I've been having a discussion with some friends on FaceBook about when rent is late. I use Cozy for rent collection for my Maryland property. My tenant didn't start the Cozy transfer until today, October 1st. My FB friends said since she started the transfer on the first, the rent is not late. I said, the funds aren't in my account and there is no promise that the transaction will go thru so therefore I constitute the rent being late. I'm curious to hear from you guys your perspective on this.
I use cozy as well. I logged on today, rent is paid, rent is on time. Tenant is not responsible for the freakishly slow transfer from cozy to my bank. One tenant is on auto-pay which gets deducted on the 1st. You can pay the extra $3 to get it faster from cozy but I don't need it so I am happy to get it on the 6th or 8th or whenever they do the transfer. I am transitioning to VerticalRent for other reasons so things should move a bit quicker.
2 things that might ease your mind on the 'no guarantee I will get it...'
1: One tenant tried to use a prepaid debit to pay rent...cozy rejected it right away. She pays another way now.
2: One tenant had moved out but forgot to cancel his cozy autopay and they deducted the full rent from his account but he had less than that amount in his bank account. I tried to stop the payment but could not. I ended up with the full amount and cut him back a check for it.
My point is, more than likely if cozy collects the $$, it will get to you.
Late or not is a discussion you needed to have with the tenant before they started paying through Cozy not after.
If you did not make it clear in advance then they were to start the transfer you dropped the ball. You let your tenant decide when he pays.
If they mailed a check and it was postmarked October 1st, would you consider that late?
I use Cozy as well, I wouldn't consider rent late if the transfer was initiated October 1st.
Since you set up the Cozy account and your tenant uses it to pay you then when they pay your Cozy account that is when you are paid. It is not the tenant's responsibility for how fast the payment reaches you from Cozy.
If a tenant were to pay you by check it would be in your possession and you would be considered having been paid when you receive the check. However until you cash the check the money will not be transferred into your account. Also it will take time for the check to clear the bank. This is the same as when a tenant uses Cozy.
what does the lease say?
When they "Attempted" to pay and when you received your funds is really not your problem. I would be curious what your mortgage company would say if you told them you attempted to pay but for some reason it never made it out to them. They would be ok with it but you would still have a late fee.
A bigger thing you should be worried about is that when you have a lease agreement it is a Bi-Lateral contract, they have to perform (Pay rent on time) and if they do not perform you have to perform (Charge late fees). If YOU do not adhere to the contract you can be construed as violating the lease first by some judges if you ever have to evict the tenant. Many court judges are now asking if you have charged late fees per the contract every time. If you have not then you could have set a precedent to not be able to enforce the contract. Some owners have even be accused of discrimination and that cause them a lot of problems because they charged one tenant or race fees and not another.. (It was BS but still had to lawyer up and fight it)
Some speculation is that since many owners do not live in their jurisdiction and the tenants do, they are the ones that vote for them not owners that live in other areas or states. So many owners are now siding with tenants and making sure the owners abide by the contract.
Bottom line if you contract says late fees on a certain day... charge the fees.
Pretty clear cut to me. They paid on the due date. Now if it’s rejected due to nsf then a late fee would be added then.
The way I treat it if the transfer is initiated on time then it is on time as far as I'm concerned. IMO cozys processing time is not the tenant's problem esp if payment via cozy is something you requested for your own convenience.
Fwiw they could give you a personal check today the check could fail to clear and you wouldn't know for several days. Most forms of payment short of cash or a wire transfer have some form of processing time, usually measured in days, even if the money "appears" in your account.
We currently live in a near zero interest rate world. The 5 days or so processing time is not really material, as long as the tenant consistently pays on time how you communicated it I don't see processing time as material.
I think unless the lease says the payment has to be received by the first the rent is on time. If its says due on the first or paid on the first then they have paid whether you have received the payment or not.
When a tenant pays by check and rent is due on the first and we receive the check on the first, we take the check for it's face value and we deposit it into the bank. We have accepted the check as rent being paid the day we received it. Therefore, rent was paid on the First when it was due.
Now if the check bounces, then the RENT IS LATE, and the late fee is charged to the tenant along with a NOTICE TO QUIT for NON-PAYMENT OF RENT. (Now, sometimes it can take 20 days for a bank to notify you of the check bouncing and that is problem, that is why I request my tenants to pay me by Money Order or Cashier's Check). BTW, don't forget to charge them for the NSF fee you are charged in addition to that Late Fee along with the rent that is now due. Many people don't think of charging the tenant for the NSF fee. And when you do, don't link it as income. That is a fee charged to you. And when the tenant pays you back for this charge you will make it a REIMBURSABLE BILLING. Therefore a wash. Neither income or an expense.
When you allow other entities to accept payment for you, such as a bank or an online "gimmick", you compromise the eviction process. You have compromised your own lease agreement with the tenant. You can't hold the tenant responsible for somebody else's slow time-line on depositing their money into your account. You just can't. It won't hold up in court, because the tenant has no control over that entities time-line for getting the money into your bank account.
This is why I encourage people to not try and make it easier on a tenant to pay their rent. They are grown adults, right? All they have to do is put it in the mail or hand deliver it to you, and they must do it on or before the day rent is due. Plain and Simple. I have that in my Lease Agreement.
You think by having automatic deposits or other places like cozy is helping you. They are not helping you. They are stalling the eviction process for you. And time is of the Essence!
Thanks for the replies everyone. Very interesting thoughts here....
@Shawn Dandridge - all that really matters is what your state laws say. We do our evictions here in North Carolina with a magistrate. If I had that question here, I would contact the magistrate to see how they would rule on it.
Don't guess, know your laws.
@Shawn Dandridge there is little to debate about this. Their is an established standard for online bill payment. The day the transfer is initiated is considered the payment date. If you want your money faster, then use a different service that specializes in prompt payment. Even if someone sent you a check, it will take at least a day to show up in your account. If there is non-sufficient funds, it could come back out of your account days later. Cash is really the only guaranteed payment method.
Keep in mind, most landlords have a grace period before late fees kick in, which is usually 3-5 days.
You can do whatever you want, within the law, as long as you spell it out in your lease clearly.
If you are asking if the rent is late, you lease is not clear enough. If a rent collection service is to be used, that should be clearly spelled out. Know your lease.
@Shawn Dandridge I'll give you my perspective on it.
First, to address the analogy to paper checks, I no longer have any tenants that pay by check. However, when I did I considered the rent paid when I received the check. Reason being, that's what my lease said and also because I had no way to know when (or even if) they mailed the check.
I now use Cozy and I consider the rent paid when the transfer is initiated from the tenant's account, not when I actually receive it in my account. One of the reasons why is because the money is actually withdrawn from the tenant's account when the transfer is initiated. Additionally, Cozy notifies me that they have started to withdraw the money from the tenant's account and the amount of the transfer. So, unlike when the tenant mails a paper check, I actually know for sure that the Cozy payment is on its way.
Anyway, I'm not saying other ways of doing it are wrong. Just giving you the reasons why I do it my way. To each their own.