Tenant always pays late, but not late enough....

Real Estate Broker · Salem, MA · Member since 2015 · 16 posts · 9 votes

I have a tenant in my first floor unit who has been late every single payment for 11 months in a row with every excuse in the book. However, they always end up paying right before the legal timeline for eviction. Does anyone have experience with this?

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

Im with @Joe Splitrock here....does it matter? The rent gets paid consistently every month but a little late, and with the late fee included. I wouldnt even bother conversing to hear the excuses, Id just keep collecting my rent. I have 1 tenant that has been late every month for 7 years. Sometimes they can get pretty far behind...but always end up catching up. I will take late but consistent any day over the ones that are non paying that will eventually need to be evicted.

Remember, even with A class rentals, you are in a business of providing a service to a population that largely is irresponsible enough that they can not buy their home home. Youve got to let some of these things roll off you, or you going to just give yourself more stress than what it's worth.

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David S.
Investor · Prairieville, LA · Member since 2015 · 311 posts · 424 votes
8y
@Colby Mulry Yes, I have experienced this. What are the chances that a replacement tenant WILL NOT be late? I would say that this depends on your local market and class of rental. Why spend 10k in lost rent, eviction costs, and turnover costs if you will be getting something similar? If it bothers you that bad, issue a rent increase in the amount of the costs of a PM and hire a PM. Or a rent increase to compensate you for the extra work. It is easy for someone to say evict or don't renew when you are the one who will feel the sting of the loss of revenue. More than likely, this tenant cannot budget the bills in accordance with paycheck dates and your rent payments are getting paid on his 2nd paycheck of the month. Also, is the place well kept, taken care of? That is another factor in your decision. If he takes care of your place and does not get social visits from the police, then just keep getting the late fee or any extra "inconvenience fee" you deem fit on the lease renewal in the form of a rent increase.
2 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
8y
As you have heard from everyone on this thread not renewing is the way to go. Just make sure you inform them of the non-renewal the proper way as outlined by your lease or state law.
1 Reply
Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Originally posted by @Joe Splitrock:

@Colby Mulry does it really matter? You are getting your money by the 11th and extra money, via late fee for your trouble. Eviction will cost you a bunch of money, so that makes no sense unless the tenant is otherwise causing trouble or damaging your property. I would wait until the end of his lease and give him a healthy rent increase to encourage him to move on his own. If he stays, you get more money.
Tenants that live paycheck to paycheck generally never move. They have no money to move, so even if you decide to not-renew, be prepared to evict. You need to decide what the best business decision is. Most businesses will just collect late fees on bills and as long as they get their payment, they will never shut off services.
I had a lease (inherited) that was a five dollar late fee, not worth the time and effort to deal with it.
One solution though could be to rinse rent but split it in smaller payments. Weekly payments can add up to higehr rents or bi weekly at higher rate.
Make it so they pay you first before the other places the money goes.
0 Reply
Joey Raquel
Member since 2018 · 20 posts · 4 votes
8y
@Colby Mulry Get there bank account automatic draft. If they don’t have money they get charge. And maybe find out what day they get paid. Some company change there pay period from bi-weekly to twice a a month.
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Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
8y
It really just comes down to basic business management.
You can manage your business or you can let your tenant manage it.
Otherwise good tenant, collecting additional fee, cost of turn over etc. It is very easy to justify being a lazy landlord.
1 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
8y
Yup. It happens. Just have to go by the lease and enforce any late penalties in it if it is a concern.
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James Mc Ree
Rental Property Investor · Malvern, PA · Member since 2016 · 1k+ posts · 938 votes
8y
I think a slightly late paying tenant is a wonderful problem to have. Keep a good operational reserve to pay mortgages, insurance, etc so month-to-month operational financing is not an issue. Keep your late fees within your state law and sufficient to be both rewarding for you to put up with the lateness and motivational to the tenant to pay on time. Think of it this way: your tenant is paying you an extra 10% or so without you even having to ask for it.
Be sure to structure your lease so payments are applied in the order charges are incurred. You might have a clever tenant who sends you a payment and writes "for rent only" on the check. In PA, late fees don't accrue more late fees. I structure my lease so that last month's late fees are paid before this month's rent to avoid the "for rent only" trick.
At the end of the lease, I would suggest raising the rent and/or late fees instead of terminating the lease. A lease termination will be much more costly to you due to vacancy and repairs for the next tenant. You can accomplish your goal if the tenant terminates the lease for failure to renew at the higher rate or you get the higher rate: win-win, either way for you.
2 Reply
Stephen A Binion
Rental Property Investor · Member since 2018 · 33 posts · 18 votes
8y
@Colby Mulry. Is their lease up in a month? I would give them a notice to quit at the end of the lease.
0 Reply
Stephen A Binion
Rental Property Investor · Member since 2018 · 33 posts · 18 votes
8y
@Michael Medeiros. I’ve done it myself and had a lawyer do it. Lawyer was the best 600 bucks I ever spent.
0 Reply
Stephen A Binion
Rental Property Investor · Member since 2018 · 33 posts · 18 votes
8y
@Kenny Dahill. I have a tenant that is a paycheck to paycheck kind of person. He asked if I could take direct deposit to a bank account weekly. I said heck yes. I divided mostly rent by four and told him his weekly amount. I opened a bank account just for him and got an extra 100 bucks from the bank for opening the account. Then he filled out the deposit paperwork at his job. His rent went up 9% and everyone is happy. Once a month I go and withdraw all but one dollar.
4 Reply
Kevin Mingle
Member since 2018 · 1 post · 0 votes
8y
@Colby Mulry What can u do if there’s no lease and the tenant is paying late
0 Reply
Kenny Dahill
Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
8y
@Stephen A Binion Boom! That's awesome. I didn't even think about the extra money setting up an account. You should've gotten the free microwave that banks sometime offer. Haha.
2 Reply
Thomas S.
Member since 2016 · 13k+ posts · 12k+ votes
8y
@Kevin Mingle A verbal lease is a legal lease. If you reference your state landlord tenant regulations you will see that rent is due on the first and late if not received by the landlord by midnight. Your verbal lease is established by precedence. Send your tenant a notice making it clear it is their responsibility to have the rent payment to you on the first of the month and that if they pay late again you will terminate their lease and they must move. Small time landlords rarely deal with late paying issues however once you scale up you simply can not run a efficient business chasing late paying tenants. It costs too much money/time.
You state regulations will outline the time period for notices.
What most landlords do not understand is that late payments are not the tenants fault, they have actually been trained by their landlord that late payment is acceptable. Mom and Pop/hobby landlords actually view late payments as a bonus without realising that tenants that regularly pay late will usually end up causing additional problems resulting in evictions. Guaranteed when they do decide to move the landlord will not receive their last months rent payment.
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Amber Gonion
Real Estate Broker · Hugo, MN · Member since 2016 · 688 posts · 596 votes
8y
@Colby Mulry we deal with late payments all the time. Every large company that I have worked for in the past have owners that love the late fees. Just set your criteria for payments and stick to it. Allow them to pay late, charge a fee and collect the late fee income for the number of days that you are comfortable with. If they exceed that date be very clear you will file for eviction the very next day. It is sort of a side loan income.
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Tony Salvatore
Rental Property Investor · Webster, MA · Member since 2015 · 9 posts · 1 vote
8y
Collecting late fees for late paying tenants to me is like frosting on the cake. Think about it from an investor's point of view. If you got paid on the 1st, where would that money be between the 1st and the 12th? Most likely in your bank account earning an extremely low interest rate. If you get paid on the 12th with late fees, figure out what that late fee from an annual percentage rate is for those 12 days your money was tied up, you'll find it could be astronomical. Example, rent is $1000 a month with a $20 dollar late fee. If the tenant is 12 days late you are getting 60.8455% APR interest on your 1k for those 12 days.
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Anthony ThompsonPro Member
Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes
8y
@David Moore I've been told that judges in RI have effectively made it so that anything more than a 5% late fee is considered excessive. I believe over the years a few attorneys have confirmed this as well, and I don't know any investors who charge more than that (though some just charge a small flat late fee on all their units for sanity, rather than trying to keep track of differing late fee amounts for different rents/units).
I don't know the consequence of attempting to have a late fee more than 5% (i.e., whether it's simply disregarded/set-aside, or whether the judge actually punishes the landlord in some way) but I haven't been tempted to push the envelope in that particular way.
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John G.Pro Member
Rental Property Investor · Brainerd, MN · Member since 2015 · 72 posts · 42 votes
8y
@Colby Mulry This may not be the way to deal with it BUT, I had one tenant that was the same way. Always excuses, I hit them with the late fees, which is another thing to actually get from them. My solution was Ended up moving the "1st" of the month pay date date to the 15th. They paid on time the 15th every month. So it worked out. But I went from wanting and threatening to evict them to them paying rent on the 15th every month and keeping them as a tenant. They take care of the house, mow, and fix things for free. This just worked for that particular tenant. I have plenty of eviction stories too....if it ends up down that road, its very intimidating but once you do it yourself...you realize its not hard AT ALL.
Good Luck
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Carl Pickens
Griffin, GA · Member since 2017 · 63 posts · 82 votes
8y
I have tenants who do this every month and i am glad to just collect the late fee. If i had to actually file for eviction then it would be a different story. Are they an otherwise good tenant?
0 Reply
Tony Salvatore
Rental Property Investor · Webster, MA · Member since 2015 · 9 posts · 1 vote
8y
Just to clarify my earlier post, do not confuse APR with the percentage that you are charging the tenant for the late fee. In my example ($20. Late fee on $1000. Mo. Rent) the tenant is only being charged a 2% late fee. (2% of 1k is 20). Your APR (annual percentage rate) that you receive for your money being tied up will be based on how many days go by between when the rent was due, and actual payment date. In my example I used 12 days. Less days would result in a higher APR, more days would result in lower APR. So as long as they do pay, but just late, I don't look at that as a negative.
0 Reply
Ken Morrow
Rental Property Investor · Las Vegas · Member since 2018 · 2 posts · 1 vote
8y
I have a tenant that has been late every month for three years and have paid the late fee. They are a family and when I have inspected the home it is always in good order. I am actually okay with collecting the late fee as long as they don't get a month behind and are generally good tenants other than being late.
1 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
8y
Originally posted by @Colby Mulry:

I have a tenant in my first floor unit who has been late every single payment for 11 months in a row with every excuse in the book. However, they always end up paying right before the legal timeline for eviction. Does anyone have experience with this?
Good. No, GREAT.
Just make sure you're charging late fees. I have a few tenants like that. Just for giggles I ran a report for late fees COLLECTED (not just charged) this year.
It's over $100k (actually it's over $120k as I have another GL code for a different late fee classification)

Here is a screen shot of the total. It just shows from 15th of this month on as its pages and pages obviously.
2 Reply
Jennifer T.Pro Member
Investor · New Orleans, LA · Member since 2014 · 1k+ posts · 944 votes
8y
It's been my experience that tenants who habitually pay late will eventually become a problem. Plus they are irritating and it is time consuming to post a 5 Day Pay or Quit on the door most/every month.
Funny you should bring this up. I was just in eviction court yesterday for one of those "always pays, but always pays late" tenants. Admittedly, I put up with it for way longer than I should have. I finally gave her a Notice to Vacate in mid July, for no later than August 31st. Even gave her two weeks longer than legally required, to bring it to the end of a month. She was on a month-to-month. Except, of course, she didn't leave. Because that's exactly the kind of unreasonable and difficult tenant she's been. I figured it would take a court order to get her to leave and, unfortunately, she did not prove me wrong (shrug). But I have one now and am happy to report her days are numbered.
0 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
8y
Originally posted by @David Sisson:

Biggest problem is the waste of your time and having to listen to all the stupid excuses. Otherwise, you are making $ on the late fees at least. You can either put up with the aggravation and make a bit more $, or not renew.
The trick is not listening to the excuses. Rent is due on the 1st. If not paid, the get a late fee applied by the system on the 4th, and a 3 day notice. After the 7th, an eviction is auto filed and a charge on the ledger is applied for the court costs. If not paid by court (+ the 7 days the give them before we can buy the WRIT) we remove them.

Again, the trick is not even bothering with an excuse. If someone says "I'm going to pay, I swear" I say "cool, okay" If they do, they do. If they don't, they don't. As long as you have systems and processes in place it takes almost no time to deal with someone that's late and it can be a money maker.
3 Reply
Gloria Sheridan
Rental Property Investor · Marietta, GA · Member since 2018 · 41 posts · 43 votes
8y
I'm experiencing this same situation right now with one of my (inherited) residents. I set the "late" date to be the 7th of each month because they told me they don't get paid until the 7th of each month. Well, after a few months of waiting around for payment past the 7th, I've (finally) gone ahead and started assessing late fees. This month they paid an extra $90 in late fees ($50 for past the due date and then $10 per day for each additional day). So, despite the small hassle, I got an extra $90 paid to me this month. They now are crystal clear that the late fees are going to be assessed each month going forward. If they want to pay me what amounts to at least an extra 7% in rent each month, then I will go ahead and take it. It's easy to bill them for this as I use Cozy.co also. I have not had to spend a dime to fix up their unit since I bought it, so I think I'm not going to rock this boat. Let them pay their late fees. Their inability to plan/budget is my extra 7+% revenue gain.
0 Reply
Bradford Clark
Charleston, WV · Member since 2017 · 113 posts · 50 votes
8y
@Colby Mulry it’s unfortunate but the more units you own/manage then the higher percentage chance you will run into these inconveniences. Charge a late fee and don’t renew their lease
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