When Gulf Coast Property Management signs a lease on behalf of an owner with a tenant, the intent is that both parties understand the obligations of the other. The primary obligation of the tenant is to pay the lease payment and pay it on time.
Pay on time
Why does paying the lease on time matter so much? Several reasons outlined below:
- Mortgage Payments – most owners owe a mortgage payment on their property and those payments are normally made on the first day of each month. Late payments are brutal for owners amounting to at least 10^ or more of the payment. If the owner fails to make a payment because a tenant did not pay them, their credit is affected. Nothing is worse than a late on a mortgage payment.
- Owners Solvency – owners must be solvent to keep the property in good terms with all creditors including utility companies. The last thing a tenant needs is to have the water cut off. A decade ago, many owners stopped paying their mortgages because tenants failed to pay. This caused foreclosures without notice to the tenant. Paying on time avoids this possibility.
- Social Commitment – the agreement between the owner and tenant is more than a contract. It is a belief on the part of both parties that they will honor their word to meet their obligations. This works both ways. Some of our tenants know that our owners insist on keeping the property well maintained regardless of cost. This is the commitment that they make to the tenant.
- Good Faith – a follow-up on the above. Paying on time builds creditability for the tenant with the property owner. This means if there is an extraordinary situation the property owner within their capability is more likely to work with the tenant. A good example is renewing the lease. If a tenant is constantly late with payments the lease may not be renewed. An owner through GCPM may communicate with a potential tenant creditor that the tenant has paid on time every time which will help the tenant obtain credit.
- Property value – the value of the property is in part due to the consistency of the lease payments by the tenants. When owners sell their property they must produce records. A potential buyer will consider how often a tenant is late when evaluating the income stream of the property
One of the most important elements of a good tenant -owner relationship is communication. If you know that you will be late for example, notify the GCPM immediately, do not wait until you are late. The late fee will still apply but this allows GCPM to notify the owner who then can have valuable time to arrange their mortgage payment.
A key point to remember as a tenant is that the property manager or owner are not lenders. When you do not pay your lease on time, you in effect are borrowing funds from the property owner without their permission. You may not know it but most property owners are not rich nor are they big corporations.
Residential rental properties are owned by individuals, many who are retired and depend upon the income to pay not only the mortgage on the property but perhaps on their own homes. This is the reason for a credit check and all of the questions during the interview process. The property owner has to “know” that they will be paid.
Some of our tenants live on the edge meaning that they live pay check to pay check with little or no savings. GCPM knows this and while accepting a tenant without sufficient funds to bridge at least one month without income is our goal, on occasion we trust that the tenant has resources e.g. family that can help them out.
Gulf Coast Property Mgt is an Agent for Owners
Please understand the Gulf Coast Property Management is an agent for the owner. Owners have signed an agreement with us to perform certain tasks on their behalf so when we call and tell you that your payment was late and you need to pay it or action will be taken, it is our clients instructions that we are following.
The best way to avoid being late is to pay ahead. That is, if you are paid on the 15th, pay the lease on the 16th even if it is due on the 1st. If you have a checking account, schedule bill pay to pay the lease on the first. We have the ability to send to you an invoice with the option to pay by credit card.
Lease payments are due on the first day of every month. Some agreements have “grace” days. So, this is what “grace” days are for:
- If the 1st falls on a weekend or holiday you would not be late by paying on the first business day after the 1st
- That rare occasion when your pay check may be delayed by a day or two.
- You arrived at the bank on the 1st too late to have the deposit recorded.
Grace Period
The “grace” period (if there is one in the agreement( is not to be used on a regular basis to avoid paying on the 1st day of the month. If your pay day falls on for example the 4th day of the month each month or something like this, you can request a one time adjustment in the due date. Keep in mind that this is a great inconvenience to the property owner which makes it more difficult for them to make their mortgage payment on time. It can however be done to accommodate a good tenant.
Bad Checks
If you make a deposit and your deposit is rejected, immediately call GCPM. The way the system works is that the bank sends a notification by mail and it takes a few days to arrive. This may cause a GCPM check to our property owner to be dishonored compounding the situation.
Tenants who fail to deposit checks that are honored will be given notice to vacate. This may not occur the first time depending upon the tenants record of on time lease payments. It is an option that GCPM holds.
If your deposit fails, you must immediately deposit cash into the GCPM account and notify GCPM that the cash deposit was made. You will be required to make a late payment, compensate for the bank charges and fees for managing the issue. It’s gets expensive.
Failure to immediately deposit cash would cause GCPM to begin eviction proceedings.
Banking System
Understand the banking system. The old idea of a “float” on a deposit is no longer true. The FED must process checks in less than 48 hours. This means if you deposit a check without funds in your bank, you may not have time for your deposit to be credited before the check is presented for clearing.
Also, many banks put a hold on deposits by check. An example is that you deposit your pay check into your bank. They may give you partial credit for it on day one and full credit by day two. If you write a check against the entire amount it may clear before your hold is released.
If you receive a check from an individual e.g. a parent or customer, that check may be placed on hold for up to five business days. You can not gain access until it is released. On occasion check we receive from tenants are placed on a hold.