How to Handle Consistent, Yet Profitable, Late Payments?

12 Replies

I have a tenant that takes immaculate care of my property. They are a good family that fell on hard times in the recession. They have great long-term rental history as well.

Unfortunately, they have been late on their rent the last two months. We had a bounced check once about a year ago as well. Those are the only issues we've had. The ALWAYS pays though. And they always include the late fee or bounced check fee without being asked, which is nice.

The last two months they've paid their rent five days late (on the 10th) and included the late fee of $30/day. While this is profitable for me, clearly they are tight on money and I'm afraid by starting this cycle of paying us on the 10th that they won't be able to pay us on time at the beginning of the following month.

What do you recommend? Here are a few options I can think of:

1. Let them pay late and keep collecting the extra $30/day. If they don't pay by the 15th they get an eviction notice.

2. Tell them that rent is due on the 5th and late payments are not okay.

3. It sounds like they get paid on the 10th. Can I work out a way where they always pay us on the 10th rather than the 5th? This could make our mortgage payments a burden though if they are late on these payments.

$30/day.....woa.

Yeah, $30/day is huge....

As the landlord you can make the rent due on whatever day you want. If you want to set the due date to the 10th, then just do it. That might be an easy solution to help out a good tenant.

I have a similar situation with a decent tenant. The last two months he has called on the 30th and said he would be 4-5 days late and would pay the $5/day fee. As long as he keeps giving me a heads up and paying the fee then I'm okay with the situation.

You're charging a late fee of $30/day? Is that legal in your state? Many states have maximum late fees you can charge and others have lose definitions of "reasonable" fees. Unless the rent is extremely high those late fees may be seen as unreasonable. Here in FL there are no specific maximum late fees but it must be "reasonable" and the general rule of thumb I've heard from eviction attorneys is your total late fee shouldn't exceed 10% of the monthly rent. If your tenant is 30 days late and you say the late fee is $900 most judges would call your fees predatory.

Anyway, as for a solution to your program, if you already made the rent due on the 5th (a non-standard day) there's no reason why you can't change it to the 10th. All you'd need to do is collect an extra 5 days of prorated rent from the tenant along with the next full month's rent payment and then the rent could be due on the 10th.

I didn't realize $30/day was so high. Thanks for mentioning that.

The rent is $1,850 per month, so I set it to 50% of the "rent per day". If it was much lower I think they would take advantage of it every month. Good to know though.

Looks like California law is very vague on late fees, stating that they must be "reasonable". Apparently CA courts "generally" uphold charges of late fees that do not exceed 5-10% of a month's rent. For this property that would be between $92.50 - $185.

I'm glad this came up and will make sure to keep the late fees within or below that threshold.

To me it doesn't sound like an issue...yet. As long as they continue to pay the late fees I wouldn't give them a hard time, but if you want to try to help them out try talking to them. I'm sure they would appreciate it.

I think $30 a day is gouging the tenant, and if you had to evict make sure you save the late fee because there is a good chance the judge will make you return it.


Joe Gore

Thank you everyone for your comments on the late fees.

That aside, how would you handle a tenant that takes great care of a property but is often late paying rent?

Great late fee. Wow!

Originally posted by @Scott J. :
That aside, how would you handle a tenant that takes great care of a property but is often late paying rent?

Like I said before, if you like the tenant and want to make accommodations then move the due date. You don't have it on the first as it is so I don't see a big deal in moving it 5 days later at this point. Rent is paid in advance so the tenant would need to come up with an extra 5 days rent on the first month with the new date to move the due date back 5 days. Tell them that they can move the due date to the 10th and this month their rent would be $1850 plus $308.33 (5 prorated days). I'd let them pay that payment on the 10th of this month and then it'd be $1850 on the 10th going forward.

I have a lot of rentals so I don't mess around with random dates anymore but I have a few holdovers that still have payments due on the 15th that's tied to some sort of check they get mid month (and apparently can't save until the 1st). For non-standard payments like that I require electronic payment so it doesn't cause an extra trip to my mailbox and the bank after I have the rest of the rent collections done for the month (hopefully).

Originally posted by @Joe Gore:
I think $30 a day is gouging the tenant, and if you had to evict make sure you save the late fee because there is a good chance the judge will make you return it.


Joe Gore

In many states you could be liable for up to triple the damages if your fees are illegal. I'd guess California is one of them because that's one of the more tenant friendly states around. If it never goes to court then that doesn't matter so I'd work with the tenant to find a solution that works for everyone.

Originally posted by @Patrick L. :
Originally posted by @Scott J. :
That aside, how would you handle a tenant that takes great care of a property but is often late paying rent?

Like I said before, if you like the tenant and want to make accommodations then move the due date.

I'd avoid having rent due on any day other than the first. You can change the late date to whatever you want - i.e. due on the first but late after the 10th - to accommodate these tenants. I make rent due on the 1st and late after the 5th for all of my tenants (recently started changing to late after the 3rd instead of 5th). I also used to charge a per day late fee of $10, but changed that to $50 if not received within 5 days of being late and increasing $50 every 5 days. This is more incentive for them to pay on time and keeps me from having to track how many days late something is...I've heard "It's in the mail" too many times!

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