected was your risk-premium but it was severely under priced in my opinion, the risk-premium should have been at least an extra 3 months rent via cert. cheque. If you would have done it this way, as soon as the renter defaults for the first time which is a high likelihood given their credit history (sob story or not, being a landlord is strictly business) you could have started eviction process immediately and the risk prima could have been worth it to insulate against the time lost if you knew the eviction process. You also don't seem to have a full grasp of your province's eviction process which means you should have denied these renter's at first glance at their credit...

If you don't mind me asking OP, what city is this property in?

You don't need a lawyer for assistance in eviction process in residential as some people have suggested, you need the services of an experienced property manager. I would suggest looking for these services from property managers located in Brampton or Toronto (near Jane/Finch) as they will have the most relevant experience.

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