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:
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.
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.
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.
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:
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:
After that, the court will most likely issue a judgment in your favor. Here are some things to consider about court decisions:
After you win a case, you will need to enforce the court’s judgment.
If your state allows it, you can:
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:
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.
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.
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.
Secure your financial future, and register for your FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST!
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
Ready to know more than your attorney? You'll get over two hours of instruction combined with five ebooks to teach you how to best structure your real estate investments.
Join thousands of real estate investors in all 50 states as they enjoy exclusive content, special promotions, and behind-the-scenes access to me and my guests. No spam, ever. Just great stuff!