Tenant Late on the Rent

44 Replies

Good Morning,

We have a tenant that stated they will be late with their rent for June.  They asked if they can pay $400 on the 1st and remainder $475 by the 15th of June.  She didn't mention paying the late fees of $50.00 and $25.00 each additional day for total of $275.00.  The  reason why they are late is because of unexpected car repairs.  Any suggestions on how to handle this tenant?  

I know some people will tell you to start the eviction process on the 2nd.

She’s being honest and wants to work with you. I’d explain that this can’t be a regular occurrence, as you have bills to pay, mortgage payments, etc - but you’ll try to work with her.

Maybe explain the fees and tell her you’ll waive the daily late fee if the remainder is paid on the 15th, but the $50 late fee is still required. Follow up with an email or in writing so that there’s no confusion. And this is a one-time thing.

I think it’s important for her to know that you’re helping her out and working with her - and saving her the issues of eviction notices and the $275 in late fees.

If it took them 2 weeks to come up with $475, what makes you think they will come up with $975 (plus $50) by the first of the month, two weeks later? 

My immediate response would be no to their request. Rent payment on time takes priority over all other expenses. They are simply using you as a bank and will repeat this request in the future. You never want to train tenants to pay late or use you as a bank loan. Tell them to go to a pay day loan office.

You will likely get responses on here to the effect that if they have been good tenants why would you not but you must insist on the late payment penalties. 

It's up to you but I believe if you say no to their request they will come up with the full payment on time. If you say yes you will have made a huge novice mistake. Late payment will become a habit. Reality is that bad tenants are created by bad landlords. 

It is your business and your decision as to whether you wish to train them to pay on time as required by your lease or train them to pay late. Late payment fee is not a training tool it is a bank fee for their loan.

I offer grace one time. My policy is to hit with a late fee on the 5th and file a 3-Day Notice on the 10th. I will ignore that one time but I make it very clear that this is the only time. If the money is not in my hands on the day they said it would be, then I hit them with the late fee and file the 3-Day immediately.

Whatever you do, develop a written policy so you don't have to think about it again.

"but I make it very clear that this is the only time."

All this will accomplish is increase your odds of having a tenant consistently pay late. You will be viewed as a soft touch by allowing them to pay late and they will do it again. When they do, having drawn a line in the sand, you must make a decision when it happens. Evict or allow them to pay late as they please. If you do not evict you have then completed your bad tennat training program.

This is a major mistake in tenant training. Never ever tell any tenant it is ok to pay late. 99% of landlords are not prepared to evict due to late payments. Tenants ignore idle threats.  

Unexpected car repairs are not your problem.  Any more than they would be the grocery store's problem.  Like others, I'll be flexible for a good tenant who has a hiccup.  If they have been there six plus months and this is the first issue, I'd be somewhat flexible.  If they moved in at the first of May, maybe not.

I think your late fees are very steep.  Have you verified with an attorney these are acceptable?  Your fees seem punitively high.  Mine are $25 plus $5 per day for rents around $1200.  And here rent due on the 1st is not late until the 5th.  So, the late fee for paying on the 15th. would be $25 + 10*5=$75.  In one case, I prorated the late fee based the amount paid, i.e., 400/875 * $275 in your case.  That would make the late fee $125.

I would also make it clear that if they say by the 15th, I want the money by the 15th.  If not, I start an eviction on the 16th.  Honestly, the 15th is a long time to push.  When I've had past tenants want to push that long it was the beginning of the end of their tenancy.

I like filing the 3 day notice right away if they don’t have it in by the grace period. If they don’t have it in by around the 15th or whatever day the PM always files evictions then they have the eviction filed on them. To get it removed they have to pay the eviction fee, plus late fee plus rent

I know it's hard to be the "bad guy", but the great question was asked earlier:

What makes you think they'll have full rent on 01 July when they just paid half of June rent 2 weeks prior?

Explain that you're sorry but rent is due in full on time or you will unfortunately have to file for rent court. Once they pay in full, rent court will be cancelled. You can give bad news in a kind tone, and they are almost always understanding. 

If you really feel you must give them a "break", 15 days is way too long. 7 days late to pay in full should be the max before you start filing court papers.

I am placed in similar situations almost every month and I am still learning from my decisions. One word of collective wisdom from biggerpockets is that, whatever your late fee policy is, be consistent with that policy in dealing with all tenants. Don't make a case by case policy.

In your case, I would collect $100 of late fee ( my late fee are 50 + 5 per day) and allow them to pay on 15th. 

I see some people here have NEVER had an unexpected expense in their life. A lot of you seriously would NEVER give a single grace period or second chance to a tenant? I like the idea of putting in writing this is their one and only time they are allowed to be late. And guess what if they're late again, as some of you have stated is a certainty? They used their one chance. It's late fees galore and eviction notice immediately. 

@Anthony Wick I'm willing to bet that every single one of us have had an unexpected expense in our lives. That does not mean we get to call our mortgage companies and inform them of said expense and say we'll be paying late without there likely being some sort of repercussion. Life doesn't work that way.

I'm also willing to bet that most of us have given a grace period or second (and third, and fourth) chance to tenants...and have been burned.

The thing about letting this tenant pay the rest of June rent in mid-June is that now they have to some how turn around in 2 weeks and pay July rent in full. If they can't handle one unexpected expense, do you honestly see them being able to pay July rent on time after just paying half of June rent late? 

The trouble is that your kindness can actually snowball the problem of late rent.

No one *wants* to be mean. But this is the reality of responsibilities in life.

@Nicole A.
Here’s what we don’t know. How long tenant has been there. Have they ever been late. Are they clean and keep the place in great order. How long is left on lease. If they’ve been asked how their July rent will be on time. Actually, we don’t know much at all from original poster. But you and others have jumped to “they will burn you and you have now given them 3-4 chances”? I’m not leaping there until I hear “they just moved in a month ago and are also a pain in the *** tenants”. My way, they get a single chance for possibly an isolated incident. Your way; zero chances ever, tenant gets evicted, tenant is angry at you, possibly trashes place, your rental is empty or simply not paying any rent. Am I going overboard on scenarios? Yes. But I’m not making any more guesses than anybody else with limited info here.

Originally posted by @Tammie Welch :

Good Morning,

We have a tenant that stated they will be late with their rent for June.  They asked if they can pay $400 on the 1st and remainder $475 by the 15th of June.  She didn't mention paying the late fees of $50.00 and $25.00 each additional day for total of $275.00.  The  reason why they are late is because of unexpected car repairs.  Any suggestions on how to handle this tenant?  

I self manage properties in C- areas. If I wasn't willing to work with tenants when problems come up I'd constantly be churning my units. Instead I have a very stable tenant base with people that take care of my properties. Here is what I do:

As long as a tenant stays current on daily rent, AND notifies me in advance, I'll accept a payment plan. Good tenants always do what your tenant did, they notify in advance, they have a plan, and the plan includes paying a good bit NOW. I send an email confirming the payment plan and waive or discount the late fees if payments are made on time as agreed. This kind of policy will ensure that you have loyal tenants because so many landlords won't work with people. If your property is in a "B" neighborhood you probably wouldn't have to do this because you could find tenants that aren't living so close to the edge. In one of the neighborhoods were I manage, EVERYONE willing to live there is living paycheck to paycheck. Most tenants are just relieved that you will work with them and aren't going to be rude.

PS. My history isn't terribly long but it's been two years and nobody owes me any money and I haven't had to do any evictions.

Originally posted by @Thomas S. :

Question. Why does a tenants mechanic get paid ahead of their landlord. 

Answer: Because all tenants know they own their landlord.

 A truly ignorant quote there.

@Jill F.

As a new investor with very limited landlord experience myself this seems like a fair approach to managing tenants that works well for you. However, I can also see how it’s easy to take a “no tolerance” approach as well. I do think you can train tenants to push the limits every month which only causes you more grief. Everyone has unexpected expenses but why does the landlord being the one that gets asked for relief instead of the mechanic, the doctor, etc?

This is a good discussion to hear the pros and cons of both sides!

Yeah, we all know it's a business.  But I'm in agreement with @Jill F. , if you can't work with your tenants in C class properties, you're going to constantly be turning units over.   We just placed a new tenant in a house I spent several month rehabbing.   They paid extra deposit because of their dog, and the 1st months rent.   They notified me before the 2nd months rent was due that they would be short, but they asked if the could pay half, set a date to pay the other half and included the late fees.   And their explanation made sense to me.  Just moving into a house, they had lots of other expenses, utility deposits, things they needed for the house, etc.   I was willing to accept that, this time.  I also told them, this is the only time I can do that.    If it continues, then we have a problem.

Most of my tenants suck at money management, a flat tire is a crisis.  Because I've been there, I understand.   Once is ok, twice is not.  It's not been a problem.

My first thought was exactly what @Thomas S. wrote.  If this was a "car emergency", why doesn't the tenant work out a payment plan with their mechanic?  Why is their housing expense moved to the bottom of the list?

However - personally in this case, as many others have said, I would waive only the daily fee this one time if they were a good tenant, but I would also diplomatically convey to them my feelings about the mechanic being paid first.  I work hard for them, and it feels like a slap in the face.

I once heard someone say that in nearly all cases the lack of rent payment is not an issue with cash flow, but an issue of the tenant's priorities.  That has always stuck with me.

Good luck!

Thanks everyone for your input.  I decided to accept the partial payment and waive the $25 per late fee but the $50 is still due.  I also let them know this is a one time deal.

It's ironic that my check engine light come on yesterday and if my husband is correct we may need a new motor if his code reader is correct.  I'm praying it's something simple.  

@Andrew Merriman asked a fantastic question:

Why is it that the mechanic (or other bill) gets priority and paid in full while the landlord is asked to give a break on their bill?

Probably because everyone knows that you have a great chance of asking your landlord for a break because it's not like your landlord can immediately refuse service. You're already in the house. Basically what Thomas said but with less abrasive wording.

No no no

It will be rediculoisly confusing between late fees and what they are paying on the 15th. Late fees come first so the $475 will cover the late fees but not the remaining late fee which will still be accruing at $25/day 

Add to this if they get an Atty if you have stated late fees come first they could get a judge to side with them and avoid the eviction 

Talk about a nightmare.     No no no repeated again and again and eviction notice as soon as law will allow