Late Fees.
Im trying to get some opinions on the best way to bill a tenant for a late fee..
for ex.. if rent is $475 but $450 will be excepted if paid before the first of the month, and after the 5th is considered late.... how do you bill the tenant? say they send $450 but you see its post marked for the 6th and you recieve it on the 8th. Do you call and let them know that they owe the $25 plus the late fee for next months rent or do you collect that late fee and $25 right away.... Or is a written notice sent...? thanks for opinions
This may depend upon the tenant. I often telephone them and ask them to pay the late fee. Putting it in writing is probably better since you have record of notifying the tenant of your intent to collect late fee.
Related to this is another trick you can put into your leases. In California you cannot evict over a late fee but you can give a "pay or quit" 3 day notice on unpaid rent. My leases state that any payment from the tenant is first applied to any other owed money before it is applied to rent. That way if the tenant decides not to pay the late fee, my lease credits the late fee first and there is an unpaid balance for the rent in the amount of the late fee. I can then threaten eviction to collect.
Hope this helps.
Regards, Ed
Hey,
I tried the "pay before the 3rd and get a discount" route and, for me, it was nothing but headaches. The rent would be $800, with a $25 discount, and on the 10th I would get $775. Anyone who is a landlord knows the conversation..."I mailed it on the 2nd, the postman must be slow".
Have a rent, due on the first, but excepted as late as the 5th with no fees.
If the tenant is a new tenant or rarely late, a nice phone call is all it takes. If they are always late, send letters.
Charge a daily late fee.
thanks for the replies
[quote]
On 2004-01-12 22:47, edmeyer wrote:
This may depend upon the tenant. I often telephone them and ask them to pay the late fee. Putting it in writing is probably better since you have record of notifying the tenant of your intent to collect late fee.
Related to this is another trick you can put into your leases. In California you cannot evict over a late fee but you can give a "pay or quit" 3 day notice on unpaid rent. My leases state that any payment from the tenant is first applied to any other owed money before it is applied to rent. That way if the tenant decides not to pay the late fee, my lease credits the late fee first and there is an unpaid balance for the rent in the amount of the late fee. I can then threaten eviction to collect.
If you state that there is a late charge in the lease and they don't pay it, it is considered a breach in contract for which you can evict if they don't pay. Of course, you do have to give them a 3 day cure or quit (in CA) -- check with a local attorney in your area.
It's best to always have the tenant agree to the late fee up front... in writing and signed by both parties.
Incentives are great. Mr. Landlord's website has some great ideas on motivating tenants to pay. For instance, one property owner who owns a lot of properties offers all his tenants who pay on time a chance to win a $100 gift certificate.
My own view is that we're not in this for the late fees. I'm not at all happy when I get a late payment. I'm looking to invest my rental income into other properties or to use it to pay for something (i.e. mortgage). So I jacked up my late charges. Rent is due on the first of the month. If the postmark on the letter is anything after the last day of the previous month - $50 late charge and another $5 per day after the first. And this is on apartments that rent for $475 to $550 per month. Is this legal? Maybe. Maybe not. But my goal is not to collect late charges; it's to get the rent on time. I have some properties where the tenants are still on a lease that says $25 after the 5th of the month. It doesn't work. Half the tenants pay late and include the late charges. In fact, I've never had to insist that anyone add the late charge. My point is that these tenants have clearly accepted this charge as a part of their rent, and they are not particularly motivated to pay the rent on time. In those properties where I implemented the $50+ approach, I get twice as many early payments and half as many late payments. I definitely like the idea of positive motivation, like what HouseHunters described. But along with the carrot, I think you also need to have the stick.
[addsig]