Raising late fees does it help train your tenants?

8 Replies

I am thinking that my late fee is to low. Almost every month I have about 25% of my portfolio in Connecticut get a late fee assessed. My question is if I raised my late fee of $50 to 10% of rent which would be between $75 to $150 do you think it would improve this chronic late payment. I have only had 1 eviction in 3 years, and the folks paying late do end up paying. We do proceed to immediate late fee and a pay or quit notice on the first working day past the 10th (state law in CT) . Most people are also long term and so are month to month at this point, so it would be possible to change relatively easily. What are your thoughts?

Your basic problem is not your fees it is that you have lax business practices that have trained your tenants it is OK to pay late. For example your pay or quit notice should be sent the day after rent is due not 10 days later. Additionally tenants that pay late more than a couple of times should be given non renew notices.

Excessive late fees may help somewhat but the reality is that your tenants have been trained by you to pay late. If you allow tenants to pay late, with or with out fees, they will pay late. This is human nature.

To stop tenants from paying late you inform them that the next time they pay late you will give them 30 days notice to non renew. Then when you get new tenants you train them from day one that they will be given two strikes and then receive a non renew notice.

Guaranteed this will put a end to any tenants ever paying late.

If this is not within your abilities you live with tenants paying late. 

If they get well each month and aren't bad tenants in any other way, keep collecting the late fees making the extra income. 

My experience - I've had this scenario before and made a lot of extra income off of a tenant with $100 late fees. I did, however, eventually evict the tenant for non-payment....so much for all the "extra" income.

You could also explore switching to collecting 1/2 the rent every other week to accommodate the tenants poor money management habits. They may welcome this and you'd collect an extra month of rent every year as compensation. 

Or do what @Thomas S. has recommended.

Who knows if that would help. We've found that tenants that pay late, just seem to like to pay late. We collect a late fee from the same tenants every month and it's actually become a nice bump in revenue. We don't have any tenants that simply don't pay, they just enjoy paying the late fee, it seems. That's fine with me.

Honestly my fees are 10% and as long as they pay it I consider the extra income to be my "fun money". Basically I make it high enough for it to be painful for them, worht it to me. All within legal allowances of course. 

@William Collins Most landlords have a grace period and allow late payments . They don’t get upset at the tenant oR make it hard on them for being late .. all of this is bad and trains the tenant “it’s okay I’m a big pushover pay whenever you feel like after you buy beer and cigarettes “. I see It dIfferent , If they are late that is a personal insult and I consider it stealing from me . I have no grace period at all and late fees and notices are going up right away . Plus I’m going to be standing at the front door fuming demanding to know when I’m getting paid and what the issue is . I make it unpleasant. I want them to realize this is a negative unacceptable experience they don’t want to repeat

You can try the increased late fee.  Ours is $75 in Bridgeport, Connecticut.

What also works is adding $75 to the monthly rent during initial lease signing, then offering a discount if they pay before the 5th of the month.

Sometimes the carrot works better than the stick.

I agree with Craig, we’ve had tenants who were ALWAYS late so we made the late fee increase with each lease renewal. It’s effectivley a rent increase but not in their eyes. If your tenant class is B or C then there is no fixing it. If they live paycheck to paycheck and others things get priorities over rent then they will always be late. 

Having been involved with the paying public for many, many years now, late fees do nothing for the person that's inclined to pay late. An unreasonably low late fee - let's say $1 - will encourage more people to be on that side of the line, but you could have a late fee of $1000 and you'd still have people paying late (and some that would pay the fee). The fee is there for the same reason you put locks on your doors - to keep honest people honest. A thief will still break in through the window, and a deadbeat is still going to pay late. The late fee gives you a little cash for your aggravation and also gives you a step-up point for escalation.