One of my units has a young couple that have been paying late for the last several months. They always pay, but about a week after the final due date. I have never charged a fee, but I threaten that one day I will. Am I not being a good landlord? Am I training them to take advantage? How do I become more strict without causing a battle? Oh yea, I believe I am already being lenient since I allow them to partake in their medical marijuana (California). I'm not happy with everything, what should I do? Well, finally getting rent every month makes me second guess my disheartening.
Establish clear expectations in your rental agreement. Enforce the terms of the rental agreement. Be firm and fair and swift. Don't let tenants slide. Every time I did, it bit me in the end because the tenant got too far behind, couldn't catch up, weren't willing to move and we had to evict. You are teaching the tenants that they can take advantage of your good nature. The extra worry and stress is not good for you. If you have late fees in your rental agreement, charge them. Start now. Serve the "Notice to Pay Rent or Quit" today in accordance to how it is done in your jurisdiction.
Take a listen to Podcast #83 where I share some of our strategies. PM me if you would like to see our "late rent letter" where we communicate with a tenant with the gentle approach first and usually get the desired result of them paying the rent and late fee. If a tenant does not respond to our late rent letter, they know to expect the legal notice next. We charge $20 every time we post a legal notice regarding a tenant's breach of the rental contract.
What I do the first time around given my tenant pool is invoice the late fee to them by email , mailbox, ect. We can't charge late fee until the 5th. I send the late fee invoice on the 5th and most tenants then correct and pay on the 5th that month, and are on time thereafter. I let the late fee go once and after that they have all paid it. I would go with the pay or quit after that but I have not had to do that. I did find you have to be very specific in the lease on this point of when a late fee happens. Do enforce the lease and your expectations as tenants will walk all over you if you don't.
I've had this same problem and have found the most important thing is establishing a good relationship with them and open communication. Once they trust me and see that I make every effort to take care of them and the property, it's easy to honestly explain the situation- "when you pay late, I have to pay my mortgage late, and that causes me major problems. I like having you as tenants, but the rent must be on time so I can keep this house, and you can continue to live here." I've found that if they respect you, this will do the trick. After that conversation, if they do happen to pay late again, I serve them a pay or quit notice in person, and repeat that sentiment.
I've only evicted tenants twice, but both times, it's started with this tactic, and each time they've ended up apologizing to me for making me evict them and the stress that it's caused me. It's all about the communication. I know that won't always be the case, but thus far, it has been in my experience.
@Marcia Maynard is right on when she stated Stated you have to start out with very direct and clear expectations. About 2 years ago I had a property that had a large rent of $2700 a month, and they had issues with paying rent. All I wanted to do was collect that rent, and I would talk to the owner and relay their sad sob story that they told me and the owner was a nice guy and waived the late fee. So after a little longer we ended having to go to court because they vacated in the middle of the night. They told the judge that they were never late because they never paid a late fee. It was obvious that that was an inaccurate statement based on the fact that you could look at the Tenant ledger and see the date they paid rent and anything after the 5 was late. I won the case, however the judge suggested that if someone is late you have to charge some sort of late fee even if it was just a $1.00, just to show it on the tenant ledger.
By allowing the tenants to pay rent without a penalty, you are not putting a precedence on paying rent, which i believe it the problem that you currently have. If you want them to change and pay rent on time you have to make it "hurt" in the wallet before you will get some action.
I also have a habitual lateness clause which states that if a tenant is late 3 consecutive times the rent goes up $30 to the end of the lease. I know that sounds harsh, but when you are dealing with young people, you have to remind them that they don't need cable, electricity, or even water if they don't have a roof over their head. Also if they call they can make payment arrangements with the utility companies and not always you.
You have already trained them to pay late with no adverse consequences. It will be much more difficult to institute penalties, since you have established a precedent of no action on your part.
If there are clauses in your lease spelling out late fees, etc. you need to enforce them right from the get-go. Otherwise, there's no point in having them.
You should (my opinion!) get this under control as soon as possible or they will continue to take advantage of you. Great suggestions posted already - put them into action TODAY.
Start charging the late fee. Right now they have no incentive to pay on time.
Send them a statement every month with the late fees accumulating. A statement is pretty clear.
Thanks for all the advise!
After texting them "where is the rent..." last night, they paid on the 5th day making the rent not late for this time. Well, is it on time? They pay through Chase online funds transfer, and it takes about 4-5 days for the money to clear in my account. I have always questioned if that was late or not, but one time their funds did not clear in the 5 day bank hold, and they had to pay well after the 5 day grace period. Besides this month, during the last several months, they paid 2/3 on time and 1/3 about 8-10 days late (plus the 5 day bank hold on the fund transfer).
@Marcia Maynard I would like to see your late letter, I tried to PM you, but we need to be colleages first before a PM is allowed... Do you charge a late fee and then also later charge $20 for a "pay rent or quit" doc? I'll listen to your interview/podcast again. I previously listed to it twice already, but now that you offered your suggestions here, I'm going to listen again. I love the podcasts! They make my commute from Santa Barbara to Santa Ynez go by quicker each day. Your the first Podcast guest that I have interacted with, so I'll listen to show 83 more intently during my next commute.
@Corby Goade I will put your advise in action when I have my talk with them. My uncle has been a landlord for many years and gave me the same advise; he tries to make friends with the tenants or at least communicate from the heart that late payments, etc., cause him difficulties. He said it usually works, but there have been some cases where the tenant turned out bad anyways, and he had to evict.
I am putting together a plan of action and will have a talk with them once my plan is organized in the next several days. I got out the lease (mo to mo), and I looked up the section about late fees. I told them in person when they signed the lease exactly 1 year ago that after 5 days, the late fee is $35. Well, it turns out that the $35 fee that I pointed out to them verbally is actually a blank line, and the written "$35" is a NSF fee for a returned check. I was supposed to write in $35, but didn't.
Here are a couple ideas for my plan so far:
1. Have a discussion about paying late, and explain that late payments are difficult on me.
2. Have them sign and date the page of the existing lease with the late fee written in.
3. Or, have them sign a new lease since they have been tenants for 12 months (just started month 13). Put enphasis on the late fee clause that it will be enforced after the 5th day.
4. Raise rent? Since they are having trouble paying rent on time, maybe put in the lease that after 3 late payments, the rent goes up $30 as mentioned by @Lisa Doud ?
5. Explain that a formal letter "pay rent or quit" will be served at the end of the 5th day, or just send an invoice like @Colleen F. suggested, or both? Show them an example of what the letter will look like so they know I'm serious and know what it means when/if they get one?
6. Keep the lease on month to month terms, so it is easier to ask them to move out, if needed.
As extra precaution for me, my lease is $100 more per month and I give the tenants a early discount if the funds are in my account by the 1st. I explain they need to have them in my account, which takes 3-5 days to process so they need to plan ahead. Once the 1st hits, they lose the discount and are on the lease rate. I use 5 days as late if they still haven't paid. Then they start getting hit with the late fees.
Once you start allowing them to pay late, things need to be shaken up to get them back on track.
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