The people's voice of reason
The people's voice of reason
When it comes to rent collection, every missed rent payment puts landlords in a tight position. You’re forced to cut into your bottom line and cover expenses out of pocket, all while hoping tenants pay their past-due balance. But if they don’t, what options do you have? TurboTenant takes a clear, realistic look at rent debt collection so you can decide your next move with confidence, not frustration.
Approaching a collection agency for unpaid rent may feel like a last resort. It’s the breaking point where your patience runs out, you’ve taken legal action, and your relationship with the tenant changes. And while this scenario is common, the rental debt collection process is often misunderstood. Many landlords have questions, such as:
This guide answers these questions and more. Learn everything you need to know about rent collection agencies for landlords, including when to use one, what the process looks like, legal considerations, and strategies to avoid going to collections in the first place. Let’s get started.
Here’s a quick overview of what all landlords should know about taking unpaid rent to a collections agency:
Let’s get into the details.
When tenants don’t pay their rent, landlords can contact a debt collection agency for assistance. The collection agency helps landlords recoup their losses by collecting outstanding amounts from tenants. Here’s how it works.
To prompt tenants to take action, the agency typically reports the outstanding balance to the three major credit bureaus — TransUnion, Equifax, and Experian. Then, each credit bureau sends the tenants a letter notifying them about their outstanding balance. Once a debt enters collections, credit bureaus typically keep it on a tenant’s credit report for up to seven years.
The collections process helps motivate tenants to pay their outstanding debt. If the tenant pays, most agencies deduct a commission and remit the balance to the landlord. In most cases, the fee is between 25% and 50% of the balance collected.
Keep in Mind: Under the Fair Debt Collection Practices Act (FDCPA), tenants have 30 days to dispute a debt with a collection agency. To do so, they must send a written request to the agency asking them to validate the debt (15 U.S.C. § 1692g).
When tenants request validation, you must wait until the agency verifies the debt before you can reclaim the unpaid rent. If the agency can’t verify the debt, you lose your claim to collection.
At this point, you should pursue other options, such as filing a small-claims lawsuit or negotiating a payment plan directly with the tenant.
Because reporting a tenant’s unpaid balance requires sending an official notice, rental laws apply. Each state has its own legal guidelines.
Some states, such as Washington (Wash. Rev. Code § 59.18.170) and New York (N.Y. Real Prop. Law § 238-A(2)), mandate grace periods. Other jurisdictions have specific notice requirements when tenants fail to pay rent. Here are a few examples to illustrate just how different each state legislates the process.
Always check your local rules or speak with a trusted legal professional if you have specific questions.
Pro Tip: Landlords can use property management software to access rent debt collection tools, including digital payments and automated late fees, that comply with their state’s regulations.
While each state has its own legal requirements, the following four steps cover most aspects of a compliant rent debt collection process.
Once rent is late, your first step is to document it. Send your tenant a written notice, including:
By providing written notice, you create a paper trail. If you have to escalate the issue to eviction or collections, you’ll need detailed documentation showing that you notified the tenant.
As mentioned, remember to check your state’s law on grace periods to keep your process compliant.
If tenants fail to pay by the due date, your next step is to send them a formal pay or quit notice. The official notice gives tenants a specified period to pay the rent in full or vacate the property. You’ll need to complete this step to proceed with eviction or collections later, if needed.
As outlined above, many states have laws governing this step, so check your local regulations.
If you reach the pay or quit notice deadline and the tenant still hasn’t paid, you can file for eviction through your local court system.
The eviction process doesn’t guarantee you’ll recover the unpaid rent, but it does strengthen your position if you send the debt to collections. Many agencies require proof of eviction or a court judgment before accepting rent debt.
At this point, you can submit the unpaid rent to a collection agency. Agencies typically try to recover the balance by reporting it to credit bureaus.
If tenants take action to resolve the issue, they usually pay the collection agency directly. The agency forwards the funds to you, minus any fees or commission for the rent debt collection process.
Just because you submit a rent debt for a single-family home or apartment property doesn’t mean they’ll accept it.
Today’s agencies prefer to work with landlords who provide clean, well-documented files and verifiable records. In most cases, organized, accurate accounts move faster and have higher recovery rates.
To increase your chances of reclaiming your lost funds, provide the following to the collection agency:
Meticulous recordkeeping and cloud-based software enable the agency to perform its work quickly and efficiently.
No tenant wants to deal with the ramifications of having a debt sent to collections, which include:
Beyond the financial hit, the process can impact a tenant’s rental reputation. Tenant screening reports usually list debt in collections, making it difficult for renters to qualify for their next property. The record can follow them for up to seven years, which is a long time for a renter to contend with. So, many will choose to pay it to avoid the record hanging over their heads.
The Fair Debt Collection Practices Act (FDCPA) protects tenants by governing how rent debt collectors pursue unpaid balances. Here’s what you need to know:
If tenants feel the collector is violating these federal guidelines, they can contact a lawyer.
As a tenant, you can avoid the headaches of having landlords send rent debt to collections by paying on time or communicating transparently.
If you can’t make this month’s rent payment in full, reach out to your landlord in advance. They may be willing to set up a payment plan or accept a partial amount.
Remember: If your landlord refers your debt to collections but you believe it’s invalid, contact the agency and request verification. Consider consulting a legal expert for more support.
In a perfect world, your tenants pay rent in full and on time every month. Most tenants have valid reasons for falling behind on their payments. And you probably don’t want to go through the rent debt collection process or pay the agency’s commission fee.
But when communications fail, and they still haven’t paid, turning to collections helps you protect your investment. It’s not personal — it’s practical, and the process can help you mitigate losses and keep your business on the right track.
This story was produced by TurboTenant and reviewed and distributed by Stacker.
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