Late fee

7 Replies

HI BP,

I was thinking through a hypothetical late fee situation and wanted to get your input. Our lease agreement says that we charge a late fee if rent is past due. A tenant paid past that date and our late fee is applied. HOWEVER, if they write a check after rent is already past due and that check that bounces, do you think they should be assessed a second late fee in addition to a bounced check fee? 

Thanks for your input!

Taylor

Depends on the wording in your lease pertaining to how late fees are to be charged.  Is it a flat fee if rent is not paid by a certain date?  Or is there a daily late charge?

If it's a flat fee, I would submit that you could only charge it once for that month.  However, if it was a daily late fee, I would charge it up until the rent was actually paid (a bad check that bounces does not constitute paying the rent). 

My lease also allows for an additional charge for bounced checks (in addition to the late fee), and it gives me the right to require the tenant to pay future rent in cash, money order, or cashier's check (basically any manner I choose other than a personal check).

Ultimately, it mostly comes down to how your lease is worded.

Charge them rent, late fee, NSF fee (whatever your bank charges) and get that cash in hand.  Piling on tons of additional charges may only make it harder to collect.   @Kyle J.  Is absolutely correct about your lease language.  My lease is worded similar to his. 

For me, anything received after the 5th of the month is considered late, and a 5% fee is assessed.  So, they would have been charged the 5% late fee plus the fee for the bounced check.  My lease is setup similar to Kyle J's, once you a bounce a check, I reserve the right to change the payment form to ensure it doesn't happen again.  

No.  I'm sure this wouldn't hold up in eviction court.  Besides, you don't want to be a jerk landlord.

Most people want to pay.  Keep that in mind and it helps humanize your tenants.  Even the tenants I've evicted, it is not that they didn't want to pay, they either just couldn't or were terrible at managing their finances.

Have a late fee, a return check fee, and evict when you need to, but remember that your tenants are people too.

My lease is similarly worded, although I never take checks. Tenants pay online or they can deposit the rent directly into my TD Bank business account. But rent is considered late after the 3rd ($50 late fee), plus $5 a day after until paid in full. 

For online payments that are auto-debited from the tenant's account, the payment can also bounce due to NSF, but there are no fees from the banks or www.erentpayment.com. But by the time that happens, usually 7 or 8 days have gone by, so late fees still apply.

@Kyle J. , what you said makes sense. My leases is worded that it is a flat fee. I do have the additional late fee too, so I will charge both, but not a late fee twice for the same month.

I appreciate everyone's perspectives here. You all are a great community to be part of.

@Larry T. , being a jerk landlord is not an area I would like to venture in. Remembering the human part is important too.

Interesting thing I learned from our attorney about late fees in our jurisdiction... Of course you can't charge late fees twice for the same month, but if in your rental agreement you established a late fee per day you could add them up.  However, if an eviction is underway and the court has ruled the tenant was supposed to be out by the end of the month and they held over into the next month, you can charge rent for the additional days or month that they held over after the fact, but not a late fee because they were already supposed to be out by then, so therefore you would not have a "late by" date as you would no longer be asking the tenant to prepay rent for that additional month. To do so, could mess up your eviction process.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here