I have a tenant who has been late on rent payments twice in five months, this month she still hasn't pay all of the rent for September. I charge her $50.00 late fee after five days. So she rather pay the late fee and be late for so long. I would like to amend the rental agreement and raise the late fee so high that she would pay on time. My question is, can I change the contents in the rental agreement while it doesn't expire until February 2020? If so, what is the maximum I can charge for late fee?
@Roy Lam No, you can't just change a contract (the lease) you and your tenant entered into, unless it states such or the tenant agrees. $50 is decent, depending on your rental rate. @ 1k/mo rent, a $50 fee with them paying 30 days late every month comes to an effective interest rate of 60%.
What you'll find is if the late fee is crazy high (assuming your local laws don't limit it), they simply won't pay it, and you likely won't evict because the rent is being paid eventually. The key is to make it as high as possible for you to still collect it, not to discourage them paying late, because obviously this tenant doesn't care about the later.
Always check your local laws but generally there are no laws for late fees. Just make them “reasonable.” $1,000 per day would not be reasonable.
I would just have a honest conversation with her to find out what is going on in her life. Seems like a good first step. Don’t take her paying late personal as that will only effect your ability to go logically down this path.
Her rent is $900 a month, and she paid $500 in the middle of the month. This month she had already used six excuses when I texted her regarding the rent. Yesterday morning she even said she can pay $100 and the in the afternoon, she asked if she can pay everything she owes plus next month's rent on the 1st. I plan to give her a 3 day notice if she doesn't have the money on the 1st. Would it be good idea?
@Roy Lam First, you can't amend the lease unless she agrees to do so which is unlikely in this case because the amendment will cost her money.
Second, the reason she doesn't feel compelled to pay any quicker than she feels like is because the late fee is the same whether she pays on the 11th or the 25th. Consider putting some kind of escalation or per day late fee in your lease next time around so the tenant is losing more money every day they don't pay you.
Also, you may want to consider serving her with your states version of a notice to quit to show her that if needed you are willing to evict her. She may look at paying on time as something she can do at her leisure because there are no consequences for doing so.
Why not collect the late fee as additional income? I wouldn't make the late fee astronomically large. I agree that your lease should have a late fee escalation after so many days (per day late fee). Perhaps just show her eviction paperwork and let her know you're filing it if she doesn't pay on your most recent agreed-upon date. In the meantime, update your lease agreement for the next tenant (or when she renews).
Thanks Ryan and Michael, I appreciate your opinion. Escalating the late fee sounds very good. I will do that every time when I have to renew or sign new rental agreement. I plan to give her a 3 day notice on the 1st if she doesn't have all the past and current rent.