New Property | Existing Tenant | Late Rent

11 Replies

We just bought our first rental property.  It's a 4 plex made up of three 2 bed/1 bath units and a studio that we plan on turning into a real 1 bed/1bath.  Two of the units have been rented to the same people for 5+ years and the other two are empty and we are renovating them.  We are cash flowing positively with just the two units, but one of the tenants has been late the first two months.  She told me the first month that she would be late and I gave her the benefit of the doubt.  Now this month she is also going to be late.  Do charge a late fee?  Do I just take the rent when I can get it as long as she pays?  The other issue is that both tenants are related.  The tenants that pay on time are her parents and I would hate to lose them.  

It's only been two months, but I don't want it to become an ongoing thing.  Any thoughts would be appreciated.  

@Brandon Hall  I purchased my first 2 unit as well a couple months ago. I have a tenant that pays 3-4 days late every month since her pay day is on a friday. I put in the original lease that after 5 days late they pay 5% penalty of the total rent. She is always 3-4. Hope this helps. How late are the payments? As long as they pay I say keep them.

Definitely charge the late fee. As the new owner, you need to establish the ground rules early otherwise the tenant(s) will take advantage. I assume your lease spells out the procedures for late fees, including how much they are and when they will be applied. If so, it shouldn't come as any surprise to the tenant that one will be due. Plus, if you don't enforce your own lease and abide by its terms/conditions, how can you expect the tenant to?

Keep in mind you MUST honor the existing lease.  If it allows late fees, absolutely charge them.  This is enough to get most tenants to pay on time.

Discuss the situation with her.  Perhaps a shift in the due date is needed to accommodate when she has money coming in.

Focus on getting one of those vacant units up and running and collecting rent.  That will ease the pain if you do have turnovers.  Put your efforts into one and neglect the other, especially that studio conversion.  

You can only charge late fees if they are included in the lease. Here even if they are included in the lease you can only charge after 5 days.   If the late fees are in the lease enforce them after letting her know that is what you are going to do. Particularly since you didn't do it last time. Be nice but firm,  let them know you noticed it is late, you understand things happen but you still have to pay your bills on time so this is the late fee  and cite chapter and verse in the lease.  I would say if it is only a few days you need to set expectations rent comes first and it may work out fine,  you don't know now if the tenant is testing or if something else.  If the parents also rent from you of course it will get back to them and they will learn that you expect rent paid on time too.

Dealt with chronic lateness when I did OF deals on mobile homes...just remember - you're either training them or they're training you.  Figure out which way you want it to be and follow that path.

Ok so my tenant actually called me today and asked how much she owed in late fees before I even sent out a late notice. That was awesome.  She paid both rent and late fees and is caught up.  What are the guidelines for late fees?  I used the same rate that a friend uses, but we are in different markets and I'm thinking my late fees are way too high compared to my rent.  My lease says $10/day, but i'm thinking about switching to a percentage of rent.  Any thoughts?

You have to follow your lease. you can't change it it till renewal time. I charge 10% with the attitude it shouldn't be late! Personally I allow the first time to just be a warning. I always tell them very strong that it must be paid by  X date or late fee happens. I find a strong warning usually work.

Brandon, here is some information about late fees under North Carolina law:

Under North Carolina law, a late fee when rent is due monthly cannot be higher than $15 or 5% of the rental payment, whichever is greater, and may not be imposed until the rent is 5 days late. A late fee may be imposed only one time for each late rental payment. A late fee for a specific late rental payment may not be deducted from a subsequent rental payment so as to cause the subsequent rental payment to be in default.

Send her letters such as a 3 day pay or quit. Keep the verbal communication to a minimum. Sounds like an eviction maybe imminent. You will need to show the proper notice paper trail in court if it comes to that.

@Steve Nowak  Thanks for the link.  I knew there was a state law about late fees, but I wasn't sure where to find it.  I want to make sure I'm fair in charging them.

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