What Is Rental Arrears? How to Handle Late Rent and Protect Your Income

Being a landlord comes with many responsibilities, but few challenges feel as stressful as dealing with missed rent payments. If you’re managing property, chances are you’ve come across the term rental arrears. But what is rental arrears, and how should you handle it when tenants fall behind?

In this comprehensive guide, we’ll demystify what is the arrears of a lease, explain what does it mean when a property is in arrears, and explore the common reasons behind this issue. From proactive strategies to legal considerations, the information here will help you handle these situations professionally and confidently, whether you're a new landlord or a seasoned pro.

What Are Rental Arrears?

So, what is rental arrears? Simply put, rental arrears is the total amount of rent that a tenant owes to a landlord or property manager after the payment due date has passed. This situation occurs when a tenant fails to pay all or part of the rent on the agreed-upon date in their lease agreement. It’s a common issue many landlords face.

Imagine you own an apartment building with five units. If two tenants miss their rent for the month, the property as a whole is considered in arrears because not all rental income was collected on time.

Common Reasons of Rental Arrears

Why do tenants fall into rental arrears? Tenants rarely plan to fall into arrears. Most of the time, life circumstances interfere with their ability to pay rent on time. Below are some of the most common causes.

Change or loss of income

This is one of the leading causes of rental arrears. A sudden job loss, reduced working hours, or a significant change in income can make it impossible for a tenant to afford their rent. Any major shift in their financial situation can create an immediate cash flow problem.

Illness or injury

A serious illness or unexpected injury can prevent a tenant from working, leading to a loss of income. Medical bills can also become a significant financial burden, making it difficult for them to meet their rent obligations.

Rising rent and cost of living

The rental market can be volatile, and rent increases can outpace a tenant's ability to pay, even if their income hasn't changed. When rent goes up, along with other daily living expenses, many tenants find it challenging to keep up. 

For example: A tenant in Los Angeles had been paying $1,000 in rent for several years. When the landlord raised the rent to $1,250 while grocery and utility costs were also rising, the tenant could no longer keep up. Within four months, they were behind by $1,250 in arrears.

Welfare and benefit issues

Some tenants rely on welfare or housing benefits to cover their rent. Delayed government payments, benefit overpayments, or sudden reductions in welfare can lead to rental arrears in California and other states.

For example: In California, a tenant who depended on housing assistance experienced a three-month delay in receiving payments due to administrative errors. By the time benefits resumed, the tenant had $3,600 in rental arrears.

Personal circumstances

Personal events like a divorce, separation, or a family member moving out can change a tenant's financial situation. These shifts can reduce the number of people contributing to the rent, creating an unexpected financial burden.

Multiple debts and competing financial priorities

When tenants have multiple debts (e.g., credit cards, car loans), they might prioritize paying those over their rent. Poor debt management or competing financial obligations can easily lead to rental arrears.

Lack of financial management or awareness

Some tenants simply lack budgeting skills. They underestimate how much rent impacts their monthly income and fall behind. For example: A young tenant earning $2,000 a month in San Francisco spent heavily on dining out and entertainment. By the time rent was due, he didn’t have enough left. After three months, his arrears reached $4,500.

Housing benefit overpayments and non-dependents in the household

If a tenant receives too much housing benefit and is later asked to repay it, this financial strain can push them into arrears. Similarly, when adult children or other household members don’t contribute, the rent burden falls heavily on the main tenant.

How to Calculate Rental Arrears?

Calculating rental arrears is simple math. If you’re asking, is rent charged in arrears? - The answer is yes, in most leases, rent is due on a specific date (usually the 1st of the month). Any unpaid balance after that due date is considered arrears.

• If the tenant has not paid for one month: The arrears is the single monthly rent payment.
• If the tenant has made a partial payment: The arrears is the full rent amount minus the partial payment.

For example:

This calculation accumulates over time. If a tenant doesn't pay for two months, the arrears would be $3,000 (assuming $1,500/month). Keeping clear records will help you manage the debt efficiently.

How to Handle Late Rent and Rental Arrears

Once you understand what is rental arrears, the next step is to take action. Dealing with arrears requires balance. You need to protect your income while staying compliant with state laws. Here’s a step-by-step process:

Step 1 – Send a Late Rent Notice

The first step should always begin with clear communication. In most cases, landlords start by sending a friendly reminder to the tenant, giving them a chance to resolve the issue without escalating it further. If the rent remains unpaid, the next step is to issue a formal late rent notice.

This notice should maintain a professional yet respectful tone. It must clearly outline:

• The total amount past due
• The original due date
• The final deadline for payment
• Any applicable late fees or penalties

Step 2 – Offer a Payment Plan

Before moving to more drastic measures, try to negotiate with your tenant. If they have a valid reason and are willing to cooperate, you can propose a payment plan. This plan allows them to pay off the arrears over time while also making their regular monthly rent payments. 

This can help them get out of arrears without facing eviction. Offering a payment plan shows that you’re willing to work with them while still securing the money you are owed.

For example: In California, a tenant fell two months behind on $1,500 monthly rent after losing a job. Instead of pushing for immediate eviction, the landlord agreed to a repayment schedule: $500 extra per month for six months, in addition to regular rent. The tenant stayed in the home, and the landlord recovered the money without needing court action.

Step 3 – Serve a Pay or Quit Notice

When arrears become serious, landlords may serve a legal Pay or Quit Notice, which gives tenants a final chance to pay rent or face eviction. This is a legal document that demands the tenant pay the full amount of arrears within a specific time frame (usually 3-5 days, depending on local law) or vacate the property. 

Step 4 – Initiate Eviction Process

Before moving forward, it’s important to understand what eviction means. Eviction is the formal legal process through which a landlord regains possession of their rental property when a tenant fails to meet lease obligations - most commonly for nonpayment of rent, violating lease terms, or staying after the lease has ended. 

If all previous attempts, such as late rent notices, payment reminders, or payment plans - do not resolve the issue, the landlord may need to initiate the eviction process. This step should always be taken cautiously, as the rules differ significantly depending on the jurisdiction. Typically, it involves:

• Filing a complaint with the local housing or civil court.
• Attending a hearing, where both landlord and tenant can present evidence.
• Obtaining a court judgment, which may authorize the sheriff or constable to remove the tenant if they do not leave voluntarily.

5 Strategies to Prevent Rental Arrears

While it’s important to know what happens when you go into arrears, it’s even better to prevent it from happening in the first place. Here are 5 practical strategies:

1. Tenant Screening & Background Checks

Tenant screening is the process landlords use to assess whether a potential tenant is reliable, financially stable, and likely to respect the rental property. Think of it as the first line of defense against late payments, property damage, or lease violations. A thorough screening helps landlords make informed choices instead of relying on gut feelings.

Within this process, landlords often run a background check. While screening covers the overall evaluation, a background check is more specific. This usually involves pulling data from credit bureaus, court records, and sometimes employment databases to confirm the tenant’s trustworthiness.

A solid tenant screening process generally includes:

• Reviewing credit score
• History of fraud
• Outstanding debts
• Employment contracts or contact previous landlords for references
• Proof of benefit entitlements

When combined, tenant screening and background checks provide a comprehensive picture of the applicant’s financial stability, reliability, and risk level. For landlords, this proactive step reduces the chances of rental arrears, legal disputes, or costly evictions later on.

You can also check out this guide on how much rent to charge to make sure your property stays affordable while still profitable.

2. Set Up Automated Rent Collection

Collecting rent is one of the most critical aspects of property management, yet it’s also where many landlords face delays or disputes. Traditionally, landlords collected rent through cash payments, checks, or in-person drop-offs. While familiar, these methods come with several challenges:

• Inconvenience – Both landlords and tenants must coordinate schedules to hand over payments or wait for checks to clear.
• Risk of late payments – Checks can get lost, delayed in the mail, or bounce due to insufficient funds.
• Manual tracking – Landlords must keep paper records, which increases the chance of errors or disputes.
• No automatic reminders – Tenants may simply forget to pay on time without a structured reminder system.

By contrast, online rent collection offers a modern, automated solution that reduces friction for both parties:

• Automation of payments – Tenants can set up recurring transfers, ensuring rent is paid on time every month.
• Instant reminders – Digital platforms send email or SMS notifications before due dates.
• Faster processing – Payments are deposited directly into the landlord’s account, often within 1–2 business days.
• Secure records – Every transaction is documented automatically, which helps in resolving disputes and maintaining accurate financial records.
• Flexibility for tenants – Tenants can pay via bank transfer, credit card, or digital wallet, making the process more convenient.

In short, online rent collection significantly lowers the risk of missed or late payments, reduces administrative workload, and builds more transparency between landlords and tenants. For landlords managing multiple properties, the time savings and efficiency gains are even greater.

3. Maintain Clear & Open Communication

Establish an open and friendly line of communication with your tenants from the start. This makes them more comfortable notifying you of any financial difficulties they might be facing. When a tenant proactively communicates, you can work with them to find a solution before rental arrears becomes a major issue.

4. Use Rent Guarantee Insurance

Rent Guarantee Insurance ( or tenant default insurance) is a type of policy designed to protect landlords if a tenant fails to pay rent. In simple terms, it acts as a financial safety net: if tenants stop paying, the insurance company covers the missed rent so the landlord’s income remains stable.

Most policies cover rental income for a fixed period of 6 to 12 months, depending on the provider and terms of the contract. Some may also include legal expenses in case eviction proceedings become necessary.

For landlords who rely heavily on rental income to pay mortgages or other expenses, rent guarantee insurance provides an extra layer of financial security and peace of mind.

5. Require a Guarantor or Advance Rent

If you have some reservations about a tenant’s financial history, you can require a guarantor or ask for a few months’ rent in advance. A guarantor is another individual (often a family member) who agrees to pay the rent if the tenant cannot. Requiring advance rent also gives you a financial cushion to deal with any issues that may arise.

State Laws Consideration When Handling Rental Arrears

Rental arrears aren’t handled the same way across the U.S. Each state and locality has specific laws regarding landlord-tenant rights, especially concerning rental arrears and the eviction process. Before you take any action, it's crucial to understand the laws in your area.

1. Waiting Periods Before Notices

Each state sets rules for when landlords can serve a Pay or Quit Notice after rent becomes overdue.

• California: Landlords must give tenants at least 3 calendar days to pay overdue rent or move out before starting eviction (Cal. Code Civ. Proc. §1161).
• New York: Tenants are entitled to a 14-day Rent Demand Notice before landlords can begin eviction proceedings (Real Property Actions and Proceedings Law §711).
• Texas: Landlords can issue a 3-day notice to vacate unless the lease specifies otherwise (Texas Prop. Code §24.005).

2. Notice Content Requirements

States often require specific details in a rent arrears warning notice. Missing any required information can invalidate the notice.

Typical requirements include:

• Exact dollar amount of rent arrears
• Due date for repayment
• Tenant’s legal rights (e.g., ability to cure arrears before eviction)
• Landlord’s signature and date

Example: In California, a 3-Day Pay or Quit Notice must state the exact rent owed (excluding late fees or utilities) and give the tenant a chance to pay before eviction can proceed.

3. Legal Eviction Process

Eviction must strictly follow state procedures. If a landlord skips steps, the court may dismiss the case.

• In California: Courts may allow repayment schedules if tenants demonstrate financial hardship, especially under the Tenant Protection Act (AB 1482).
• In New York: The Housing Stability and Tenant Protection Act of 2019 expanded tenant rights, requiring longer notice periods and banning certain fees.
• In Florida: Landlords can serve a 3-Day Pay or Quit Notice (Fla. Stat. §83.56). If tenants don’t comply, eviction can proceed relatively quickly compared to stricter states like California.

4. Late Fee Restrictions

Some states allow late fees but set limits to prevent excessive charges.

• California: Late fees must be “reasonable” and cannot be used as a penalty. Courts generally reject late fees that are disproportionate to actual damages.
• Texas: Landlords may charge late fees if rent is at least 2 days late, but fees are capped at 12% of monthly rent for properties with more than 4 units (Tex. Prop. Code §92.019).
• New York: Landlords may not charge more than $50 or 5% of the monthly rent, whichever is less (NY Real Prop. Law §238-a).

5. State-Specific Tenant Protections

Some states offer broader tenant protections during financial hardship:

• What is rental arrears in California? California often gives tenants repayment extensions during declared emergencies (e.g., COVID-19 protections). Courts may prioritize mediation before eviction.
• Other states: Texas and Florida allow faster eviction timelines with fewer tenant protections, giving landlords more leverage when arrears build up.

Other states may allow quicker eviction processes or have fewer tenant protections. This is why landlords should always research state-specific rules before issuing notices or starting legal proceedings.

Conclusion

Now you understand what is rental arrears and how landlords can act when tenants miss payments. By sending a proper rent arrears warning notice, offering payment plans, and knowing how to get out of arrears, landlords can protect income while staying compliant with state laws. Most importantly, implementing preventative strategies like tenant screening, online rent collection, and communication can stop arrears before they spiral out of control.

If you’re looking for an all-in-one solution to simplify rent collection and tenant management, try LeaseRunner. With features like online tenant screening, digital lease signing, and secure rent payment processing, LeaseRunner helps landlords reduce late payments and stay on top of rental arrears before they become a problem.

FAQs

What does it mean to be in rent arrears?

Being in rent arrears means you owe your landlord a past-due amount of rent because you haven’t paid it on time or in full. It is the status of having an outstanding rent debt.

Can I go to jail for rent arrears?

No, you cannot go to jail for rental arrears in the United States or other developed countries. Rental arrears is a civil matter, not a criminal one. However, if you fail to pay, your landlord can sue you in court to evict you from the property and recover the money owed. 

What is considered serious rent arrears?

The term "serious rent arrears" can vary depending on the lease agreement and local laws. However, it is generally considered to be when a tenant owes an amount equal to one or two full months of rent. Once the debt reaches this level, the landlord typically has the legal right to begin the formal eviction process.