Last week a client, who I will refer to as Larry, called me regarding evicting a tenant who was behind on his rent. Larry is new to real estate investing and this was the first time he dealt with this issue. What should Larry do? Short answer – hire an attorney. Long answer – hire an attorney and learn how to handle these matters on your own.
The Eviction Process – “Notice to Quit”
The most important step in evicting a delinquent tenant is serving the Notice to “Pay Rent or Quit”. A misstep here will prove disastrous down the road. Most states allow for three methods of serving Notice (Note that additional requirements apply to Section 8 tenants):
- Personal service – Hand a copy of the notice to each tenant. Failure to serve each tenant on the lease will limit the action to only the tenant actually served and you will need to begin the process anew for the remaining tenant.
- Substitute service – Serve copies to a person of suitable age and discretion. Hand one set of notices (one for each tenant) to either a tenant or someone of suitable age and discretion. There is no bright line age limit. Rather, the idea is to hand the notices to someone old enough to understand the importance of the document. Also, you will need to mail a copy separately to each tenant.
- Posting and mailing – If you can’t locate the tenant then posting the notice on the door (put all of the occupants/tenants names on the notice) at eye level and mailing the notice to the tenant should suffice.
The Notice should give the tenant a certain number of days to pay rent or quit the premises. Each state has different requirements. Most states allow for three days. However, this is why I suggest using an attorney for your first eviction so you learn the laws of your state. Keep in mind that the day of service does not count. For periods of seven days or less (such as notices to pay rent or vacate), weekends and holidays do not count. Add one additional day if service involves mailing.
CAUTION – Review your lease agreement. If your lease agreement grants more time than required under law then the terms of the lease will control.
CAUTION – Include all past due rent and only rent in your notice (A three-day notice to pay rent or vacate is a demand to pay the rent or vacate and must not include non-rent items).
CAUTION – Require the tenant to pay in cash or cashier’s check. Do not take a personal check.
The Eviction Process – “Unlawful Detainer”
After notice is served and the time has passed for payment, you can file your “Unlawful Detainer” action to seek recovery of the premises and establish the amount owed by the tenant – the “Judgment”. This is the legal step in removing a tenant and generally takes between 15 and 30 days depending on your state. State Statutes and your court’s Rules of Civil Procedure govern this process so relying on a local attorney for your first action is money well spent.
CAUTION – If you are bringing an “Unlawful Detainer Action” be sure to list the proper party as the Plaintiff in the suit. If your property is owned by a land trust then the trustee of the Land Trust should bring the action. If the property is held in an LLC then the manager should bring the action unless your state requires incorporated entities to be represented by counsel.
The Eviction Process – “Collecting”
After you obtain your judgment and Writ of Possession, the next step for many landlords is determining how to collect the unpaid rent. If the tenant has skipped and you have no information on him then it is most likely a lost cause. However, if you know information such as the tenant’s place of employment, bank accounts, or vehicle information, then there may be a chance at recovery. Here are some options to consider:
A wage garnishment is one of the more effective ways to collect a judgment. It is very easy and your court clerk can generally provide you with the forms. Up to 25% of a person’s wages can be garnished and employers take it very seriously because the employer is on the hook for any failure to withhold the money.
If the tenant has money in a bank account, this can be a quick source for recovery (this is why I advocate in many of my posts to keep your savings in a Limited Liability Company and not in your personal name). Similar to wage garnishment, your local court clerk should have forms to use to attach funds held in the defaulting tenant’s bank account. Assuming you know the tenant’s bank account information (this is why keeping copies of personal checks is important), you can serve his bank with the attachment request. The bank must then file an answer with the court stating how much money was in the account at the time that the attachment was filed. If there is money in the account that is not otherwise exempt from attachment by law, the bank should issue a check to the clerk of courts for the amount in the account, provided that it is less than or equal to the amount owed under your judgment.
A less effective means of collecting a judgment is through attachment of personal property. This procedure involves having your local sheriff attach and auction the tenant’s property at a sheriff’s sale. Typically this only works for vehicles or watercraft with sufficient value to cover your judgment and the considerable time and expense involved in this procedure.