Payment plans for Delinquent tenants

[Leah]

Hello all!

I am a new general manager in the storage industry. The previous general manager allowed tenants to get way behind. She would work with the delinquent tenant to come up with a payment plan. This meant that each delinquent tenant had a different payment plan and it was rather difficult for our employees to manage. A little context: we are a U-Haul dealer and a contract postal unit for USPS so we have about 9 employees, most of whom also help in managing storage customer accounts.
Auctions were not held often and tenants would get months behind. We have some tenants that get 2-3 months behind and then pay up, over and over again. The previous gm's reasoning for these people is that we are still getting paid. While I understand this and I understand wanting to be kind and work with people, we are running a business. I want there to be a cut and dry system so that it is easy to manage. If a tenant isn't paying, we need to get them out and get someone in who will pay.
I have heard of some storage facilities having a one time payment plan option for tenants who are delinquent. They had to pay a quarter of their rent plus something every single week. The responsibility was totally on the tenant (no reminders sent). If they did not follow that exactly, then they move to public sale.

What do you all do for delinquent tenants as far as payment plans? Any help/advice/input is greatly appreciated.

[KrisinCali]

We no longer accept partial payments on ANYTHING. It makes life so much better. Everything in Lien must be paid with cash, cashiers check or money order only. My life is exponentially much easier.

[helenatim]

Hey Leah - Welcome to the joys of storage management Getting everyone caught up and on your program will be a little challenging but really worth doing! If your facility is in a strong market with new tenants available, I would not be afraid to make all of your tenants pay up to date and get on autopay if you offer it.
Check your state law for foreclosure and auction schedules and send out notices to all delinquent tenants right away. Get them paid up or get rid of them. This sounds heartless, but its a business, not a charity.
You could talk to individual tenants and get a feel for their situation, offer them a one-time settlement payment contingent on them moving out, or forgive some of the debt in order to free up the unit for a tenant who will pay each month. I would not do a payment plan because it will get strung along and you will be the one overseeing it.
Also, get signed up with an Online Auction company. This makes auctions very easy to manage compared to in-person auctions.
Our end goal is to get rid of all delinquent tenants and get everyone on autopay, which may not be your goal. But its a good one to strive for.
As the new GM, you can set the new rules and you can explain to the tenants that you are just doing what ownership wants. That way you are not the bad guy!

[Storman]

No payment plans. You'll be shocked at how many people will find the money they owe you when you follow your rental agreement and take them straight to lien status and add additional fees for doing so. For the most part, they're taking advantage of your willingness to put them on a plan. You're causing more work for your staff, risking making mistake with differing plans and most importantly, you're ignoring the terms of your contract.

If/when you get to the point that you enforce your contract and go to lien, someone could easily make the argument that the contract was no longer enforceable because YOU decided not to proceed as written. You can't have a contract and then pick and choose when and what you will enforce. Either the agreement binds both parties, or it binds no parties.

No payment plans. Make the tenant ask his cell carrier for a payment plan, or his cable provider, or Starbucks, or his gym membership, or his local pub owner, or his cigarette habit, or, or. It shouldn't be you. Just because we're face to face with the tenant and we feel there's a relationship there doesn't mean we should ignore the core business we're in. Renting units to PAYING tenants. There isn't a unit out there that I care more about than the tenant does. If they don't care, then I most certainly don't care.

No payment plans.

[lady5563]

We very rarely accept a partial payment.
Sometimes I do.
It depends on who the tenant is and their payment history.
If I agree to a partial, they need to commit to a plan.
There is also a partial payment form that hey must tell us how much and when they plan to make this partial payments.

But most times my canned response is NO partial payments are accepted.
I tell them to save their money until they can pay in full.

[Bella_Lindemann]

We stopped doing payment plans after a tenant had her boyfriend call and threaten us. She was crying tattooed tears when her stuff went to auction. We no longer accept partial payments after a tenant accused us of overcharging her, and purposely stealing her money. She started screaming at me with her foul smelling breath. I got up and opened the door and told her leave and come back when she could act like a lady. So yeah we don't do payment plans or partial payments anymore.

[Foxes Den]

If they are renting a unit, they already have a payment plan Full rental rate once a month

[KrisinCali]

If they are renting a unit, they already have a payment plan Full rental rate once a month

Priceless.

[DairyGirl]

I've tried it twice with 2 different tenants. The first one accused us of over-charging and the second one called me, crying, that she didn't understand how she still owed money when she just gave me some. Will never do a payment plan again.

[T_Champeau]

Wow so much hate for payment plans! Which I get. I've done payment plans with a few customers, but it's few and far between. And it'd take a lot to get me to do it again. 50/50 whether it works out. But payment plans are generally 1 shot and if they fail to meet it then no hesitation in going to auction. Also depends on what our occupancy looks like for that size unit and what rate they are paying.

As for people who are consistently late, I both love/hate them. On one hand late fees yay! It's surprising how much they add up every month. On the other hand, you're late. After a few months I got to know who is always going to be late because they are a contractor/traveling/gig worker vs who's late because they won't pay until I tell them they are up for auction. I generally refer to their payment history too as that can be a good indictor if they will end up paying up or not.

We wait for 2 months before we auction because that seems to be the sweet spot in our area for a decent chance of people showing up and paying the balance. Not sure with your area/ population/ etc.

You have to decide for yourself if late tenants are worth it to you, but good notes are important, especially with so many employee.

[BusyProperties]

I sent out a past due text message yesterday and the lady followed up with a phone call. Of course she is usually late so I was ready lol I explained that rent charged and it was now 10 days past due so the text message goes out. She proceed to say "you said I was paid up through 6/25/22 so I thought that meant I wouldn't owe until August." I had no words.....I just simply let her know that rent charged again on the 26th as it does every month and that she was now late. She repeated what she said again and then I think it hit her that she made no sense whatsoever. Then she told me she had rent to pay and she would call me next week. You truly haven't lived until you have heard the excuses of storage unit tenants

[MamaDuke]

She proceed to say "you said I was paid up through 6/25/22 so I thought that meant I wouldn't owe until August."

6/25/22 = August Duh!!!

[Billings Storage]

We did a few payment plans, maybe 1 a year, most often if it was a size we needed we would forgive some late fees if they paid up and moved out.

[BransonsBestStorage]

This is all very interesting. We strive to operate by what the law tells us to do. Meaning that if the lease (e.g. contract law) is entirely based around monthly timeframes then that should be adhered to (else risk invalidating all your leases). The definition of default, application of late fees, notices, lien sales are all affected by dates/timeframes. We try to temporarily accommodate in very rare situations where tenants had an immediate unexpected hardship and no prior history of defaults or unit damage or other rules violations. These are very rare one-time exceptions allowing a few extra days or waiving a late fee. If you are to do payment plans then you would likely need to rewrite a large portion of the standard storage lease and get those re-sent out to all tenants.

In considering any new variation to management operations, we operate on determining the ability to easily duplicate what we do, quickly and easily to the newest employee. It is a set of simple questions of how long would it take the newest person to understand this, how much training would it take, and can they execute on it very consistently (or will they understand the potential problems from inconsistency)?

We also consider how the 'new' situation varies from the norm of one unit for one full month with one payment and one person signing the lease. The 'new' situations are almost always temporary. We treat the temporary situation in a manner to get back to the norm above. Typically a special form is involved to address the temporary situation only. We get signed Abandonment forms or Lock Cut Authorization forms in play when a tenant wants an exception to the norm/standard lease or wants a lock cut off (which can shift the security of the unit to the operator -- thus opening up for being accused of theft). We strive to keep the tenant lease 'story' intact and consistent so that the next person/employee that comes along doesn't have to deal with a slew of agreement variations and try to reconstruct 'the story'. Making temporary variations permanent will certainly impede your ability to upgrade your management software in the future also.
Have a great storage business day!