Partial payment and late fees calculations

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Partial payment and late fees calculations

Mak J.
Member since 2018 · 234 posts · 44 votes

I have a consistent situation and would like I some best advices. My tenant pays late (7 days -10 days late) but also pays the late fees. The issue is in few instances, the tenant rent plus late fees but keeps a small amount of $100-150 pending every time and pays off in next month cycle.

My late fee clause in lease states

- first day $75

- every other day $25/day

So if the tenant has $100-150, pending, do I still keep charging $25/day late fees as technically it’s still late as full payment is not received? If I go this route, tenant will have late fees way over the actual amount owned. So for tenants pending amount. If $150, the person may end up with $300-400 in late charge?

How to deal with this? I want to trend carefully as not to loose the tenant as except this, so far the person has been good tenant. I have a renewal in few months so do not want to anger the tenant.

Any suggestions on how to best deal with partial payments?

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  • Mak J.
    OP
    Member since 2018 · 234 posts · 44 votes
    5y

    @Mak K. I am sorry for grammatical errors on my post. Hate the spellchecks and auto correct on the phones.

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  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    @Mak K.

    I have a few people who are late. One lady is late every month by like two or three weeks. I only charge a $50 late fee. There might be a limit on how much your late fees can add up each month. Check with your state. I guess I’m too lenient, but my tenants always end up paying me. I just don’t count on rent being on time with a couple of them. Lol. But those $50 late fees start to add up. Maybe an extra $1,000/year or so for me? Not much, but I hope to keep all my tenants forever so I just deal with it and it don’t let it bother me.

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  • Laurie Watkins
    Investor · Nashville / Atlanta · Member since 2021 · 13 posts · 2 votes
    5y

    What is so special about this tenant that you want to renew them even with this headache? 

    If I were you, I would bite the turnover and get new tenants then train the new tenants to pay on time. During screening, I tell all my potential tenants that rent is due on the first,  late on the second,  and the eviction process starts on the third. The ones that have a problem with this never call back. With this method, I've never had a late payment, so I can't speak from experience on dealing with late payments. 

    I've heard that some landlords don't accept the payment if it's not in full and continue to accrue daily charges. i.e. if the tenant pays rent and only half of last month's late fees, return it and make them resubmit payment in full, with each day adding a late charge to next month's bill.

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  • Mary Smith
    Rental Property Investor · Member since 2021 · 385 posts · 197 votes
    5y

    @Mak J. I would charge your tenant the late fees exactly as you laid it out - $75 on the first day and $25 every other day. States have limits on how much you can charge for a late fee every month, so I would double check this before charging them the above fees.

    If you have other tenants with the same late fee structure, but only modify this tenant's late fees just to keep them, it is definitely unfair to the others.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    Late fees continue to accrue until ALL amounts owed are paid in full. 

    Some Landlords see late fees as extra income, but that's usually a mistake that will catch up to them in the end. If the tenant is consistently late, get rid of them as soon as possible.

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  • Mak J.
    OP
    Member since 2018 · 234 posts · 44 votes
    5y
    Originally posted by @Laurie Watkins:

    What is so special about this tenant that you want to renew them even with this headache? 


    The reason I want to keep is because, I get 95% partial payment on time and last $100-$200 in few weeks (Which is usually late charges). Its extra income. It pays for home warranty and maintenance so far.  

    Also, kicking her out and finding another gambling on another one is going to cost me more.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    I don't know where your property is at but markets are in high demand right now. Wouldn't it be better to find a better tenant that pays $100 more each month and pays on time? Maybe your market is hot enough you can get $200 more a month?

    Every time you accept the late rent, you tell the tenant your rules are pointless. What do you think happens when this Tenant decides to leave? There's a very good chance they won't pay the last month of rent, expecting you to use the deposit. They probably won't clean. They may not even give you notice. 

    Everything is a risk. You're accepting her bad behavior and hoping she doesn't do anything else wrong. That's a gamble.

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