How do you set up a payment plan for a tenant who is behind on rent?
Put it in a short written agreement signed by everyone on the lease: the total owed, each installment with its date, that current rent must still be paid on time, and exactly what happens if a payment is missed. A plan works well when the tenant is behind by one or two months and has a real way to catch up. Before you sign, check whether your state treats the plan as pausing or waiving a pending eviction notice, because in some places accepting money or agreeing to terms can restart the clock. This is general information, not legal advice.
When a payment plan makes sense, and when it does not
A plan is a trade: you give the tenant time, and you get a clear schedule and a signed promise. It makes sense when the tenant has been reliable before, the cause is temporary (a missed shift, a medical bill, a delayed benefit), and the back rent is small enough to repay in a few months without falling behind on current rent.
It makes less sense when the tenant has been late most months, the balance is already more than about two months of rent, or the tenant has stopped answering. In those cases a plan is usually a delay, and the cost of delay lands on you. A move-out agreement or the notice process may serve both sides better.
Example a made-up tenant owes $1,200 rent for last month and the lease rent is $1,200. Repaying it in 4 installments adds $300 to each of the next 4 months, so the tenant must find $1,500 a month. If that is clearly out of reach, a 4 month plan fails in month 2, and a longer or smaller plan, or none, is the honest choice.
What the agreement should say
- The names of every tenant on the lease and the property address.
- The exact amount owed, split into rent, late fees and any other charges, with the dates they were due.
- Each installment amount and its due date. Use dates, not "the first week of each month."
- That current rent is still due on the usual date, in full, in addition to the installments.
- How payments are applied. Say whether the money goes first to rent, then fees, or the order your state requires.
- What counts as a default (one missed or late payment is common) and what happens then: the whole balance is due and you may continue or start the notice your state requires.
- A statement of whether late fees keep running. Many landlords pause them during a plan, but that must be your choice and written down.
- Signatures and dates for you and every tenant. Give each tenant a copy.
Terms about notices, waivers and fees are controlled by state and local law. Ask a local landlord lawyer or association to review your template once.
Does a plan stop a pending notice?
This is the part that can hurt you if you guess. In many states, taking rent after a notice to pay or quit has been served can be treated as waiving that notice, or as creating a new tenancy, unless you accept it with a written reservation of rights. Other states have their own timing rules for cure payments.
- If no notice has been served yet, the plan simply sets a schedule and you serve a notice later only if the tenant defaults.
- If a notice has been served, decide in the agreement whether it is paused, withdrawn or still in force, and say so in plain words.
- If a court case has been filed, only a lawyer or the court can tell you what a private agreement does to it.
When in doubt, ask your local court's self-help page or a landlord lawyer before you accept the first installment.
Keeping the books right while a plan runs
Record each installment as a payment against the oldest balance, with a note that points to the plan. Do not change the original charges. The tenant ledger should show the back rent as it was, the plan payments as they arrive, and the new month's rent as a separate line, so anyone reading it can tell the plan is working or not.
Rent you do not receive is not reported as income until you do receive it, which is the usual cash-basis rule explained in IRS Publication 527. If you use a different method or the amount is large, ask your tax preparer.
Example a made-up tenant owes $900 and agrees to pay $300 on the 5th of each of the next 3 months, plus current rent of $1,000 on the 1st. The ledger shows a $900 balance, then $300 payments on the 5th. After the 3rd month the back rent is zero. If the tenant misses the second $300, the agreement's default clause applies, and you follow the steps you wrote.
How DoorKeeping handles it
In DoorKeeping the tenant ledger holds the balance, and bank feed lines are matched to the tenant by memo and exact amount, so each installment lands in the right place. You can ask Claude or ChatGPT to show who is behind, draft the plan from the ledger and email it to the tenant; anything involving a legal step waits for your one-tap approval. Late fees stay within the state cap, and you decide whether they run during a plan.
Sources
Questions
- Does a payment plan have to be in writing?
- It should be. A signed agreement with dates and amounts protects you and the tenant, and some states require certain agreements to be written.
- Can I charge late fees during a payment plan?
- That depends on your lease and your state's late fee rules. Whatever you choose, write it in the agreement so there is no argument later.
- Can I still evict if the tenant misses a plan payment?
- Often yes, but the exact steps depend on your state and on what the agreement says about notices. Check before you act.
- Should the plan include current rent?
- Yes. Current rent should stay due on its normal date, or the plan only makes the problem bigger.