What Landlord and Property Owners Should Know About Late Rent Fees…
As a landlord or property owner, you may find yourself charging tenants late rent fees at one point or another. But what are late rent fees? If your tenant does not pay rent on time, it is standard to charge them a fee for their late payment. Typically, there will be a grace period stated in the lease, usually between three to five days after the rent due date each month. During this period, tenants have the opportunity to get their rent payment to the landlord or property manager without facing any consequences. After the grace period is up, the tenant will then be charged a fee for their late rent payment. The late fees are usually calculated on a reasonable percentage of the monthly rental rate (5-19%). Make sure this percentage and date days in your lease contract. State and local laws dictate how much of a fee a landlord is allowed to charge for late rent payments.
Outline Rent Terms and Late Fees The Lease Agreement
If your lease or rental agreement says nothing about late fees, your landlord may not impose one, no matter how reasonable it is. For example, if you hand your rent check to the landlord two days late and he tells you he will accept it only if you pay an additional $10, you may refuse unless your lease or rental agreement includes a late fee clause. So as a property manager, you want to make sure you include the following in your lease…
- Description of Rental Property
- Term of the Tenancy
- Security Deposits and Fees
- Repair and Maintenance Policies
- Landlord’s Right to Enter Rental Property
- The Amount of Rent and When It Is Due
- If There Is A Grace Period And For How Many Days
- The Amount of the Late Fee
Reference any state statutes that apply to your rent payment terms and late fee policies.
Make Sure To Communicate Well
The best way to avoid late rent payments is to communicate clearly and effectively with your tenants. To this end, be sure to carefully review the terms of the lease before your tenants sign their names. They should be fully informed about the date on which rent is due, how to calculate late fees on rent, and the grace period. You should also clearly state other consequences which may be faced if rent is paid late consistently, such as the risk of eviction. Furthermore, you should consider sending reminders about rent payments when necessary. A scheduled mass email to all of your tenants wouldn’t be very time-consuming; but may, in fact, have a positive impact on their punctuality. As a tenant, you should always be upfront with your landlord or property management company if you expect to make a late rent payment. By communicating with your landlord he might still charge you a late fee but he may hold off on the eviction process.
What Property Owners Should Know About the Legality of Late Rent Fees
Charging a tenant a late fee is legal, provided the conditions for collecting a late fee are included in the rental agreement and allowed by your local landlord-tenant laws. If the lease doesn’t include a provision for charging a late fee, a landlord can not legally collect one. Even when the lease allows late fees, there are questions landlords should consider before adding a late fee to the monthly rent…
- Is the late fee reasonable? – Late fees for rent should be a certain percentage of the monthly rent, usually around 5% unless the rent is extremely late. Keep in mind that your local landlord-tenant laws may limit how much of a late fee you can charge and when.
- Is the rent really late? – There are three guidelines to think about when determining if the rent is late…
- When the payment was scheduled or mailed
- When the payment is received by the landlord
- When the payment is deposited and clears the bank. All the dates must be outlined in the lease.
- Does Your State Have Late Fee Laws? – Make sure you are following late fee rental laws correctly. If you own a rental property that is part of rent control, additional laws will apply to your property and how you structure your late fee policy.
The stress of late rent payments can be huge to a lot of property managers. However, a good property manager always knows what to do. By equipping yourself with some precautionary measures and a proactive approach, you’re sure to find a great system for managing late rent payments and late rent fees.
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