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…
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.
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.
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.
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…
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…
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.
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.
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.
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.
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/