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February 6, 2009
Late Rent Notice
I need some advice on an awkward situation that has come up with our current tenants. Over the course of the last 1.5 years our tenants have often paid their rent late. Usually, this is no more than 3 or 4 days, but on occasion it has been over a week late (they do incur a penalty if the rent is more than 7 days late, but this is not what the issue is about.)
We have asked the tenants to let us know on the due date if they will be late with the rent. We live in a two family house and so are paying the typical costs of a residing landlord. Our request for them to give us a heads up is only so that we can make the necessary arrangements to cover the short-term decreased cash flow. However, our tenants feel that they are not obligated to do this given that the lease does not state that they are to communicate with us if the rent will be late. Aside from how we feel about this argument, we have decided to honor their preference and amend the future rental agreement accordingly.
So my question is what kind of clause would you recommend that we include in the lease to ask them to communicate with us on the due date if they will be late. Does anyone have a similar clause in their lease with their tenants/landlords? Or should we take a different angle and enforce stricter late rent penalties to avoid the issue all together? Thanks for any and all advice.
Comments
I wouldn't renew their lease. The rent is due on x date. They are being terribly rude and immature to be late on a regular basis. If this is how they treat you on such a clear cut matter, I wouldnt want to deal with them on others.
Posted by: Mrs. Limestone at February 5, 2009 4:12 PM
Reduce the grace period to a point that you will be comfortable with your cash flow. Mine is 3 days; if it falls on a weekend, then that Monday.
When I was a tenant I would send the payment in to make the late payment deadline, not the first of the month. They're doing the same thing, which is human nature.
Posted by: corolla at February 5, 2009 4:14 PM
Hi tj, I agree with Mrs. L. Also, it seems like a stretch to try to bulletproof a lease to force this kind of communication while trying to have a good relationship with tenants. They do live in your home. If they don't work out, don't renew, or raise their rent enough so that either they will leave or they will pay you enough so that over time you won't be so jammed up if they are a few days late. I think you need to find a way to get a bit of a cushion so that this isn't so stressful, perhaps by tightening your belt. Perhaps the next lease, for whomever, should move up the penalty date to 4 or 5 days.
Posted by: slopefarm at February 5, 2009 4:20 PM
I thought most landlords are thrilled if the get the rent by the 10th. But I realize that's full time landlords, not 2 family houses.
Having said that, I feel they are pretty low to not honor your simple and fair request to let you know if they will be a couple of days late.
What SF said, move up the late date to five days and put a penalty on it.
Posted by: denton at February 5, 2009 5:09 PM
Seems you are beholden to your tenants! I would reduce grace period to 3 days max. They only do it because they can get away with it of course, so they will just have to adjust to your way. I know how annoying it is when you have to wait for rent.
Posted by: HurricaneKate at February 5, 2009 5:14 PM
Thanks everyone. I really appreciate the guidance and it is very helpful. It took me a great deal of self control to not go into a rant about how we really feel about them and their attitude in this situation. Much as I wanted to...
Posted by: Turtlejam19 at February 5, 2009 5:15 PM
I use three days before there is a late fee. Since the rent is due on the first of the month, three days is plenty of time to be late and still be on time. In one house where I inherited tenants from the previous owner, his leases stipulated a late fee if the rent wasn't received by the 1st of the month, with the late fee escalating with each passing day. That seemed a little brutal. I've always found that every tenant that I've rented to who intended to make good on their end of the deal and keep the relationship on a positive tone has payed the rent occasionally early, and certainly by the 2nd without any discussion.
As for putting anything in the lease, the only thing worth putting in the lease are the actual terms - the day rent is due, the day after which it is late, and the penalty if any.
Unless you are a bad landlord and you are late paying your bills, doing repairs and providing services, there is no reason for the rent to be late unless your tenant is having financial problems and comes to you beforehand for a workaround of some sort. It could happen.
But no, it isn't mean to expect the rent on time in order to maintain a cash flow managing your house. And if you're not going to enforce the rules of the business deal, then you either shouldn't be renting or should give the space to a relative and spare yourself the hassle.
As for the comment that was made: "most landlords are thrilled if they get the rent by the 10th"??? sorry, but which planet is that on? some of these comments just crack me up...
good luck.
Posted by: raphael9 at February 5, 2009 5:24 PM
Does seem odd that they don't just honor your request to give them a head's up about when they expect to pay--what's the big deal? But to answer your initial question, you can combine some of the suggestions and simply include in the lease a provision that says they have a 3-day grace period unless they notify you by the due date that they'll be late, in which case they'll get a 7-day grace period. But, I wouldn't do that (it just begs them to give you notice each month) and just shorten the grace period perhaps with only a very modest penalty if they pay betwen 3-7 days.
Posted by: aishling at February 5, 2009 5:28 PM
honestly, as a former landlord, I'd be thrilled with any tenant who paid in full every month, even if it were a week late. if that's the only issue I had with these people, I'd be THRILLED. wait until you get a bad tenant.
Posted by: Ringo at February 5, 2009 5:32 PM
I agree with Ringo.
Even with late fees, you have then have a new hassle of enforcing them. How much new aggravation are you going to expend on that???
With this tenant, put the pressure on them to pay on time, but assume that they will not. If they are consistently yet reliably late in their payment, it may just be their nature....procrastination. If you just make yourself a little financial cushion to work with, YOUR problem will go away (no the late payments will not go away). You can still pressure them for timely payments and if they comply it is just icing on the cake.
Posted by: Oxygen at February 5, 2009 5:49 PM
I've found it's very difficult to pay on time if you have to mail the payment in. You don't want to pay too early, but you don't want to pay late, and weekends and holidays interfere. Then my landlord sometimes doesn't cash the check for three or four weeks, which unnerves me. But whenever I lived in someone's house, I always slipped the check under the door exactly on the day it was due.
Posted by: mopar at February 5, 2009 7:01 PM
I've been a landlord for 25 years. Two family house. The rent is due on the first of the month. There IS no grace period. I make that clear to them before they sign the lease (along with lock the door, don't damage my property and don't store garbage in the house). I don't get crazy if they're a couple of days late on occasion. The ones who were consistently late (and/or gave me checks that bounced) were problems in other ways as well and I did not renew their leases.
It has happened with more than one tenant who was consistently late with the rent that their paycheck did not clear in time for them to pay the rent on time. I made it clear that they had to work out their finances so the rent came from the previous check and/or borrow from relatives to pay the rent, not essentially borrow from me by being late with the rent. I said it nicely. Each of them got it and turned out to be long term tenants, paying on time.
You are being too easy on them and I would not renew. Your request is simple enough and they are rude. I also agree with the poster who recommended that you adjust your finances so it's not so stressful when you get the rent late.
Posted by: jfss at February 5, 2009 7:55 PM
I donʻt understand why you are asking them to let you know that they are going to be late. It seems like the kind of wishy-washy door that opportunistic people tend to plow through.
Be clear about what you expect and people will tend to follow through.
Posted by: vanburenproud at February 5, 2009 9:35 PM
Sorry, hit the post button before I was finished.
Be clear about what you expect and people will follow through. By asking them to tell you when they are going to be late, you are clearly stating that you expect them to be late.
Itʻs just weird to me that you are complaining about them being late, when you are the one who set the expectation that they could be late in the first place.
Posted by: vanburenproud at February 5, 2009 9:38 PM
as a landlord with 2 tenant for many years- You do sound a bit over the top worrying about a few days. I doubt any court is going to go along with you. In other words, you sound a bit unreasonable and controlling.
Posted by: Petebklyn at February 6, 2009 9:56 AM
OP, I think your question is valid and reasonable.
Times are tough and lots of people are having financial problems. But giving you a heads up if payment is gonna bump against the definition of "late", while not in the lease, is the kind of thing courteous people do in 2-fam situations.
If they want to go with the letter of the law/lease, probably not much you can do short-term, but a gentle reminder that not renewing the lease is also part of the lease might soften their attitude a tad. Good luck!
Posted by: Johnny at February 6, 2009 10:28 AM
agree with the above but if it really becomes problem, you could use their security deposit
Posted by: jnjnjn2 at February 6, 2009 10:51 AM
I agree with all other posters: if it bothers you this much, then don't renew their lease. BUT, if you have the 7-day grace period firmly established in their lease, and they've never been more than 7 days late, then I would let it go, especially if you don't have any other problems with the tenants.
Posted by: BrooklynButler at February 6, 2009 10:56 AM
I'm with Ringo on this one. You can have a non-paying tenant who would drag you through the court system.
Posted by: landlord at February 6, 2009 11:00 AM
If you're stressing out over conflicts w/ then tenant then don't renew and find a new tenant you're comfortable with.
On the other hand, my mortgage is due on the 1st, and there's no penalty if the bank gets paid by the 9th, so my payment is on autopilot for the 9th of every month. I'm happy if I get paid from a tenant around the 1st and no later than the 7th. If your cash flow is thrown off by a payment a couple of days after the 1st you're cutting your finances too close.
Posted by: Bklnite at February 6, 2009 11:08 AM
Two points:
1. Most renters will consider the end of the grace period to be the due date. So much for "grace periods," huh... But I remember when money was tight for me I'd be juggling things like "my paycheck will clear on the 4th so I won't mail my rent check until the afternoon of the 2nd...". Point is, if they don't get a late fee until the 7th, then as far as they are concerned their "due" date is the 7th. Charge a late fee on the 5th or 4th or even 2nd if you want to get money sooner.
2. Adjust your finances so that getting the rent a little late (or even not getting it at all) won't cause you any short term problems. Don't leave yourself vulnerable like that.
Posted by: northsloperenter at February 6, 2009 11:12 AM
As a renter... I hate to write this... but Don't Renew their lease. OR, renew it for 5 months to let them know they are on notice. If they are late, move on to a new tenant and kick these sad sacks to the curb! :-)
If they are on-time for those next 4 months, then renew their lease with NO grace period. $200 or 10% or whatever penalty on the 2nd of the month -- send then an invoice for that penalty in writing.
Just gotta be a little tough.
Posted by: tybur6 at February 6, 2009 11:14 AM
the simple thing to do is move the due date. i did this with my tenant who would also be late (only by a few days). The new due date is just three days earlier. If they are five days late, it's still early enough for me to manage my cash flow just fine and still impose a penalty if I need to.
Avoid the back and forth with your tenant. Restart their lease on a new date and move the due date for the payment. Problem solved.
Posted by: cmontgom at February 6, 2009 11:26 AM
something that i know does help a lot of people, me included in the past, is a landlord who will accept rent every week or every two weeks instead of monthly. it helps your tenant immediately sort out their finances and it insures that you get your money on time.
*rob*
Posted by: PitbullNYC at February 6, 2009 11:31 AM
If you have a real pressing need to receive the renter's check by the first, and the grace period and penalty strategy is not working, there is a much simpler solution to the problem that's very effective.
If you give a penalty for being late, then give a deduction of the rent if the rent is paid early. Doesn't have to be a lot -- even $20 would do, for example, if the rent is paid say 5 days prior to the first of the month.
The point is: human psychology is such that saving that twenty bucks on a deal will be a stronger motivator for most people than paying a penalty for a late fee, even if the two amounts are roughly equal.
Posted by: Smokychimp at February 6, 2009 11:44 AM
Most landlords understand if the rent is a few days late (thank goodness mine does). When I was getting paid bi monthly, and monthly, the day the check came would vary wildly so it was tough. that said, I see - no reason why the tenant just can't be polite and let you know. Yours isn't a big apartment building it's you and the tenant.
The other issue is how much difficulty the tenant will create over late fees, and grace periods. If I am not mistaken, even with the terms of a lease, I think if they pay within 30 days they can't be evicted. And if you start eviction procedings you are in for a nightmare. I agree with some of the above posters- and as a tenant I also hate to say it- tell them they must be considerate enough to tell you when they will be late or you won't renew the lease. You sound like a nice landlord- I know some who would be screaming and calling the marshalls if the rent is a day late. All you're asking for is a little consideration. If they can't do that small thing, they are not good tenants.
Posted by: bxgrl at February 6, 2009 11:45 AM
I think they are trying to get you to break with them so you can take them to court and they get 6 months free rent. The best you can do is document your actions, Remember it is no longer a homeowners market. And I hate to say that the greed of some homeowners will bring the wrath of government on alot of honest homeowners.
Posted by: hannible at February 6, 2009 12:17 PM
I don't know that that's the case- they could just be inconsiderate jerks but in any case, if they are given at least 30 days notice of nonrenewal, they won't be able to use it against you. As a LL you have the right nt to renew. Hopefully it won't come to that but I just don't understand why they simply can't let you know what's going on. You're trying to be nice. They should be grateful that you're considerate of their situation. They should be considerate of yours too.
Posted by: bxgrl at February 6, 2009 12:24 PM
There's full text for a lease available at: http://www.ilrg.com/forms/lease-res/us/ny which contains the following: "LATE CHARGE. 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 ($___)." I don't use this lease and have never read it throughly. From skimming, it seems fairly comprehensive. I've seen other leases which include such clauses as: "No Waiver of Lease Provisions: Even if owner accepts your rent or fails once or more often to take action against you when you have not done what you have agreed to do in this lease, the failure of owner to take action or owner's acceptance of rent does not prevent owner from taking action at a later date if you again do not do what you have agreed to do."
Personally, late rent is not an issue I would turn into a contest, unless it occurred repeatedly and excessively. You might find it useful to start providing the tenant a statement of rent due a few days prior to due date, and recording the late payment penalty and interest on each of those statements. Relating to your post, the bigger issue strikes me as being whether your tenants are both responsive and responsible. Someone, anyone, tenant included, who can't take the trouble to be responsive to deadlines or notices (rent due, appointments for work on premises, etc.), is lacking what I consider an important desirable element for someone sharing your premises (in a real sense, a very close member of your community). I'd certainly factor that into the the terms and decision of a lease renewal.
Posted by: vinca at February 6, 2009 12:29 PM
There was a lot of good advice on this topic. This is what I think. It is really about setting limits with people from the start and getting it straight in your own head that this is a business and once you get the rules down, you can have a beautiful relationship. I made it clear when I rented that my one rule is that I have to have the check on the 1st of the month or before. There is no grace period. It is not the second or the third. We have no rules for a late fee because a condition of their tenancy is that they don't pay late. That is their job. MY job is jumpting through hoops to make sure the place is great -- i.e. everything is clean, in working order, warm, the water runs, the gas flows, the works. That is a big job for me. I work to pay my piece of the mortgage and when things go wrong, I have to do backflips to meet people and then PAY for repairs, etc. etc. I take care of the people. They have built up a feeling of trust that I will keep the building in good shape and I don't annoy them.
THEIR job is to give me the money on the 1st or before. If they are going away or on a business trip, they give me a check before hand. The point is that my bill is the first they pay. It HAS to be the most important thing for them -- to have a roof over their heads, so they can pay their AMEX bill late or their cable or whatever, but I say that up front -- that is my big rule. One great tenant starting slipping a little - the 2nd and then once on the 3rd, no check and I called her and she was on her way to Boston for a few days. We had a little heart to heart and it never happened again.
YOU have to set the rules. I could never DO this brownstone thing if I couldn't rely on the tenants. THEY can certainly rely on me but we have to have some rules.
Posted by: donatella at February 6, 2009 1:23 PM
Thanks again to everyone. This has been hugely helpful and we will be taking the good advice offered here on a number of issues. Among other things we will change the late rent penalty date to the 3rd on the lease for all future tenants - whoever they are. We are first time landlords and we inherited these tenants when we bought the house 2 years ago. So we are still learning, but the advice has opened our eyes quite a bit and will help to make us wiser landlords.
Posted by: Turtlejam19 at February 6, 2009 1:25 PM
ugh it didnt fully go thru
i mean, this kind of thing wouldnt be an issue of people actually bought homes THEY COULD AFFORD!
*R*
Posted by: PitbullNYC at February 6, 2009 1:31 PM
Over the years I have had many tenants. Courts routinely uphold the right of a landlord to not renew a lease even when the rent has only been paid a few days late if it is late many times during a lease. And for a non rent regulated tenant you don't even have to give a reason for non renewal. How long it will take you to get them out is another story, however. Personally tenants who pay on time are worth their weight in gold.
I like a lot of people relayed on the rent on my apartments in a three family to pay for the house. I was able to afford it but the tenant payments made it more affordable. In NY the apartments in these small houses are just as important to the housing stock as a big apartment house...you know even the big apartment houses relay on tenants paying on time so no one can afford to buy those houses if the tenants didn't pay and the housing stock would look like the south Bronx in the 70's/
Posted by: smeyer418 at February 6, 2009 2:17 PM
Rob - not sure what you mean. The houses would still exist, and the units would still be filled with renters. Perhaps people wouldn't be stressed by the few days late if they had 100k in the bank, but many of the same issues would exist.
I have a tenant who I am pretty sure is no longer working (he just graduated from B school and his employer has been in the news as a stressed bank; he is always at home). He's been smoking up a storm (forgot to put rider forbiddne it in his lease), and has stopped payment on one check (claimed he didn't know how that happened); he wrote another which went through. But I'll be happy if I get through the spring without him (1) leaving or (2) stopping paying rent altogether. Perhaps I am wrong, but I suspect it will be harder to rent my apartment at its current rent when I have to. So I am putting up with some shit in the meantime.
Posted by: Putnamdenizen at February 6, 2009 2:20 PM
No need to be afraid of the tenants as long as you follow all the rules.
First rule I've learned is not to give a lease to someone who has bad credit. I have found that credit scores are the most accurate predictor of future willingness to pay.
That being said, the tenant knows that they have more to lose in this than the landlord; they will have to find a new place, pay for moving, pay new security deposits and fees and will most likely trash their credit if it gets to the point where they are issued an order of eviction for non-payment.
If they have bad credit to begin with, they don't have much to lose and you may have to go the route of housing court. The lost rent is deducted on next years taxes as lower rental income in addition to deprecitation, taxes, hazard insurance and mortgage interest.
if they are good people, cut them some slack and have a frank discussion with them about your many responsibilities as a landlord. If that doesn't work, raise their rent on next renewal.
Posted by: Legion at February 6, 2009 2:31 PM
I would be mostly appreciative they paid every month too. But in a 2-family house I would not offer a Grace Period. That's for big apartment buildings not a private homeowner with one wee income producing apartment in their home. Sounds like the tenant sees the Grace Period as the true date the rent is due, not the first of the month. Doesn't sound like a deadbeat but rather a procrastinator. If you really do need your rental income on the 1st, inform them when the lease comes up for renewal that you are removing the Grace Period and rent will always be due on the 1st from now on.
Posted by: traditionalmod at February 6, 2009 3:46 PM
Lot's of good advice here and obviously there are no hard and fast rules. The common thread is to clearly define the terms of the lease, make sure all parties understand them and agree to live with them, be reasonable but firm, and don't feel guilty about enforcing your lease.
In my view, you do need to keep a cash float so that a late payment won't mangle your cash flow. Also, however much of a grace period you have, if you have a nice but disorganized tenant and it is the last day of the grace period and the rent hasn't been paid - call them and remind them. Tell them that it's officially late after that day and that you'll have to charge them the late fee. Once or twice I've simply explained to people that I set the rent at an appropriate amount and really don't want to collect late fees, that they exist solely to remind people of the importance of paying on time.
Also, the grace period is not the due date. They are two different things, and whether a tenant generally pays closer to one or the other tells you a lot about the tenant.
Lastly, there was a lot of discussion about not renewing a lease. If you are the kind of person who has trouble enforcing a grace period, this is not going to be an easy thing for you, not to mention that it raises the question of how you will guarantee a vacancy as you would obviously like to be showing the apartment before the old tenant moves. The single most graceful way to deal with a tenant who is problematic but not terrible is to raise their rent. The bigger the problem the bigger the increase. If you do this in a civil manner, it is up to the tenant to accept it or notify you that they will move on. You should have a lease or rider clause that stipulates how much time they have to respond to you, or how many days before the end of the term they have. In this way, you 1) keep it civil 2) most likely avoid having to bring an action and deal with a holdover 3) in most cases get a clear answer from the tenant themselves indicating that they will accept the terms or move. When dealing with things that are thorny always try to find the easiest way to help the events take place on their own.
good luck.
Posted by: raphael9 at February 6, 2009 4:33 PM
I agree about getting your finances in order. I also agree that your tenant is taking advantage of the climate you created. I wouldnt be surprised if there are other issues, but a slight delay in payment probably isnt enough reason to non-renew in this environment.
When it's time to renew, you can give the tenant options. You can charge significantly more rent or reduce his options to delay payment. Further, you can explain to the tenant that his minor delays have a significant effect. If you get an extra $100 per month in rent, I bet you'll be happy to get it on the 7th, or if a late charge of $200 applies after the 3d, I bet you'd be happy to do it that way as well...
Posted by: slick at February 6, 2009 6:29 PM
I can understand the "if the cat's away" mentality of renters (I'm a ex-landlord), but when your tenants live WITH you and still have the balls to not even come to you on the due date... Why deal with the in-house headache?
I know this is a difficult economic environment but I would really consider not renewing their lease. You're not being at all unreasonable with your tenants. You could also significantly raise their rent, give them a "discount" for rent paid on the due date and shorten the grace period to 3 Calender Days (NOT Business Days - businesses actually close). Make sure you put this in the lease under the "RENT" heading in bold and have them initial the paragraph itself so there is no confusion in the future since they like referring to their lease...
Posted by: i_heart_brooklyn at February 7, 2009 12:26 AM
Smokey - we also offer the credit for early/on-time payment. It's smaller than the penalty for a late payment (which is at 5 days) - but almost always get our rent checks on or before the first of the month.
As someone stated above, when a tenant choses to pay the rent can tell you a lot about the tenant. Our tenant who wasn't motivated enough by the credit to pay on time ended up being a problem tenant in other ways.
Posted by: Heatherie at February 10, 2009 11:22 AM
By your definition rent is due on the first and not deemed late after the seventh. If your tenants are paying a few days after the first they may not know that this is offending you. The best thing for you to do if lower your grace period.
I am renter and I always turn my rent in on the first or before the first. There is a five day grace period in my lease. My landlord usually waits two to three weeks before she deposits my check. Last month I had a few things going on and I didn't pay my rent on the first as I usually do. Three days after the first my landlord approached me about the rent. I told her as far as I was concerned I had two more days before it was late and I would incur penalties. I of course gave her rent the next day but this was more offensive to me than it was to her. I am still within the contract so there is no reason for my landlord to make me feel as if I am trying to dodge her or pay late. If your tenants are within there contractual obligation and you are feeling awkward about there payments then the problem is with your lease agreement not your tenants.
My parents have several apartment complexes and have a number of tenants who pay consistently late. Their cashflow is such that they actually love these tenants. A late payment of twenty five dollars on unit that is 1000/month is the same as have an APR of 30 percent. So they just choose not to worry about it, and enjoy the benefits of the late charge should
My advise, change your policy before you change your tenant.
Also I would work hard on getting your cashflow in line so your are not dependent on the rent coming in on a certain day of the month, I would work on saving a few months worth of mortgage and costs so you stop taking out your worries on your tenants payment schedule which is totally permissible by your policy.
Posted by: ScottyMax at February 13, 2009 4:13 PM
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