I have heard different opinions regarding late fees. My properties are in the Denver Metro area, and the currently renting for $1150 per month and I charge $20 day late fee stated in the lease. Is this fair and reasonable for a 3/2 duplex? I have not found any written laws in this regards but doesn't mean there are not any; all advice welcomed.
normally people charge $50 late fee. some people charge 5% late fee. i think you can charge anything you want. if the renters dont like it, they should be on time
@David P. - Every area is different. My city has limits of what you could charge - I suggest looking up if your city or state has a specific amount or percent
@David P. I guess the first question is why do you want to know? Is a tenant pushing back, are you headed to court and concerned it might be questioned or do you just want to be out in front of it?
At any rate, $20 per day amounts to $600 per month on $1,100. That is a lot more than the late fees you would incur if it was a mortgage being paid late.
I use $10 per day. Not saying that's right and yours is wrong. I use autodebiting so I rarely get tenants paying any late fees. I want paid on time but if they are late I don't want to bury them either. I want incentive pay sooner than later and surely $20 per day is more likely to create that than $10 per day. There is no state law limiting late fees. Locally some judges may have opinions on that.
Originally posted by @George P. :
i think you can charge anything you want. if the renters dont like it, they should be on time
That is terrible advice without knowing what the state and local laws are in a specific area you could be advising someone to do something illegal. You can't just impose whatever fees you want and hope they're legal. That's like if you were a day late on your mortgage payment and got a ntoice that there's a $100k fee for that and you called up and they said "if you don't like it, you shouldn't have been late.....please pay today or we're going to foreclose on your house." There are often laws that specifically cover these fees and if not only fees found to be "reasonable" will be upheld by a court of law.
Hi @David P. My leases follow the Colorado Residential Lease Agreement template on the State website which doesn't list a fee, it simply states,
In the event that any payment required to be paid by Tenant hereunder is not made within three (3) days of when due, Tenant shall pay to Landlord, in addition to such payment or other charges due hereunder, a "late fee" in the amount of ____ dollars ($__)
In my leases, I charge "10% of the regular monthly rent, with an additional late fee of $3.00 per day being imposed for each additional day that the full amount of the monthly rent remains unpaid." In hindsight, $3 seems a bit useless or arbitrary, but I think the 10% would be effective. Not sure as I've never had a late payment. Good luck!
I charge 10% after the 5th..Tenants automatically include with rent(only waive 1st )...
Thank you everyone - I don't think it is acceptable to charge outrageous fees, however I do want the rent when the rent is due and sometimes this is done through higher fees.
I have seen this URL and unfortunately Late Fees: No Statute. The reason I am asking is one of my tenants are consistently late. While it is written in his lease $20 per day late fee, I normally give them a break and cap it at $300, but I have found they are consistently being late and told them that I will start charging them $20 if they continue being late.
The tenant often avoids my calls and text messages and when I do get a hold of him, he says I don't have the full amount; I only have $700. Then I say to them "it's better that I have some rent money than none at all", and I will be by to collect it. When I show-up they always have $100 bills in cash (I do write them a receipt on the spot). It is often I get this amount between the 7th and 10th of each month, but then the remaining amount doesn't come until sometime later in that month or even the beginning of the next month. I once served them with a 3 day notice to pay on Dec 20, (yes right before the holidays) but didn't have rent for November yet. The very next day I received the full amount for November. That said, they were late again the next month as well, so I started charging the late fee.
Their lease is coming due at the end of July and I am not going to renew their lease. I think they know they need to move on to something they can afford. I want to ensure that my late fees are within the law (which it doesn't look like there are any for Colorado) and that I am charging the "Norm" for our area.
Thank you for your response as well; I am just trying to get out in front of this and be prepared for the next tenant.
Just because you can charge anything you want I want to do what is fair and reasonable. This is why I specifically asked what others are charging in the Denver metro area as I want to ensure I am in aligned with other landlords.
I do $20 per day to a maximum of 10% of the rent, which is what my laws cap it at. By the day I reach 10% though I'm at a point where a pay/quit notice is being issued.
@David P. I totally understand your frustration. Since there is only one month left this won't work but for me it's like this. They must sign up for my debiting service (clearnow or erentpayment). If they don't sign up for that, rent is $40 more per month. I make rent payment due when they get paid. The debit comes out the day after their payroll hits the bank.
If the tenant doesn't have a bank account (some will lie about this but there are some that don't), I point them to the nearest bank (I open an account there just for rent collection). The funds must be in that account on the 1st or day after they are paid as we agree. If they don't pay according to the plan then they get a 3 day notice. The 3 day notice is posted on the 1st on their front door in bright pink. If they don't pay by the 3rd business day of the month. I file on the 4th business day. Once I file then payment is in full by the court date or they get an eviction.
If a tenant gets paid every two weeks. Rent is 1/2 the monthly amount. I would even do weekly but haven't yet done that. Notice you will collect 26 (52 for weekly) rent checks with this method. Make sure there is full disclosure here. The rental period is every two weeks. It costs more but it's more convenient and the extra amount covers your bookkeeping costs.
You need fees in your lease to cover the cost of posting the 3 day notice. You need fees to cover the cost of serving for the eviction court and for filing with the court. Once you do that having a "reasonable" late fee is less important.
The idea here is that you remove yourself from the equation to collect rent. Rent is paid via debit or via the tenant putting the funds in your account. You look online. Funds are there, all smiles, funds are not there, tenant frowns.
For safety reasons do not collect rent/cash in person.
You are working harder than they are to collect rent. That sends the wrong message. You are more worried about rent being paid than they are. That's backwards.
Personally I would give them the 3 day notice today (if your lease doesn't give them a grace period-don't get me started on that) and evict them if they don't pay in full for June. I would also do the same if they don't pay July. I expect them to stiff you July's rent thinking the SD will cover that month's rent. Tenants know that having an eviction can prevent them from finding housing. If you serve them in person in Colorado with the eviction filing, you get a money judgment along with the eviction.
this is great stuff; I didn't think of doing it this way, however you make a good point. I may also collect rent on a credit card with 4% fee and let the credit card company worry about collecting from them.
Additionally I like your point of collecting from them when they get paid; and I do that for one of my section 8 tenants and this seems to be working well. Once these tenants move out I am prepared to modify my lease to better fit their lifesytle and pay the rent!
In NJ, my attorney says the cap on daily accumulating late fees is either 5 or 10 days worth (I forgot, but will ask again) and I charge $5 per day after the initial $50 fee as of the 4th of the month. In FL, I charge the same and there is no cap for number of days.
Bill is right, by the sound of this tenant, expect to get stiffed for July's rent. Even though my leases state the security deposit cannot be used for the last month's rent, and I discuss it with the tenants at lease signing, it happens. I post a 3 Day Pay or Quit when it does, and that usually gets the tenant's attention to pay as required. But not always.
@David P. I have been told that CC is not a good way to do rent. Crafty tenants can pay and then later dispute the rent for a repair issue or something and the CC company comes back to you for the funds. Fees are very steep compared to ACH companies like ClearNow and erentpayment. It's my experience that tenants operating on a cash basis (no bank account) don't have CCs either.
If you are willing to stop by and collect the rent in person, they will use that to their advantage. You will get this: "We have the rent payment, but we cant get by your PO box today..."
If you don't charge them late fees some of the time, they will expect that all of the time.
You must do business in a consistent manner and without emotion. You are running a business and not a charity. I would use a fixed late fee of 10% or whatever your state allows. You are going to drive yourself crazy with a daily late fee and constantly trying to figure out how much they owe.
Thank you everyone for your consideration. I agree that I need to be consistent on collecting the late fees. However on a good note, I did collect last month's rent from them up front when I the tenant. I have made some concessions and given leniency on the late fees as they were pretty consistent on pay then they fell on hard times. As a business you have to say I don't care about your circumstances and charge the late fees, however we are also humans as well and try to be fair and compassionate. This said, the main reason for this post was to see what standard Late Fees others were charging so that I align better with others; not so much about the current tenants.
Again I want to thank everyone that posted - your points are well taken and hopefully others will learn from this post as well!
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