Tip of the Month - June 2014

Charging tenants late fees when they do not pay their rent on time is one of the most effective ways to encourage on-time payments. Although many rental property owners have late charges, they are often enforced inconsistently and therefore become ineffective. Other rental property owners have very long grace periods or set their fees so high that they are unenforceable if challenged in court, so they are often waived.

Late charges are very controversial and many state courts have ruled that excessive late fees are not enforceable. Implementing and enforcing a late charge policy makes sense, as long as it is reasonable and relates to your actual out-of-pocket costs or expenses incurred by the late payment.

Do not allow tenants to form the impression that your late charge policy approves of late rent payments as long as the late charges are collected. Your late charge should be high enough to discourage habitual lateness, but not so high as to be unreasonable. Send a written warning to those tenants who regularly pay late (even if they pay the late charges) clearly indicating that their late payments are unacceptable and legal violation of the terms.

Waiving the late charge is excusing the late payment of rent and can send the wrong message. If you routinely accept late payments and waive the late charges, you cannot suddenly change your attitude and begin eviction proceedings the next time your tenant pays late. You need to give your tenant a written notice that you will once again actively enforce the strict rent collection terms of your lease or rental agreement. You also need to be consistent in applying your late charge policy to all tenants equally or you could face claims of discrimination.

Tip from Crossett Real Estate Services

We will accept late rent including late fee at five percent (5%) two (2) times during occupancy which is clearly spelled out in our rental terms/agreement (lease): we will not accept partial rent at any time.