Late Fees?

Question

Do you always charge late fees?

Account Closed · Answer

One very important issue you need to keep in mind...Legal precedence.  I am not an attorney, so I am not giving legal advice.  I am sharing something I learned the hard way many years ago.  If you let them pay late and not charge late fee, you set a precedence that can be held against you if you later need to evict them.  They can claim that they have been late several times and I was not penalized and nothing ever happened....now they want to evict me.

I always let tenants know from the beginning that there is NO grace period and no exceptions on late fees.  I know that may seem harsh, but like others have mentioned, this is a business...you are not a non-profit.  Taking that firm approach has saved me several times when having to take tenants to court.

Nancy L. · Answer

I tend to have a one time courtesy waiving of one fee per lease term. I think the important thing is to have a policy and stick to it consistently so tenants know what to expect. If they think there's wiggle room some will test the boundaries and figure out exactly how much room there is.

Steve Rozenberg · Answer

Thanks for the comments. We also learned our lesson very early on in our investing career, by giviing tenants breaks and specials it actually was more work for us to try and remember who got what deal, then if they did not come through when they said we would get upset but really it is our fault for bending the rules.

When we had 20 properties of our own that might have been ok, but now managing over 400 homes there is no way to keep track of everyones "Special Deal'. Not to mention it could be a HUGE Fair Housing Violation and possible Discrimination by letting one person slide and not another. Now that we manage other peoples properties we really do not have the right to give deals, it would only put the owner and ourselves in legal trouble and breach of the contract.

Remember, when that lease is signed it is a Bi-lateral contract, the tenant has to perform and the owner also has to perform. I was told that the first time the owner does not abide by the contract and they let the tenant slide on the rent they are in Breach first and have set a precedent, obviously all state are different but this is what our attorney told us. And said if you put it in the lease you better enforce it.

So like a lot of you all said, we enforce it to the dollar, it is a business and thats what real businesses do!

Account Closed · Answer

I had one tenant who started out persistently late. We talked to his family were told it was connected with when their pay cheques arrived. So instead of charging a late fee  - we asked him to nominate his own  payment date. He hasn't been late since.

From what I read here it may make eviction harder. Well is an easier eviction a desirable outcome? I'd rather not have to evict thank you. For some tenants the deterrent of not having their lease renewed can be effective in improving their performance.

For the demographic I deal with, the problem with late fees is that if they are occasioned by difficulty in paying the rent it makes the thing they are trying to prevent (late rent, no rent) that much more likely.

Running a business  entails evaluating the commercial smarts of any course of action and is  more nuanced than just trying to collect every dollar a contract says you entiltled to.

Kelly N. · Answer

We have had a policy allowing one late payment to slide, but making them aware that the next time they would pay the late fee.  This has worked well, but we are adding more units so it will get harder to keep track of who got the waiver and who didn't, I will be doing away with the policy.

In my experience, they are either paying on time, all the time, having an issue once or twice, or chronically late.  I doubt my treatment of the late fee is going to change any of that!

Kelly

Ryan Haase · Answer

As soon as your start to bend on this it becomes harder to evict. You need to lay out your policies and stick with them. Our contract says that we offer a 2 day grace period with a $25 late fee per day and eviction starts on the 3rd day.

Donald Morrison · Answer

The point of a late fee is to not have late rent. Also, in some states you cannot charge a late fee until a certain amount of time has passed (at least residential). I would check on this where you own before you charge a late fee.

Glenn McCrorey · Answer

I do the same thing as @Nancy Larcom  I give them a pass on the first one but explain that the next time I will have to charge the fee which I do from then on.

Justin B. · Answer

Yes.  No exceptions :)

Michael Noto · Answer

Yes.  We always charge late fees according to what our lease states.  No exceptions.

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