Does MN require a grace period before impsoing a late fee?

20 Replies

I inherited some leases and they all provide for payments being due on the 1st of the month and that a late fee will be assessed if they have not paid by the 5th.  So inherently they all normally pay on the 5th....

I need to present new leases anyhow but I can't find anything that stipulates a grace period is required.  Can anyone confirm whether MN requires a grace period or whether I can charge a late fee on the 2nd?  

Thanks,

John

On line search shows that rent is due the day as required in the lease, late fees as defined by the lease to a maximum of 8% of rent. It appears that the landlord determines the grace period if any. Don't know why any landlord would voluntarily allow a grace period.

Assuming their lease is up you put in your lease what ever you desire. No reason to allow any grace period, rent due on 1st, late fee effective on 2nd when rent not received by midnight on 1st. Make sure you specifically state in lease that landlord may evict due to late payment.

There is no MN Statute that requires a grace period before accessing a late fee;  as long as it is agreed to first in writing and the late fee accessed is no more then 8% of the past due rent. 

Rosie

Hmmm....  Just filling out a new lease using the MN bar form and it mentions late fee assessed after 5 days.....

John.  

Good question.  I assume you aim to switch Minnesota residential, month to month tenants onto new month to month leases or new term leases as the existing term leases expire.  So long as you provide written notice to the tenant greater than the notice to vacate provision, you are free to require the new leases upon renewal.  There is no Minnesota state law against assessing a late fee on the 2nd (1 day later).  I can say based upon reviewing hundreds of leases across many companies and properties, Due on 1st and late on 3rd (after 2nd) is most common.  If you have manual checks or drop boxes, this extra day may be best to avoid conflicts over the charge.  If you require online payment or ACH, this 1 day grace period may be less of a practical issue.  If I were in your shoes, I would stick to late "after 2nd" and the maximum 8.0% late fee.  At the end of the day, this is a management decision and what "tone" a management company or landlord wishes to take with its tenants.  Good luck to you! 

Thanks @Brad Schaeppi .  I have been finding similar, came to my conclusion, then the MN Bar lease agreement threw me off.  I am doing what you are saying, all tenants are on a month to month starting Feb so I plan to implement new lease forms.  The old landlord used the same form he received from the previous landlord 18 years ago!  A one page lease doesn't protect anyone anymore.

@John Woodrich I was advised by a tenant advocate attorney to have a short grace period.  He stated it looks good in front of the judge.  I use the MN bar lease and give them through the 4th with the late fee on the 5th. It does not hurt me and I want to appear reasonable to both tenants and judges.  I also find its much harder to collect the full 8% fee after 1 day, tenants will resist.  I charge $50 on the 5th and then $10/day after that with a cap that is just below 8%.

Thanks @Tim Swierczek .  I am sticking to $50 then if not paid I will probably just pursue a notice to comply or quit.  Haven't had issues in the past but I don't have time to deal with them in the future!

@John Woodrich

I have a different take.  First, you have to be careful what you use as an authoritative source.  The MN Bar association would not be as good a source as the opinion of a real estate attorney.  I've seen on websites, for instance, and from many other posters on BP that a security deposit cannot be used under any circumstance to cover unpaid rents.  Yet, I read the Minnesota statute, and it has a provision whereby you can retain damage deposits for unpaid rent.  It is actually quite landlord friendly.

I brought in a property management company for two months this past year, and canned them, but before I did, I learned some of their best practices.  One, is they have no grace period.  They've been doing this a long time.  Your lease is your legal document between you and the tenant.  If it says rent is due on the 1st of the month, then that's when it is due.  I assess the 8% penalty the morning of the 2nd, every time.  And no, I don't cap it at 50.00.  I don't want late fees.  I want tenants prioritizing rent over cable TV, or whatever else kind of stuff they want.  If the late fee is 8%, they likely won't want to pay it again.  

Just Google Minnesota statutes on grace periods.  You won't come up with anything in the search.  

I find Homeline in Minneapolis, which is a tenant advocacy group, a great resource of info.  They also train landlords, and  dispel common myths in their training.  I highly recommend to anyone to take their landlord training course (I did).  

@David Moore I love the HomeLine training.  I have taken it twice about 7 years apart.  It's actually the class instructor from HomeLine that suggested showing a reasonable grace period as a good practice to come off as fair in housing court.   Also, that same attorney was on the drafting team that drafted the MN bar lease.  As far as damage deposit being used for unpaid rent, I think the confusion comes that tenants are not under any circumstances allowed to use the security deposit to pay rent, however, the landlord as you noted is allowed to retain the security deposit to cover unpaid rent.  I think this is where most people miss interpreting the law.  Let's face it most landlords do not read MN statue they read nothing, or in some cases they read the attorney general's guidebook to landlord-tenant law, which is MN law simplified.

@David Moore

Yours is the proper professional business approach to insure tenants actually pay on time. Allowing a grace period actually incentivises tenant to pay late. Regrettably most landlords have no concept of how to train tennats. 

@Tim Swierczek

Good comments.  Let's face it though, guys.  If you are before a judge on an eviction in Hennepin County, the judge is not reading your lease and commenting on the grace period.  Since most tenants don't show up, he/she is giving a summary judgement for the plaintiff.  

While we are on the topic of residential leases, make sure your lease is not an old MHA or otherwise lease that states "landlord entitled to attorney fees if....." A new best practice is to cap or state no attorney fees to either party--the new MHA lease provides this option.   Minn. Stat. 504B.172 years ago flipped this language to tenants as well.  Please trust me--there are new aggressive tenant contingency attorneys in Minneapolis St. Paul whose primary business model is to source contingency based tenant clients (split settlement or court award), an arguable legal claim and a lease that exposes the landlord to attorney fees.  You may face this tactic in a standard non-payment eviction and face a Fritz habitability defense, a rent escrow action, or a conciliation case removed to District Court.  True actionable damages sought are typically small, but the case no longer settles for tenant best day rent abatement #s, etc. but for thousands of additional dollars as a payment to go away or face costly full litigation of the issue and a post trial motion for attorney fees.  Don't forget there are other provisions in 504B that by statute award reasonable attorney fees--unlawful ouster, etc.  

Thanks @David Moore @Tim Swierczek @Bruce Runn and @Brad Schaeppi for the advice.

I inherited 20+ year old MHA leases which is my primary reason for presenting new leases.  I was going to leave the late fee at $50 but may just move it to the 8% max, like you guys I would rather them pay on time.  Once someone gets behind it gets hard for them to catch-up.  This property in particular everyone pays via cash or money order which is a slight PITA because I can't mobile deposit money orders or cash.  Have a feeling the old landlord required this from them so if I can move them to ACH it should be easier.  Instead of modifying the MN Bar lease I may just leave it as it is written because we due rely on the mail.  Right now I don't go there until the 5th or 6th but I often see items postmarked the 3rd.

Originally posted by @Brad Schaeppi :

While we are on the topic of residential leases, make sure your lease is not an old MHA or otherwise lease that states "landlord entitled to attorney fees if....." A new best practice is to cap or state no attorney fees to either party--the new MHA lease provides this option.   Minn. Stat. 504B.172 years ago flipped this language to tenants as well.  Please trust me--there are new aggressive tenant contingency attorneys in Minneapolis St. Paul whose primary business model is to source contingency based tenant clients (split settlement or court award), an arguable legal claim and a lease that exposes the landlord to attorney fees.  You may face this tactic in a standard non-payment eviction and face a Fritz habitability defense, a rent escrow action, or a conciliation case removed to District Court.  True actionable damages sought are typically small, but the case no longer settles for tenant best day rent abatement #s, etc. but for thousands of additional dollars as a payment to go away or face costly full litigation of the issue and a post trial motion for attorney fees.  Don't forget there are other provisions in 504B that by statute award reasonable attorney fees--unlawful ouster, etc.  

I would like to hire you to get this wording correct on my lease.  I will PM you 

I have left it until the 5th because I have one guy that's handicapped and he gets his SSI on the 3rd of the month. I just go on the 6th and collect all of the checks out of my dropbox.

We do 8% late after the 3rd in MN. Never had any issues.

Brad - when was MHA lease updated with this?

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.