If you're a landlord, it can be tricky to know how to handle partial payments. Sometimes tenants will try to give you a percentage of the full amount —and you will be tempted to accept it.
Ultimately, it's your choice whether you accept or refuse a partial payment. Either way is legal. However, there are important things to consider before you do, as it can have negative outcomes in certain situations.
To understand more about managing partial rent payments, this guide can help. We'll discuss what partial rent payments are and how you can avoid them below.
TL;DR
Partial rent payments aren't just bad news for your cash flow; they can also delay evictions. Fortunately, you have the right to accept or refuse payments under specific circumstances as a landlord, following the terms set out in the lease.
This guide covers when you should accept partial payments, how to create payment plans for your renters, and strategies you can use to encourage on-time payments in full.
What are Partial Rent Payments?
Partial rental payments occur when a renter pays you less than the full rent amount in the lease on or after the agreed upon date. Sometimes they may attempt to split the payment, paying partly on the agreed date and the rest later. This still counts as a partial payment.
For example:
- If monthly rent is $3,000 and a renter pays $2,500, then the remaining amount of $500 is unpaid rent. This counts as a partial payment.
As a landlord, you may encounter situations like these, especially if you own multiple units. It's not uncommon to face financial setbacks as a tenant, making it difficult to pay the rent in full.
The best way to deal with partial payments is to write to the tenant in writing and ask for the payment in full, plus any late fees. Sometimes, it can help to use flexible payment options. These improve your ability to collect rent on time (more on this below).
Is a Partial Rent Payment a Late Payment?
Yes. Partial rent payments are late payments. In this case, you are within your rights to charge a late fee until the full amount is paid as long as it is stated in your lease agreement signed by the tenant.
Calling partial payments “late payments” matters because it allows you to invoke your lease conditions. If a tenant violates these by not paying the full amount on time, it activates your landlord rights.
Navigating Grace Periods
Of course, some leases have grace periods. This allows tenants a few days for money to arrive in your bank account. However, leaving unpaid rent outstanding longer than this can adversely impact cash flow.
When applying lease and payment rules, apply them consistently to all tenants. Doing this avoids claims of unfair treatment. Avoid a situation where some tenants pay partially while others must always pay in full and on time.
Pros and Cons of Accepting a Partial Rent Payment
As a landlord, accepting partial rent payments can be tempting, especially if you need to support your cash flow. However, whether you decide to accept an incomplete payment depends on several factors, including the tenant's history and your rent collection strategy.
Pros:
- Receiving money even if it isn't the full amount
- Showing goodwill to tenants
- Retaining a good relationship with renters who may be going through financial hardship or living paycheck to paycheck
Cons:
- It could lead to regular shortfalls in payments
- Many states will reset eviction processes after you accept a partial payment
- There is often additional administrative work with partial payments
Pro Tip: Make sure to decide what you will and won't accept ahead of time. That way you're not basing decisions on your emotions. While it's good to consider your tenants, think about your rent roll and how consistent non-payments might adversely impact your bottom line.
How to Prevent Partial Payments and Late Rent
Partial payments are often a result of late rent. Ideally, you want to avoid partial and late payments as much as possible. Here's how to reduce these as much as you can:
1. Tenant Screening
Screening tenants with a thorough background check is one of the best ways to prevent payments issues. Doing a tenant screening helps you get a better idea of if a tenant can make the rent payment and shows a strong financial history.
During the application process, check renters’ income, rental history, and credit score, and request a landlord reference letter if necessary. If it all checks out, you're usually good to go.
Screen tenants right in TenantCloud for fast, easy applications.
2. Proper communication
Communicate your rent payment expectations up front with renters. State when and how much rent should be paid in the lease agreement. Then, underneath, outline consequences for partial payments so it's in writing.
3. Make payment convenient
Check that the payment methods you accept align with your tenants. Collecting rent is often easier when you use an online rent payment app that deals with tracking and reminders for you.
4. Send friendly reminders
Consider sending your tenants friendly reminders regarding the due date and other important information. If there are any issues with payment, follow up with them promptly. Use your rent roll to spot any patterns that might indicate some renters are misusing your system.
Strategies to Follow If Tenants Pay Only A Portion of Rent
If tenants only offer you partial rent, the best option is often to refuse. However, here's what to do if you want to give your renter the benefit of the doubt, and accept the payment:
- Discuss the reasons for the late payment with the tenant immediately. Confirm they are willing to pay rent owed in full.
- Create a written agreement. A simple document entitled "Agreement for Delayed Rent Payment" that both you and the tenant sign can suffice.
- Record all the details of the payment so far. Include any documentation or notes of your conversations with the tenant.
- Apply any applicable late fees according to your lease agreement. Make sure you are consistent with applying these across all of your renters.
- Set a strict deadline. Tell the renter when the rest of the money is due and when you will begin the eviction process.
Sometimes, it helps to offer them a structured payment plan. These give tenants an easier path financially and demonstrate your ongoing support.
What to Do After Refusing a Partial Payment
If you decide not to accept a partial payment, take the following actions:
- Put it in writing to the tenant telling them you are refusing to accept their payment.
- Highlight the terms in the lease that require full payment and also the terms that outline next steps (such as late fees or payment plans).
- If you have received the partial payment into your bank account, hold it in a separate account or return the payment to the tenant immediately. This eliminates any claim that you accepted it.
- Review your standard late rent process by issuing notices and charging late fees.
Taking this approach protects you and your business, especially if you think you may need to evict the tenant. This approach reduces the risk of delayed evictions while discouraging tenants from paying late in the future.
Best Tool for Simplifying Rent Collection
Manually dealing with traditional rental payment methods like cash and checks is time-consuming and difficult. By outlining your terms in a lease agreement, communicating clearly with tenants, and screening tenants beforehand, you can have a more positive rental experience.
For automated payments, rent tracking, reminders, and late fees—plus an entire suite of property management tools—try TenantCloud today.
FAQs
How do I document a partial payment?
You can document partial payments in software, an Excel file or on paper. When you do this, always create a signed agreement with the tenant indicating when and how much they will pay to avoid future late payments.
What late fees can I charge on partial payments?
You should follow the terms set out in your lease agreement and state law. Charging arbitrary fees could violate the law.
What's the best way to collect rent?
Online rent payment systems are widely considered to be the most convenient tools to collect rent.
