Podcast 390: What To Do When Tenants Get Divorced

In this week’s episode, Podcast Host, Property Manager & Business Owner, Andrew Schultz, chats about how to change a lease agreement when the tenants are getting a divorce.

What happens when you need to find the address of an existing tenant? Find out how to figure out where an old tenant lives.

Last, but not least, at one point, you tried to be nice by breaking your tenant’s rental payments up while they tried to reevaluate their finances. Now, the tenant has stopped paying. What do you do?

Andrew Schultz: (00:00)
Hey everyone. Welcome back to another episode of the Rent Prep for Landlords podcast. This is episode number 390 and I’m your host, Andrew Schultz. On today’s episode, we’re gonna be talking about how to find the address for Long Gone Tenants, how to apply rent payments when you have old charges on the ledger, and dealing with a lease after a divorce. We’ll get to all that right after this.

Voice Over: (00:24)
Welcome to the Rent Prep for Landlord’s podcast. Now your host, Andrew Schultz.

Andrew Schultz: (00:31)
Have you joined the free Rent Prep for Landlord’s Facebook group? We just reached 13,000 members, so of course, that means we’re on the hunt for 14,000. So if you have a question or a situation that you’ve never encountered before or you just need to bounce an idea off a big group of housing providers, this is the place. If you haven’t checked it out yet, do it today over at facebook.com/groups/rentprep. Don’t forget to mention the podcast when answering the questions so we know how you found us.

Voice Over: (00:57)
Water cooler wisdom expert advice from real estate pros.

Andrew Schultz: (01:05)
We’re gonna kick things off this week with a water cooler wisdom segment. This one comes to us via the Rent Prep for Landlords Facebook group and it comes from the state of Missouri. Let’s go ahead and take a look. How do you find an address to serve a prior tenant who left damages and breach the contract? I’m trying to avoid serving them at their place of employment, so trying to track someone down when they don’t want to be found is honestly sort of a headache because the person who’s running is incentivized obviously not to be found. They don’t want whatever’s chasing them to actually catch up with them, whether it be, you know, bad debt and X the law, whatever the situation may be. Fortunately, there are a few different things that you can do to try to track someone down who’s moved without offering up any sort of a forwarding address.

Andrew Schultz: (01:49)
The first and easiest thing to try would be mail forwarding via the postal service. So the United States Postal Service offers a couple different options that you can try to use to retrieve the address of someone who’s moved away. The first thing you can do is send a letter to the tenant’s last known address, which is probably your rental and write address service requested on the envelope. When address service is requested, the post office will forward your mail item and you’re gonna receive a notification and they will only do this for a period of 12 months after someone has sent in their change of address paperwork. So if you do the address service requested, the tenant’s still going to get that notification and you are going to get something indicating what their new address is. The other option available through the post office would be again, send a letter to the tenant’s last known address and write return service requested on the envelope.

Andrew Schultz: (02:39)
In this instance, the post office will return the item to you with either a new address or something indicating that they were unable to deliver because they don’t have a new address. Uh, the nice thing is there’s no time limit for this service, so you can do this even after the 12 months as ended for the address service requested like we had talked about previously. The next option that I would recommend would be hiring either some sort of a skip trace company or a private investigator to help locate the person. Depending on how much this person owes you, this might be worth spending the cash to do. Generally speaking, skip tracing or having a private investigator locate someone typically isn’t terribly expensive. Skip tracing is typically gonna be the cheaper option here because it’s more database driven and things of that nature versus a private investigator who again is probably gonna do some database work and then go out and physically seek to find that individual.

Andrew Schultz: (03:32)
So with the skip tracing, more often than not you’re going to be able to get an address for the person who skipped out on you as long as it’s been a little bit of time and some new addresses have started reporting into the system. And what I mean by that is the databases are only as good as the information that gets fed into them. So it might may take a month or two for new addresses for that tenant to start popping up on their credit report as they go forward and update addresses for credit cards and bank accounts and auto loans and stuff like that. Eventually, they’re going to update an address and it’s going to show up on their credit. It may just take a little bit of time before that actually pops up on any of the database websites. Now talking briefly about the private investigator route, you can go and have a private investigator actually locate someone for you.

Andrew Schultz: (04:17)
It’s basically the same as hiring a skip trace service. Um, the main difference being that you have an actual human being going out and actually looking to verify that the address that they have is valid. And you may even find some private investigators that don’t necessarily do that step and come in a little bit less expensive. But essentially if you’re just looking for some sort of an address so that you can serve someone, either one of those routes is gonna be pretty straightforward and should help you find the person that you’re looking for. Another option would be sometimes you can get information from a utility company such as where a final bill was mailed or if service was established at a new address. Your mileage may vary on this one and most utility companies take customer privacy pretty seriously, but you may get lucky and find a loose-slipped customer support representative or something along those lines.

Andrew Schultz: (05:05)
Someone who slips up says something that they shouldn’t have said, whatever the case may be. Again, that’s one of those situations where it’s manipulative at best and possibly illegal at worst. So I would say, you know, at your own risk for something like that. Last but not least, depending on your state, you may be able to have this person served at their place of employment. You actually mention that in your question. If you know where the tenant was working when they were living in your property, you may be able to have them served at their place of employment, assuming they’re still at that same place. We’ve had to do this a few times over the years. It’s not something that we do frequently and it almost always guarantees that we get a phone call from the tenant immediately after they’ve been served screaming about how embarrassing it was.

Andrew Schultz: (05:46)
But at the end of the day, at least you know that they received the process service. So that might be the route that you decide to go on something like this. Good luck in finding that lost tenant. Let’s move right onto our second water cooler wisdom segment. This one again comes from the Rent Prep for Landlord’s Facebook group. Let’s take a look here. Uh, I did a favor to the tenant by breaking the second part of the deposit into multiple payments over the course of four months. However, she didn’t pay the deposit payment on time this month. Should the payment go to the deposit before applying to the rental portion? Theoretically, I can charge late fees on the rent for this month. Is that correct? Uh, there’s no state listed on this one, um, but we’ll go ahead and jump right in here and talk a little bit more about it.

Andrew Schultz: (06:28)
We actually talked a little bit about this on the last podcast episode as well. So some of this information might sound a little familiar if you listen to the last episode, but there are some new points to bring up here as well. The bottom line here is don’t do this. Splitting up a security deposit payment serves only to put you as the housing provider at risk. There’s no benefit to you here other than having a tenant in your unit that can’t afford the unit. Just don’t do this no matter how good of an idea it seems at the time, we do not split our security deposits across multiple payments or multiple months, and I think it’s one of the riskiest situations that you can put yourself in as a landlord is to not have the full deposit before someone moves in. This is literally the exact example that we’ve heard of in the past.

Andrew Schultz: (07:13)
People make exceptions and allow a tenant to pay deposit over the first few months and then they move into the property and they never seem to get the remainder of the security deposit payment, but that person is still in possession of the unit. So your only option for resolution at that point, if they choose not to pay and you really want that security deposit money would be to evict. And is that really the the type of situation that you want to be putting yourself in? So it’s, it’s very seldom that I ever hear of situations like this playing out with no issues whatsoever. Almost every single time I’ve heard someone say that they’ve done something like this, it comes back to bite them. Obviously, this is no exception. Simply put, please don’t do things like this. We do not allow a tenant to move in until we have their deposit and their first month’s rent in full until they have a $0 balance due on their account.

Andrew Schultz: (08:02)
We’re not turning the keys over. Now, getting on to your actual question here with regards to how to apply rent payments, this one is actually going to boil down to law lease and Logic. The first thing you need to do is look at your state law to determine if the state stipulates how you’re supposed to apply receipts. In some states, the tenant can specify what the funds are supposed to be applied to just by writing it on the check. Think of it as though you were sending like an extra principal payment in on a mortgage and specifying this is a principal payment. Something along those lines. Moving on to lease your lease should have some sort of a clause in it indicating that any funds received will be used to pay off the oldest charge first, and in that instance, you would be correct in that the payment would be applied to the deposit first, which would leave a rent balance unpaid, and I would think that you should be able to charge a late fee on that unpaid rental balance.

Andrew Schultz: (08:52)
And then finally, moving on to logic. If your state doesn’t have rules on how the funds are supposed to be handled and your lease doesn’t have a clause in it, that states that the oldest charge will be automatically paid first, I would move forward and apply logic here and in my mind, logic would stipulate that the oldest charge would be the first thing paid off. So if someone sends me a check and they have a portion of their security deposit still due, I’m likely applying it to the security deposit first and to the rent, second based simply off the fact that logically that’s what you would do when someone sends you a check would be apply it to the oldest portion of the balance first. So there you have it. That’s what I would do. In a situation like this, it’s pretty straightforward. Try to avoid situations like this whenever possible, but if you’re not receiving those funds, I would say that your options are either issue the eviction notice and be prepared for whatever the result of that happens to be. Or number two, look into your laws and then look into your lease and see if you’re able to apply those funds that you are receiving to the deposit first, leaving that rent charge open, leaving the ability for you to charge late fees as well.

Voice Over: (09:59)
Forum Quorum where we scour the internet for ridiculous posts from landlords and tenants.

Andrew Schultz: (10:08)
Our final segment of the week also comes to us via the Rent Prep for Landlords Facebook group. This is our forum quorum segment. Let’s go ahead and jump right in here. Hi. All my tenants who were married, uh, recently divorced and the wife moved out and the husband stayed behind. The wife asked to be taken off the lease, but I told her she needs to stay on it until the lease is up in July. She just texted me asking if I knew that the husband’s girlfriend was moving in and said she doesn’t want to be responsible for that. I’m going to let the husband know anyone moving in has to be screened and added to the lease of approved. But how does this work for the wife who moved out? I see the logic of keeping her on the lease, but see her point of not wanting to be responsible for another party.

Andrew Schultz: (10:47)
Thank you for your help. So this is a really unfortunate situation for the wife in this scenario, but in this scenario, I would not be removing the wife from the lease. Let me explain why all of our leases are written so that all tenants are jointly and separately liable for the lease, the entire duration of the lease. And we do that for situations basically exactly like this where people split up in the middle of a lease and one person moves out and thinks that they should just no longer be responsible for the unit. Having all of the tenants listed as being jointly and separately liable for the lease means exactly what it sounds like. All of the tenants are individually and jointly responsible for all aspects of that lease. That includes the rent, payments, any damages, making sure the lease is adhered to, et cetera.

Andrew Schultz: (11:36)
They’re everyone is both jointly and individually responsible. So in this exact instance, even though the wife is no longer living in the unit, she’s still going to be responsible for that unit. The next thing I’ll say is that the girlfriend needs to be screened prior to moving into the home as well, I would say to add her to the lease, but you would need the signatures of all three parties in order to add her to the lease. And obviously, the ex-wife is not going to sign something adding the girlfriend without also signing something that removes her from the lease. What you can do is require the girlfriend to be screened prior to moving into the home, and at that point, hopefully, your lease has some sort of language that allows you to charge an additional rent for the additional occupant. Keep in mind that technically you can’t add her as an occupant on this lease for the same reason that you can’t add her as a responsible party, you would need all three signatures in order to do that.

Andrew Schultz: (12:28)
Actually, I guess you would only need the two, the husband and the ex-wife. If the girlfriend was just going to be an occupant, she wouldn’t actually be signing anything at that point because the girlfriend is technically not able to be on any of the paperwork. You should be compensated on a monthly basis for having this person hanging around the property and that’s where that lease clause would come in. Another option available to you would be to terminate the lease with the husband and wife altogether, re-screen the husband and the girlfriend, and rerent the home to just them. There isn’t really a lot of incentive for you to go this route. You’ve already been through a full screening process with the husband and the ex-wife, so now you’re going to be going through a second full screening process for the husband and the girlfriend, plus generating all the lease paperwork and all the termination paperwork for the old lease and dealing with the security deposit from the old tenancy to the new tenancy.

Andrew Schultz: (13:16)
Really, it doesn’t make sense for you to jump into doing something like this until you absolutely have to. You’ll eventually have to do this at the end of the current lease term because at that point the ex-wife will be under no obligation to remain on the lease. But this is definitely something that you don’t need to do immediately. I do strongly recommend screening prior to starting the new lease with the husband and girlfriend and if they don’t meet the qualifications for the home, they’re gonna have to move at the end of that lease term as well. So this is definitely something to pay attention to. It’s definitely something you want to have resolved prior to the end of the lease term in terms of who’s going to be on the lease going forward or will everyone be vacating. But in terms of just removing the ex-wife from the lease, because she’s no longer living there, honestly I don’t see an incentive or a reason for you to do that as the housing provider.

Andrew Schultz: (14:05)
Do you know everything there is to know about property insurance in Rent Prep’s latest guide? We’ll go over the best type of insurance to get for your rental property, including the various types, costs, and more. Visit rentprep.com/blog today for more information. And that pretty much wraps things up for this week’s episode of the Rent Prep for Landlord’s podcast. Thank you for listening. We truly do appreciate it. Our goal with the podcast is to help as many people as possible make educated decisions when it comes to real estate. So if you heard something in this week’s episode or any of our other episodes that might benefit someone you know, do us a favor and share it with them. If you’re looking to get a contact with me, I can be reached over at whatsdrewupto.com. From there, you’ll find links to everything going on with me over at Own Buffalo as well as other projects that we’re working on.

Andrew Schultz: (14:51)
You can also grab a copy of our free deal analyzing tool over there. There’s no obligation and it comes with a free companion video showing you how to use it. If you’re looking for top-tier tenant screening services, head on over to rentprep.com. There are multiple products to choose from, including a tenant-paid option. And if you’re over 50 doors, ask about the enterprise-level programs and pricing. I’ve been an enterprise user at Rent Prep for years now, and it’s definitely changed the way that we screen our tenants. Check that out today over at rentprep.com. Again, thank you so much for listening. We’ll be back in two weeks with an all new episode you won’t wanna miss. Until then, don’t forget to check out the Facebook group as well as our YouTube page for more great content. Thank you once again for listening. I’m Andrew Schultz with ownbuffalo.com for rentprep.com and we’ll talk to you soon.

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