Have you ever wondered how about judgment enforcement on non-paying tenants? Or maybe you want to know what your options are other than evicting someone and putting them out on the street?
If so, you’re in the right place. Keep reading to learn more about:
- what judgment enforcement is
- your options if a tenant stops paying
- tools available to you for enforcement
What Is Judgment Enforcement?
First, it’s helpful to know that a judgment is merely a court order or a decision from a lawsuit. Sometimes, the court will order the defendant to pay the plaintiff a certain amount of money in the judgment.
Lawsuits happen. In most cases, it’s not if but when they occur. As a real estate investor, you must protect your financial future and assets. Take our FREE, five-minute investor quiz to learn more.
Why does this matter for real estate investors?
Here is a typical example you may encounter as a real estate investor. Imagine you have a tenant who has stopped paying rent. While it may not be easy to evict your non-paying tenants, they still owe rent to you. You have other options available for judgment enforcement.
What Should I Do If a Tenant Stops Paying?
You don’t always have to evict. You can sue the tenant for breach of contract, get a judgment, and then enforce the judgment. Remember the tenant signed a lease agreement with you. You can sue the tenant in small claims court.
What is a small claims court?
First, you should know the rules that control your state’s small claims court system. Second, you should know that small claims court is a low impact, relatively cheap, and hassle-free way to get paid.
In general, small claims courts are:
- without attorneys, it’s you (plaintiff) versus your tenant (defendant)
- for claims less than $10,000
- helpful to you in filing and explaining court procedures
How does small claims court work?
What’ll happen is this, you will file a suit in small claims court against your tenant for breaching their rental contract with you. After that, the court will set a hearing date. Then you serve your tenant with papers (this is easy because you know where they live).
Both you and your tenant have the opportunity to represent yourself in court. Present your facts:
- term of the leasing agreement
- fees for not paying rent
- tenant’s refusal to pay the rent
After that, the court will most likely issue a judgment in your favor. Here are some things to consider about court decisions:
- they are good or ten years
- there is an option of renewal for an additional ten years
- judgments accrue interest
After you win a case, you will need to enforce the court’s judgment.
What Tools Do I Have for Judgment Enforcement?
If your state allows it, you can:
- garnish wages
- enact a bank levy
- sell the debt to an enforcement specialist
These options are convenient because you most likely have your tenant’s job history and banking information already on the leasing contract.
Suppose you’ve won in court against someone that is gainfully employed. In that case, you may be able to garnish (or collect) a portion of their wage to satisfy your judgment.
Just the threat of wage garnishment is enough for most defendants to pay. Generally, to garnish someone’s wages, you don’t have to expend much effort:
- you provide the local official information about the tenant’s workplace
- the local official serves the garnishment order to the employer
- the employed must comply with the order and sets aside a portion of the salary to satisfy your judgment
There are various rules and limitations to wage garnishment, but this is an effective judgment enforcement strategy.
You have your tenant’s bank information, so it might be better for you to enact a bank levy.
When you win a money judgment, you become a creditor, or someone owed a debt. As a creditor, you may be able to tell the bank to withdraw money from an account without the debtor’s permission.
Sell the judgment
Another option for judgment enforcement is to sell the judgment to an enforcement specialist. Selling is a win-win situation because it allows you to relinquish the responsibility of debt collection to a third party.
Selling debt might be a good option for you if you think the debtor cannot pay or will not pay. The enforcement specialist will usually enforce the judgment and pay you a portion of the debt.
Key Takeaways About Judgment Enforcement
You have rights as a landlord too. When a tenant does not keep their promise, you should follow the law because it’s the right thing to do.
We discussed what judgment enforcement means, how to take action against non-paying tenants, and what tools you have available to enforce judgments. Now that you know this information, you have proven strategies at your disposal to ensure that your real estate investment journey is successful.
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