Negotiating with Non-Paying Clients

What happens when your tenants don’t pay? Can you negotiate? With government restrictions in place and the COVID situation, it can be a sticky situation when your tenants stop paying rent. Normal evictions were halted due to the government stepping in unique circumstances. That still doesn’t help the landlord who is now stuck with a non-paying tenant.

Let’s look at a potential win-win scenario that can help you right your ship. What we’re going to look closer at is a process sometimes referred to quite informally as “cash for keys.”

Sounds easy enough, right? Not so quick, my friend. There are legal ramifications you need to know about.

The very first thing I suggest is that you contact your lawyer. This is not legal advice, as I’m not an attorney, but these tips may help you find a solution to a difficult problem.

Tip #1:

Speak with a lawyer about your legal rights. Let’s look at why it’s so important to seek legal counsel. When you offer your tenant cash to leave, you’re asking them to vacate your property while a lease is still intact. Now, they may not be paying, but because of COVID things have gotten tangled. Knowing your rights and how to go about this process is important.

What exactly is cash for keys?

It’s just what it sounds like. You’re going to compensate your tenant in exchange for the return of your property, or them vacating said property. It’s incentive. You may think it’s ludicrous to pay them when they haven’t been paying you, but hear me out. In this case, it may be the cheaper way to get them to leave. Otherwise, you’re looking at time, court, and a lot more money out of pocket for a resolution that may or may not come about.

Part of this deal is that they not only leave the property, but leave it in better condition then when they found it, meaning it’s clean, cleared of their stuff, and they aren’t stripping anything out of it. It’s an opportunity for them to leave in a better state of mind, instead of being kicked out which can end in an angry, frustrated tenant that does damage.

NOTE: Every tenant on the lease should sign the agreement, not just one person. This covers you.

How to broach the topic of a cash for keys agreement

It’s a sensitive situation, so use common sense. You can start with something like, “If I were to give you X amount of money, would you vacate the property within 30 days?” If they agree, put it in writing. It’s important to have a signed agreement in this case. Both the amount of money to exchange hands and the dates of when they agreement was put into place and when they’ll leave your home should be included.

You’ll also want to include:

• The tenant’s responsibility
• When they’ll vacate
• What condition the home most be left in, example: broom/swept condition
• And it should be free of all debris

Again, I’m not a lawyer. Speak with your attorney. Did the client give up his right to sue? What other details will you need to include?

Tip #2:

Don’t bring cash. On the day that the tenant is set to vacate, bring a check, not cash. This can be tricky because tenants will sometimes say, “Well, I need the cash to move.”

You don’t want to provide cash up front. This is in case the tenant doesn’t vacate after you’ve given them the money. You’re then in the same position all over again. Bring a check, not cash. You get your keys, they get their money.

Next step is to change the locks.

Tip #3:

Bring a locksmith with you.

As soon as everything’s done and the tenant leaves, have the locksmith change the locks immediately. You want the tenant to be unable to slip back inside if they have a spare key.  Unfortunately, you need to think like that, because you’d be in the same position, trying to get them out again.

I hope these tips give you an option you might not have thought of. It’s difficult when you’re going through something of this nature. It’s a frustrating experience, and your hands are tied in other capacities. This is one instance that you may be able to secure your property once again.

And one last time, always consult with an attorney. The laws are different from state to state, town to town, and county to county. An attorney can help you sort out the details.