What is your late fee policy?

Question

Our current late fee is a flat $25 if not paid by the 5 day grace period. In the past I have not had issues but my current tenant seems content to take the late charge and wait to pay rent until I post a 3 day notice. The lease is up next month and I would like to make changes to the late fee policy on the next contract.

What is your policy on late fees, and is there a better way I can handle this situation to avoid this moving forward?

John Warren · Answer

@Chris Harn this really depends on your business model. Where is the property located? Is this a B area? C area? Can you get a better tenant that is less hassle? If so, I would not renew them and would spend the time leasing to a tenant that takes rent more seriously. Sometimes you have to fire tenants if they don't fit your business model.

On the flip side, some folks actually like the extra income from late fees. I have one friend with an apartment building where the late fees have added like 40k in building value!

Chinmay J. · Answer

The answer is "depends".  I have a tenant in a class A neighborhood, who always pays late - usually by 15th. I trust her that she is always going to pay. I would have had her for 4 yrs in October. She doesn't bother me with anything other than occasional repair request or there is a true emergency. Very honest and decent lady.  Why do I want to kick her out? Just because I can..?  Getting the rent a bit late and making more ($50 is late rent fee) is a lot cheaper than vacancy and turnover cost in addition to the uncertainty that the new tenants bring.

Now, a small thing like she being totally unresponsive, or chronically being late where she is not paying the rent until 3rd or 4th week, or completely stops paying  can change the whole picture..

Gregory DeRosso · Answer

Here's a line from my current lease. However, check your local laws. This is what I can do here in NY but from what I was told not in NJ.  I don't like to bank on late fees but it's a necessary consequence. In my opinion, depending on the area, demand and/or condition, go find another tenant and bulletproof your lease.

• Rent (including any Additional Rent) is due on the first (1st) day of each calendar month. Any payments paid after the 5TH
day of any calendar month shall be deemed late. Any late payments shall be charged a $50.00 late fee for the first day rent is late. An additional fee of $10.00 per day shall be assessed for each additional day Rent is late, until Rent is paid in full. Additionally, any Rent (including any Additional Rent) due to Landlord that is not paid when due shall bear interest, from the date due, at a rate of eighteen percent (18%) per annum. All late fees and interest shall be deemed Additional Rent payable by Tenant.

What is your late fee policy?

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