Nearly every landlord has heard it before: “I can give you $500 now — I swear I’ll have the rest to you by Friday!”
Ah, partial rent payments, how I loathe thee. They lay a sticky trap for many a landlord.
While most landlords are fundamentally nice people who want to help out their tenants in a bind, you really shouldn’t accept partial rent payments. They may seem innocuous enough, but they come with a plague of risks for landlords.
Why You Shouldn’t Accept Partial Rent Payments
Most novice landlords instinctively want to accommodate their tenants and offer flexibility. It feels like kindness, which all good people aspire to.
But you’re running a business, and a heavily regulated one at that. Which means there are legal and financial consequences when you bend the rules for your renters.
You Have to Restart the Eviction Process
The first and most dire reason why you should never accept partial rent payments is that in many states a partial rent payment terminates the eviction process. Which means the landlord must restart it from scratch.
Imagine the following scenario. Your tenant pays you a little money at the beginning of the month, promising to pay the rest soon. You delay filing eviction out of the kindness of your heart. But the rest never comes.
Eventually you get wise that “just one more week” is a repeating refrain. You serve the eviction letter notice, file for eviction, get a hearing scheduled, attend the hearing, get approval from the judge to proceed. Then the day before the lockout date, the tenant pays you $1.
Eviction case closed. Start back at Square 1, with thousands of dollars owed to you in back rent.
If you accept partial rent payments from one tenant, then refuse to accept it from another, tenants (and their ambulance-chasing attorneys) can construe it as discrimination.
Cue the Fair Housing lawsuits. Even if you win — far from guaranteed in today’s legal climate — it’s a terrible look for you as a landlord. Which says nothing of the legal fees you incur to defend yourself.
Landlords cannot treat one tenant differently from another. Ever. To do so opens you up to discrimination lawsuits.
It doesn’t do your accounting any favors when you receive $300 here, $400 there, and another $279.83 there. All for different rental units, and at different times.
When tenants get behind on rent, and late fees start to pile up, and then multiple months’ rents, it gets complicated. You suddenly have to track the “priority of debts” and pay them in the correct accounting order.
And it does matter, from a legal perspective. In many states, you can’t include late fees as part of the rent balance due when filing for eviction.
Keep your accounting clean by only accepting the full rent owed at any given moment.
Late Fee Disputes
Technically, landlords can (and should!) charge full late rent fees even if the tenant pays part of the rent on time and the rest of it late. In fact, your lease agreement should explicitly state that the late fee becomes due if the rent is not paid in full by the end of the grace period.
But some activist judges are so tenant-friendly that they see themselves as “defenders of the downtrodden,” and they side with the tenant regardless of the facts or the legal basis. Before you accuse me of hyperbole, I’ve seen it happen with my own properties. It once took me 11 months to evict a professional tenant who knew exactly how to play the game with judges.
The law was on my side — and it didn’t matter at all.
Behavior Management & Incentivization
Deni and I talk about it all the time: your tenants will try to push your boundaries. It’s simply human nature.
Many will try paying their rent on the third of the month, then the fifth, then the tenth. We all have many bills to pay, and some come with stiffer penalties than others when we delay paying them. If the utility company will report their late payment to the credit bureaus, plus hit them with a 10% late charge, and you won’t do anything if they pay the rent late, who do you think they’ll pay first?
It’s up to you to draw and defend the boundaries written out in your lease agreement. The rent is due in full on the first of the month. Period. If the tenant fails to pay it in full by the end of the grace period, they receive an eviction notice letter and they owe a late fee.
Most tenants will do it once to test your boundaries. As soon as they see that you mean business, they’ll prioritize the rent over their other bills.
What to Do If You Receive a Partial Rent Payment
First of all, it’s worth noting that you can require all rents to be paid online, through a landlord software platform like, oh I don’t know, SparkRental! Our software lets you select whether you accept partial payments or not when you request the rent or security deposit.
That gives you complete control over accepting or declining payments. It’s far harder when you receive a money order in the mail.
But if you do receive a partial rent check or money order in the mail, don’t deposit it. Call your tenant and let them know that you received it, but are not accepting it or depositing it until they pay the remaining balance. They can either come pick it up from you in person, or they can send the full unpaid rent balance owed.
That doesn’t mean you should be a jerk about it. Just explain politely and professionally that you don’t accept partial payments as a matter of policy, like most businesses.
Use the opportunity to ask your renter what caused the delinquent rent payment. If they’re simply having trouble budgeting, you can offer to switch to a biweekly rent payment plan. SparkRental’s online rent collection service lets the tenant set up automated recurring payments, on a weekly, biweekly, or monthly basis.
That can get the money out of their bank account before they even have a chance to spend it.
Make It Easier on Your Tenants by Accepting Credit Cards
Offer your tenants an easy out: they can pay the balance of rent on their credit card, if they’re in a pinch this month. (Which, surprise!, we offer as an option in our landlord software.)
Yes, they’ll pay a small credit card convenience fee. But it’s still cheaper than paying your late rent fee, and they stay in your good graces to boot.
You get to offer a reasonable accommodation when your tenants are in a bind, while still enforcing your lease agreement and rent policy. Everybody wins.
Rules When You Do Accept Partial Rent Payments
Consider yourself warned. But if you can’t help yourself and feel compelled to accept the occasional partial rent payment, follow these rules to limit the risk and damage.
Never Accept Partial Payments After Filing Eviction
The first and most important rule of all: once you start the eviction process, you never accept partial rent payments. They must pay the entire balance due, or they must vacate.
End of story. No further discussion. You don’t want them paying $1 simply to close the eviction case and make you start it over from the beginning.
(article continues below)
Always Charge the Full Late Fee
There must be consequences when your tenant fails to pay their rent. One of those consequences is paying the late fee.
Your mortgage lender doesn’t buckle and say “Aww, you poor thing, of course I’ll waive your late fee because your sob story is so touching.” They are a business. You borrowed money from them, and agreed to pay it back. Fail to live up to your obligations, and they first hit you with late fees, then they repossess your home through foreclosure.
You are a business too, and if you don’t think of yourself as being in business, you shouldn’t invest in rental properties. Buy stocks or index funds or shares in private REITs like Fundrise or Streitwise, and save yourself a world of headaches and financial losses.
Always Serve the Eviction Notice Letter Immediately
The other consequence of failing to pay the rent on time is that the landlord starts the (usually long) eviction process. This begins by serving an eviction notice letter, which in turn gives the tenant a second grace period to pay the remaining balance in full.
Serving the eviction notice is a prerequisite for filing in court for eviction. And it costs you nothing other than postage, because we offer templates for eviction notices for each state.
Besides, the longer you delay, the longer the back rent piles up. It’s not good for you, and it’s certainly not good for the tenant.
Put One-Time Exceptions in Writing
If you make a one-time exception, and extend the time period before the rent becomes late by a few days, put it in writing.
Sign a simple one-page agreement with the renter, stating the date that the rent becomes late and triggers a late fee. Explicitly state that this represents a one-time special exception.
Consider also swearing the tenant to secrecy about it. Remember, you become guilty of discrimination when you adopt one set of rules for one tenant and another for your other tenants. By offering one tenant special treatment, you literally break Fair Housing laws.
One more reason why you shouldn’t accept partial payments at all.
Enforcing your rental agreement and late rent payment policy is one of the hardest parts of being a landlord. Normal, middle-class people instinctively want to help each other out. But the same instinct that makes you a good friend, colleague, or neighbor makes you a bad landlord.
Defend your boundaries, especially when it comes to payment of rent and your late fee policy.
If you struggle with this, hire a property manager to collect rents for you. They can handle nonpayment of rent and eviction proceedings on your behalf.♦
Do you ever accept partial rent payments? If so, how do you protect yourself?
More Real Estate Investing Reads:
About the Author
G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.