Late payment lease clause

4 Replies

Hi, 

  I have a tenant that has been late with their rent for the past 8 months. Same game each month: 10 day notice given on the second of the month and then they pay on the 12th. However, they take good care of the property. Their lease expires soon and I would like to add a clause to a new lease stating that if they are late 2 months in a row they can be evicted. What's your opinion on this?

thanks,

Steve

depending on your state, that is probably already allowed. You usually can file for eviction right after the grace period with a 3 day notice! What is your late fee and grace period? I only have a 5 day grace period and follow up on the 6th! My late fee is 10% in order to encourage your tenant not to be late!

@Steve Babiak  is knowledgable about PA and keen about best practices. He may be able to give you some guidance.

@Steve Erkens  If it were I, I would have a meeting with the tenant as soon as possible. I would let them know how much I appreciate them taking good care of the property. Then, I would review with them the entire lease/rental agreement (rule breakers tend to break more than one rule). I would clarify that rent is due on the first and is late on the second. Show them their track record and let them know their paying late is not working for you. Then ask them...."What would it take for you to pay rent on time?" Perhaps their pay checks arrive at a time of month that is making it difficult and you could change the rent due date to accommodate. If you do that, you could add a little to the rent to compensate you for your inconvenience.

Also, build in a service fee (ours is $20) for each time you need to serve a legal notice for a lease violation. Also, as @Elizabeth Colegrove mentions, if you don't have a rent late fee, establish one (ours is $50). That would equate to the tenant needing to pay $70 extra per month if they pay late... pretty good deterrent and also pretty good extra income to cover your troubles.

Good luck!

@Steve Erkens  Oh, here is an example (from our rental agreement) of clauses pertaining to payment of rent and other payments:

RENT.  Tenant agrees to pay rent in the amount of $___________ per month to Landlord, in advance, for rental of the above premises. Tenant understands that rent is due on the first (1st) day of the calendar month and late on the second (2nd).  In the event the tenancy commences on any day other than the first day of the month, the first month’s rent will be prorated, after which time all rents will be due and payable on the first day of each succeeding calendar month. Tenant understands that Tenant will receive no rent reductions, adjustments or compensation due to repairs or interruptions of service except as provided by law.

LATE FEE.  If rent is not received or postmarked by the fifth (5th) day of the month, a fifty dollar ($50.00) late fee will charged immediately as additional rent for that month.

PAYMENTS.  All payments made by Tenant to Landlord after the tenancy commences, no matter how designated by Tenant, will be applied as follows: first, to any outstanding amounts due for damages/repairs, utilities etc.; second, to any outstanding service charges and fees from prior months; third, to any rent outstanding from prior months; fourth, to any service charges or fees due in the current month; and lastly to the current month’s rent.  

Maybe you just don't renew them. 

But first talk with them. Explain that there are certain characteristics of good tenants that they exhibit, but there are also characteristics of good tenants that they fail to display. Tell them that your rental operation runs smoother with good tenants, and you therefore only want good tenants. Explain that their inability to pay on time has put them into the not so good tenant category; you would like to have that corrected or you will have to seriously consider not renewing. And also add that when a landlord is looking at their rental history and contacts you, you will have to be honest in disclosing the failure to pay on time. 

One possible solution you could offer is to change the start and end date of the rental to be mid-month, since they seem able to pay then. Maybe they just have too many bills due at the beginning of the month; maybe it's because the pay periods from their job aligns that way. Whatever the case, it might be a way to solve this. 

Some people really are happy with a tenant that behaves like this, because they look at it like extra income without having to raise the actual rent amount. 

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.