Collections

The following article appeared in the Fall 2021 issue of Fairview Media Solutions’ Multi-Family Central Virginia Vendor Guide. Thanks to Lynn Black, Publisher, for permission to post this article here.

            Increasing collections payments from prior residents can be an important way to fill in pandemic holes in your budget.  Now is a good time to review your collections procedures in order to maximize your property’s revenue stream.  Here are a few things to consider when processing moveout reports and forwarding them to your collection agent.

            TRY TO GET A FORWARDING ADDRESS.  If residents are entitled to a security deposit refund, you want to make sure they receive it.  If they owe money for unpaid rent or damages, you want to know where to send the account statement and if you don’t receive a response, where to have them served them to secure the balance with a judgment.  Add the words “RETURN SERVICE REQUESTED” to your envelopes just underneath your address so that if a resident has filed a forwarding address with the post office, instead of being forwarded automatically it will be returned to you with the new address.

            In Virginia, a case against a former resident must be filed within five years, but it is generally best to file sooner while the witnesses and evidence are still available.  Once a judgment is entered, it is good for ten years and can be renewed for another ten.  That is a lot of time for your former residents to clean up their lives so they are able to repay the balance they owe to you.  Securing the debt with a judgment makes collection down the road more likely.

            RENT CHARGES.  The VRLTA allows you to charge a resident actual damages for breach of the rental agreement.  (55.1-1251) This means that you are allowed to charge rent that accrued pursuant to the lease until the unit is re-rented or the lease expires, whichever occurs first.  If you charge a standard lease termination fee in order to close out the tenant balance, be aware that this amount must be adjusted to reflect the actual amount of rent due if the unit is re-rented sooner. 

            DEVELOP A COLLECTIONS PROCEDURE.  Do you have a to-do stack on the corner of your desk that somehow only ever seems to get bigger?  Don’t let collections income get stuck in that stack!  Put together a checklist of items your collection agent will need and enlist the help of your team to make sure it is all assembled and ready to hand over.

            All statutorily-required documents should be included.  This includes the move-in/move-out inspection report, notice of the right to be present at the walk-through and the final account statement, which generally must be sent to the resident within 45 days, either to the forwarding address or to the property address if none has been provided.  Include the leasing packet showing the residents’ e-signatures. Collect invoices for all charges listed on the statement and be sure you have pictures documenting the damages.  In court, we often hear residents tell the judge that they left the property in better condition than it was when they moved in, so your job is to be ready to refute this tall tale.  Carpet stains can be particularly difficult to capture in pictures, so experiment with the lighting and make sure the damage is obvious in your pictures, or consider keeping a piece of the carpet if possible.

            BACK IT UP!  If you replace your computers, make sure that your moveout files make the transfer to the new one.  Better yet, store your documents in the cloud or on an external drive, labeled so that you can find what you need easily.  These files should be retained for the five-year statute of limitations period. 

            DON’T DELAY.  Those stacks on your desk have dollar signs on them.  Put them to work as soon as the information is complete by forwarding the accounts to your collection agent!