Late fees & evicting on a lease/option - Posted by HT

Posted by Prudy on March 03, 2000 at 12:29:50:

Yes, I would like to see your L/O agreement.

Late fees & evicting on a lease/option - Posted by HT

Posted by HT on March 02, 2000 at 16:49:44:

I have a situation with a lease/option occupant and would appreciate some feedback from anyone with knowledge on this situation.

First, I have a very nice occupant in my home on a 1-yr lease option. This person is paying her rent late and not including her late fees. She is not paying very late (less than 10-15 days), but these late fees, which are clearly stated in the lease agreement add up to an extra $50-$100 a month and I would like to collect them. What should I do to collect these addition funds due to me?

Second, I’ve considered evicting this person, because her late fees have added up for being late for 1-month. I placed her in a nice home and have been very considerate, and will not let me kindness be taken for weakness. I’ve submitted notices to her for the fees, but have not received a response.

I took a real estate investing course and one of the key things I remembered this successful investor saying was that a major reason he uses the lease/option method is because unlike a rental property, an eviction in a lease/option property can be done in 48 hours with the aide of the Sheriff requesting the occupant to leave. I believe he said because you still own the property in your name that the occupant has no recourse but to leave.

Does anyone know if this is true (particulary in the state of MD) and if so how do you execute this procedure?

Re: Late fees & evicting on a lease/option - Posted by doug,KY

Posted by doug,KY on March 03, 2000 at 11:57:46:

Great advise - But bottom line is your lease option makes you a landlord. Being a landlord is like managing a business. A contract/lease/lease option/or whatever are your tools of the trade. Live by them and you wouldn’t have continous problems every month. All the responders advise works for them and that’s great. Find yours and make it work.

Here my advise. Get up in the morning, shower and brush your teeth and while your looking at yourself in the mirror, Say “I want my money” fifty times or more until you believe it. Then, start being a manager, use your contract/lease, demand your money, it’s your business, you deserve it.

Re: Late fees & evicting on a lease/option - Posted by David S

Posted by David S on March 03, 2000 at 08:02:26:

First, you are being played as a weak manager. In short, it’s your choice.

My paperwork is structured to give the t/b $100 rental “DISCOUNT for prompt payment and maintenance” for paying “on or before the 1st day of each month”. NOT postmarked on the 1st, but in my hand NO LATER than the 1st. ex: if I want $695 per month, I structure the lease at $795 per month giving the $100 discount only if paid by the 1st, PERIOD! In addition, the rent credit, if any, only applies if they pay “on or before the 1st”. Now you are talking some serious cash, enough to (usually) get their attention.

There is other verbage that details how the rents will apply. First to all damages and maint covered in lease, then collection costs, late fees, and finally the balance applied to rent.

You need a strong management attitude. If not, you will experience exactly what your deserve.

David S

Re: Late fees & evicting on a lease/option - Posted by B.L.Renfrow

Posted by B.L.Renfrow on March 02, 2000 at 22:14:35:

Sounds as if your tenant-buyer is simply taking advantage of your generosity in allowing her to float, rather than paying late due to an unforseen event.

If she is otherwise a good tenant, you might want to try a little softer (but not too soft) approach before proceeding to eviction. Have you talked with her face-to-face about the situation? It’s a lot easier to ignore a letter than someone standing in your doorway!

Russ has given excellent advice below. By wording your lease so that any payments received are first applied to late charges, you create further evidence of the T/Ber’s default should you end up having to explain it to a judge.

Another thing I do - and you didn’t mention whether you are giving the T/Ber rent credit - is include a clause in my T/Ber’s option to purchase which says that for any month in which the rent payment is more than 3 days late, no rent credit will be applied for that month. On most of my L/Os, I only give $100 rent credit monthly, but that gets their attention when they realize they will “lose” that money if they pay late.

On my last deal, I “eliminated” the late charge; instead, the rent is $550 per month…BUT, if it’s paid on or before the due date, it’s only $525. (Actually, my contract does include an additional $15 late charge if they pay more than 3 days past the due date.) So they have a choice: pay $325 on or before the due date; pay $350 if they pay on the 2nd or 3rd; pay $365 if they pay after the 3rd. It’s a slightly friendlier approach, and the T/Bers seem to appreciate the discount as an additional incentive to pay on time…but if they don’t want to pay me until the 5th, that’s fine too (but I also serve the 3 day notice on the 4th, unless there are extenuating circumstances).

Brian (NY)

Re: Late fees & evicting on a lease/option - Posted by TomC (Md)

Posted by TomC (Md) on March 02, 2000 at 18:58:55:

It matters what County you are in. I’m in Montgomery County MD, so I can tell you the procedure in-and-out.

You need to file Court papers for demand of payment/eviction for the late fees owed. Yes, you can evict for late fees that are unpaid, even if the rent was paid. A court date will be set for 2 weeks later. During those 2 weeks, the tenant will receive a copy of your demand via first class mail and a second copy by the Sheriff’s office. If the tenant does not answer the door or is out, the Sheriff will tape the notice to the front door. This only costs $9 in Mont. Co, and usually gets the tenant back in line.

If you go to court, bring the ORIGINAL copy of the signed lease. That way if the tenant is there and challenges your claim for late fees, you have the proof to back it up.

You should also photocopy every check your tenant sends you before depositing it, and keep the envelope it was sent in. C’mon, 12 envelopes a year is no that much to store! That way you can prove the postmarked date. In MD, the date of postmark is considered the date paid since it is out of the “constructive receipt” of the sender.

That’s enough to get you started, hope it works out and drop me a line if you need more help.


Re: Late fees & evicting on a lease/option - Posted by Russ Sims

Posted by Russ Sims on March 02, 2000 at 18:41:38:

Be careful about evicting lease/option tenants in 48 hrs. In my state you must follow the same procedures as in a regular lease… has links to landlord tenant laws in each state. Maybe the answer lies within.

As far as collecting the late fees,your policy should be that any rent payment received should apply to late fees first, and then to rent. So lets say on the 10th of the month, the tenant owes $50 in late fees, and $700 in rent. She pays only the $700, and you get to say “Thankyou: $50 of this $700 will be to pay your late fee, and gee, that only leaves $650 for rent. You’re still $50 short and until you pay it, your rent is considered UNPAID, and late fees continue to accrue.” If she refuses to pay, give her a 5 day (or 3 day, according to local law) pay or vacate notice. Trust me: that gets their attention.

The bottom line is that failure to pay late fees is a violation of the lease, and you can evict after following procedures dictated by local law.

I’m not a veteran here, but I do have 11 tenants and I really like all of them. But boy, you give them an inch and they’ll take a mile. I learned quickly not to be lax on late fees, because if they get by with it once, they’ll expect that to be the norm…

Re: Late fees & evicting on a lease/option - Posted by Bill K. - FL

Posted by Bill K. - FL on March 03, 2000 at 08:31:01:

I like your method the best David. Simple and straightforward so there is no misunderstanding. Giving them a reward/incentive to pay on time instead of a penalty (nobody likes to pay “late fees”).
Would you be willing to forward your L/O agreement to others on this site?

Re: Late fees & evicting on a lease/option - Posted by David S

Posted by David S on March 03, 2000 at 18:41:20:

All contracts should be drafted by YOUR atty. There are many laws that are state specific and should only be in your paperwork with your atty’s approval. This is a question I see asked over and over.

Look. You can NOT share legal paperwork as if it were a book or a pencil. There are just too many people looking for a quick buck these days and if you had the wrong clause, phrase or word in the wrong place, you could be left out to hang. I wouldn’t even consider being a part of that time bomb.

Don’t be afraid to invest a few hundred bucks on your paperwork. It will prove to save you many, many times that cost over the long haul.

Good Luck!

David S