What to Do if the Deposit Doesn’t Cover Unpaid Rent?

What to Do if the Deposit Doesn’t Cover Unpaid Rent?
What to Do if the Deposit Doesn’t Cover Unpaid Rent?As a landlord, unpaid rent can be a frustrating and stressful situation to deal with. If the tenant's deposit doesn't cover unpaid rent, landlords may need to take legal action to recover the debt.  There are several steps landlords can take before resorting to legal action. In this article, we’ll explore some options available to landlords when faced with unpaid rent and discuss some preventative measures landlords can take to avoid situations where the security deposit doesn't cover unpaid rent.

Talk to the Renter

If the deposit doesn't cover unpaid rent, the first step landlords should take is to talk to the renter. This can help landlords understand why the rent is unpaid and if the issues can be resolved. It's important to approach the conversation calmly and professionally and to listen to the renter's side of the story. If the renter is experiencing financial difficulties, landlords can work with them to create a payment plan or make arrangements for partial payments.  If the renter is unresponsive or unwilling to cooperate, landlords may need to take legal action to recover unpaid rent. In many cases, simply talking to the renter can help resolve the issue and prevent it from escalating.

Issue the Tenant a Demand Letter

If talking to the renter doesn’t result in payment of unpaid rent, landlords should consider issuing a demand letter.  A demand letter is a formal written notice that demands payment of the unpaid rent and warns of legal action if payment isn’t made. It should include the amount owed, the due date, and a clear statement that legal action will be taken if payment isn’t made. SCUDO-Real-Estate-and-Property-Management-Demand-Letter The letter should be sent via certified mail, return receipt requested, to ensure the tenant receives it. A demand letter can be an effective tool in resolving disputes over unpaid rent and can help prevent the need for legal action.

Consider Moving to Small Claims Court

If talking to the renter and issuing a demand letter doesn’t result in payment of unpaid rent, landlords may need to consider moving to small claims court. Small claims court is a legal venue where disputes between parties can be resolved in a simplified and streamlined manner.  In small claims court, landlords can file a lawsuit against the renter for unpaid rent and may be able to recover the unpaid rent plus any associated legal fees.  The process for filing a lawsuit in small claims court varies by state and may require assistance from an attorney. However, small claims court can be a relatively inexpensive and efficient way to resolve disputes over unpaid rent.

Engage the Services of a Collection Agency

If all else fails, landlords may need to engage the services of a collection agency. A collection agency is a third-party organization specializing in recovering debts on behalf of creditors.  When hiring a collection agency, landlords should ensure that the agency is licensed and bonded, and should verify its reputation and track record. Additionally, landlords should provide the collection agency with all relevant documentation, including the lease agreement and any notices for payment.  SCUDO-Real-Estate-and-Property-Management-rent-collection-agency Engaging the services of a collection agency can be a last resort option for recovering unpaid rent, but can also be effective in cases where legal action isn’t feasible or practical.

How Can I Prevent Running Into This Situation?

Conduct Effective Tenant Screening

Effective tenant screening is a crucial step for landlords to minimize the risk of running into a situation where the deposit doesn't cover unpaid rent. Tenant screening includes verifying a prospective tenant’s income, employment, and credit score. A credit check can provide insight into a tenant's financial history, while employment verification can confirm that the tenant has a steady income. Additionally, checking references from previous landlords can provide insight into the tenant's rental history and whether they have a history of late payments or property damage.

Be Alert in Sending Notices for Payment

When a tenant falls behind on rent, landlords should send notices for payment immediately rather than waiting until the tenant is several months behind. This sends a message to the tenant that the landlord is taking the issue seriously and may prompt them to make a payment. Notices for payment should include the amount owed, the due date, and a warning of further legal action if payment isn’t made. Being alert in sending notices for payment can help landlords stay on top of rent collection and prevent problems from escalating.

Perform Regular Inspections

Regular property inspections can help identify potential problems early on, such as property damage or illegal activity.  SCUDO-Real-Estate-and-Property-Management-property-inspection Additionally, regular inspections can help ensure that the tenant is taking care of the property and following the lease agreement terms. During inspections, landlords should look for any signs of damage or wear and tear and note any necessary repairs or maintenance issues. This ensures the property is well-maintained and reduces the likelihood of disputes over security deposits.

Conduct Walk-Throughs Before a Move-Out

Conducting walk-throughs with tenants before a move-out is another important step in preventing disputes over security deposits. During the walk-through, the landlord and tenant should inspect the property together and note any damages or repairs that need to be made. Conducting a walk-through can help landlords identify any damage that may not have been apparent during regular inspections. This can help ensure that the tenant is aware of any issues that may affect the return of their security deposit. After the walk-through, landlords should provide the tenant with a copy of the inspection report and note any deductions that will be made from their security deposit. 


Landlords have several options to recover unpaid rent if the tenant's deposit doesn't cover it. Talking to the renter and issuing a demand letter can effectively resolve disputes over unpaid rent, while small claims court and collection agencies can be used as last resort options. The best way to avoid these situations is to conduct effective tenant screening, be diligent in sending notices for payment, perform regular inspections, and conduct walk-throughs before a move-out.  At SCUDO Property Management, we’re committed to helping landlords effectively manage their rental properties and navigate any disputes over unpaid rent in a professional and timely manner. Contact us today to get started!