A multifamily business can only succeed when rent is paid consistently.

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Consistent rent collection and steady income remain two of the biggest challenges landlords face. A multifamily business can only succeed when rent is paid consistently. When tenants stop paying, your cash flow and overall investment can be quickly affected.

By the end of 2024, the U.S. Consumer Financial Protection Bureau (CFPB) reported that roughly 14% of households were behind on rent, representing nearly six million Americans. Could your next tenant be one of them?

While a thorough tenant background check can help you avoid potential problems, even responsible renters can face unexpected hardships, such as job loss, family emergencies, or other life events that disrupt their ability to pay rent.

This guide will help you to understand late payments, tenant screening, and your options if a tenant refuses to pay or leave.

When Is Rent Considered Late?

It may seem obvious, but landlords need to know exactly when rent becomes “late.” Your rental lease agreement is the primary source for this information.

Rent is typically due on the date specified in your lease—most often the first of the month. Anything received after that date is usually considered late.

Grace Periods and Late Fees

A grace period is a short window (typically 3–5 days) where tenants can pay late without incurring a fee. Some states require grace periods, while others leave it up to the landlord. Be sure to review your state’s requirements about grace periods.

If you plan to charge late fees, clearly outline the fee amount, how it’s paid, and when penalties take effect in your lease.

The CFPB study reports that “More than 20% of renters with at least one late fee have five or more late fees in the last twelve months.” Consider requiring a guarantor or co-signer for applicants who may have trouble meeting rent obligations.

Why Tenants Stop Paying Rent and What It Means for You

Understanding why a tenant misses rent can help you respond appropriately.

1. Major Life Changes

Life events, such as a new baby, loss of a loved one, or a divorce can cause even reliable tenants to fall behind.

If your tenant has a history of paying on time, a simple written reminder may be enough to get them back on track.

2. Job or Income Loss

Job loss or reduced income can make rent unaffordable, which in turn could affect your ability to make your mortgage payments.

Discuss payment plans, lease adjustments, or rental assistance programs with your tenant, and document any new agreement in writing.

3. Rental Scammers

Some tenants have no intention of ever paying. Such fraudsters may submit false documents or even create new identities.

Catch rental scammers before signing a lease by getting data from an established, background check company, such as AAOA. Use their identity verification, background checks, and eviction reports to detect potential scammers before signing a lease.

Steps to Take if a Tenant Stops Paying and Won’t Leave

Step 1: Send a Written Reminder

Send a Late Rent Notice that includes:

• The original due date
• The amount owed
• Any applicable penalties or late fees
• A deadline for payment before further action

Keep all communication documented for future reference.

Step 2: Issue a Pay or Quit Notice

If the tenant ignores reminders, a Pay or Quit Notice legally requires them to pay the past-due rent or vacate your property.

Each state has its own requirements about how much notice to give the tenant. Some states have three-day notices to pay rent or quit. Other states have five-day notices, 10-day notices, or even 14-day notices. These notices allow a tenant to pay the rent within the designated time, or the tenant must leave the premises, or “quit.” If the tenant refuses to pay or move out, you can terminate the lease and commence an eviction or unlawful detainer proceeding.

Step 3: Paying Rent after Serving Notice

After notice is served on the tenant, they must pay within the time frame in the notice. Once the tenant pays, they have cured the breach of the lease and cannot be evicted.

If the tenant offers to pay part of the rent, no matter what promises the tenant gives about paying the balance, you cannot evict them without serving a new Notice to Quit. Any amount of money the tenant pays waives your right to evict them, and you must serve a new notice if you decide later to go ahead with the eviction.

Once the time to pay or quit has passed and the tenant hasn’t complied, you can take the next step of filing for eviction.

Step 4: Starting the Eviction Process

If nonpayment continues, filing for eviction may be necessary. Although the exact laws vary from state to state, generally, the process includes:

• Serving a Pay or Quit Notice
• Filing a court complaint
• Attending a hearing
• Receiving a judgment
• If the court sides with the landlord, the tenant is required to leave the property
• Requesting law enforcement assistance (if needed)
• Consulting a qualified attorney to ensure compliance with your state and local laws.

Step 5: Consider a Cash for Keys Agreement

Some landlords offer a Cash for Keys arrangement, which entails paying a tenant to leave voluntarily to avoid a costly formal eviction and speed up property recovery. Cash for Keys agreements are legal in all 50 states and require a signed written contract that outlines the payment amount and move-out date. It must be voluntary and comply with all local laws.

Important: Document the agreement in writing and consult legal counsel before proceeding. If you use an attorney, use one who represents landlords, not tenants.

Lease Guarantee to the Rescue

For reasons outside of your control, tenants may end up owing you rent, breaking their lease early, or leaving expensive damages. In many cases, one or two month’s rent as a security deposit is not enough to cover those costs, resulting in losses to you.

Even if you take a tenant to court and you get a monetary judgment in your favor, the tenant will most likely not have the assets to pay for it. You may seek the help of a collection agency, but that means additional cost for you and still no guarantee that the collection agency can recover the money that is owed to you.

With LeaseGuarantee, you don’t need to hunt down the tenant for the judgment. LeaseGuarantee will pay you the full judgment amount up to the coverage you selected within 30 days. It provides annual coverage ranging from $1,000 to $10,000 for lost rent, damages, or legal fees that occur during an annual lease term.

FAQs: Tenant Not Paying Rent

What should I include in a Late Rent Payment Notice?

Include the rent due date, the amount owed, any late fees, and a clear deadline for payment.

Should I accept partial rent after issuing a Pay or Quit notice?

Partial payment may reset the eviction timeline or affect your legal rights. Consult legal counsel first.

What if a tenant loses their job and can’t pay rent?

Discuss options openly, review lease terms, document agreements in writing, and consult legal counsel to ensure compliance.

Are there any downsides to Cash for Keys?

Tenants may refuse the offer, not leave even after accepting payment, or leave the property in poor condition. The upfront expense of the buy-out can potentially be thousands of dollars although it is still likely to be less expensive than an eviction.

Whether your tenant is late due to life changes, financial hardship, or fraud, understanding the reason and responding appropriately can protect your rental income and investment. Thorough, legally compliant tenant screening by AAOA helps minimize risk and keeps your cash flow and investment protected.

How AAOA Can Help 

If you need assistance with tenant screening or have questions about the rental process, consider reaching out to professionals who specialize in this area. AAOA offers a variety of services, including insurance, rent reporting, rent collection and financing. 

Contact us today to learn more.

Disclaimer: All content provided here-in is subject to AAOA’s Terms of Use. Nothing contained on this website constitutes tax, legal, insurance or investment advice, nor does it constitute a solicitation or an offer to buy or sell any security or other financial instrument. AAOA recommends you consult with a financial advisor, tax specialist, attorney or other specialist who is able to properly advise you.