Should I charge late fees for late rents?

Question

Brian Spear · Answer

@Gulliver R. In order to efficiently manage a MHP, owners should implement a black/white NoPay, NoStay policy. The majority of MHPs in our portfolio were purchased from Mom&Pop operators who had inefficient management systems... Allowing tenants the flexibility to pay when they so choose inevitably leads to burned out owners.

Rachel H. · Answer

Absolutely! Otherwise, they'll continue to be late without any consequences.

Curt Smith · Answer

@Melissa McGuire  I too am a fan of David Tilney's property management tactics, went to his boot camp.  Am converting my SFRs over.  I'm a MHP owner and arms length operator and our lease says some pretty stiff language:

3) Late fees: If monthly rental payment is not made on or before the 5th day of each month, Lessee agrees to pay an additional late charge of $100.00. If all past due monthly rental payments are not paid on or before the 6th day of each month, Lessee will receive an eviction notice to vacate the premises and tenants will be subject to pay all past due rents plus a $300 eviction fee. If Lessee fails to pay Lessor, as outlined under this Agreement, after the 10th day of the current month, Lessor may terminate this Lease.

I've not run the experiment (LOL!) of discounted rent vs big stick.   As much as I prefer to believe in the "aspirational" tenant and have great relationships and results in my SFRs, but in the MHP tenants not sure who would respond to earning the discount, the practical and em-mass approach to serious encroachment into the months beer funds seems the best match.     To be honest I'm a bit shocked at reading my own parks lease.  We inherited management practices from the previous owner who ran a tight ship and ,,, well we've left well enough alone and heck if this language gets good rent payment compliance who am I to run an intellectual experiment and muck things up?  :)

Also, I suspect our leases language is commonly used +/- in other parks given the seller of our park was a big time owner of many parks.  Park owner trade what they do...

Tip:  join the free MHP old timers forum on mobilehomeuniversity dot com  .  Great boot camp run by Frank and Dave, best there is.

Melissa McGuire · Answer

Instead of charging a late fee perhaps word it like this. Rent is 750.00 and is due by the 10th of each month. If rent is paid  in full by the 5 th of the month a 25.00 credit will be given towards the next month rent.  I know it seems silly but if you are charging say 700.00 a month anyway you wont be losing anything but it gives the tenant an incentive.  It's just a thought.  This way if rent isn't paid by the 5 th the late fee is already built in. If on the 11 th rent is still not paid the post the 3 day pay or quit or whatever you have in the state your in. Best of luck

Thomas S. · Answer

Absolutely. If you don't your only other option is to evict/non renew. Tenants need to be trained or terminated.

It actually has a stronger effect on MHC tenants as the financial hit is a harder slap than on a tenant paying $1000/month on a apartment. A $50 late fee on a $300 lot rent is a serious deterrent to never pay late again.

Aaron R. · Answer

@Thomas S. Sorry, meant to say it is due on the 1st, but late fees start after the 6th.

Thomas S. · Answer

Landlords need to understand that rent is due on the 1st of the month, or what ever day they set. It is late on the 2nd regardless of when a late fee kicks in. Many novice landlords confuse late rent with late fee.

Rent must be received by 12:00 PM on the date it is due otherwise it is late and a tenant automatically receives a pay or quit notice. Landlords do not wait till the late fee becomes effective to notify the tenant their rent is late.

@Aaron R. Is their a reason your tenants rent due date is the 6th and not the 1st of the month.

Ken Rishel · Answer

This is an interesting concept. It might be a way around late rent restrictions and perhaps a method of dealing with ultra liberal judges who often throw out late charges.

This is worth serious exploration in my book.

Ken Rishel · Answer

I would add that many states have statutory maximums that can be charged and that in some areas, counties and municipalities also have restrictions.

Should I charge late fees for late rents?

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