Late Payment Fee as leverage.. - Posted by Frank

Real Estate Investing Real Estate Financing
#1

Posted by Brent_IL on April 07, 2002 at 23:08:44:

My experience as a landlord is over a decade ago so I’m not up to speed on current laws.

The idea isn’t to evict a tenant for paying a few days late; it’s to establish paying the rent on time near the top of your tenant’s list of priorities. If there are no consequences for paying late, and no advantage to paying on time, other, more pressing bills will be paid first.

I wouldn’t accept the following month?s payment without the previous month?s late fee to underscore the importance of prompt payment. I never evicted anyone for late payment and no tenant wanted to be the first. Non-payment of rent is another story.

#2

Late Payment Fee as leverage… - Posted by Frank

Posted by Frank on April 07, 2002 at 08:07:22:

Has anyone ever logged late fees during the lease and used it as leverage at the end of the lease. For example, if rent is due on the 1st and a tenant pays on the 6th for 7 out of 12 months you may have logged $350 in late fees. Could you use that as leverage so they get there act together at the end of the lease. I have no need to charge the $350 but just would like to have more leverage not only at the end of but during the lease and be able to remind them that they have “over $350 in late fees” that I will consider waving if every goes smoothly.

Question is, can you even legally log the late payment, make a copy of the check dated the 5th or 6th, and then collect the late fees at the end of the lease or hold it out of the security deposit. Again, not that I’m trying to take advantage of tenants and I would probably never keep that money but I don’t want to blow smoke either. If I am not legally entitled to the money I would never even speak words of it as leverage or anything else. I would just collect the late fee each month if I felt necessary. Granted some tenants are smart enough to back date their check before they mail it so a copy of their check dated the 1st, means nothing if you get it on the 6th, besides that you supposedly had it in your pocket for 5 days before depositing it.

Like many landlords, I try to implement a zero tolerance management strategy. Out goes the late notice on the 3rd. In comes the check on the 6th. But you certainly don’t kick a tenant out who pays consistently on the 6th, but it NEVER hurts to have a little more leverage in any situation. I have never actually charged her the $50 late fee. I know you veterans are saying, charge her the darn $50 one time and she’ll be on time. Here’s my deal…I operate in a nice Cleveland Suburb and have never missed one month’s rent or had to evict anyone in 4 years and I have 19 units. I feel it’s b/c I’m a good property manager and not because I’m lucky. Does anyone else experience this type of management or am I just on a roll here?? I try not to be the “tyrant” landlord but again I never turn down a little more leverage!

Any legal info on whether the landlord can log and collect at the end would be appreciated.

#3

Be careful here… - Posted by Mike Daly (GA)

Posted by Mike Daly (GA) on April 08, 2002 at 17:13:13:

Although my landlord is experience is pretty limited, and I’m not an attorney, two ideas I’ve read in this thread are probably legally shaky:

  1. Deducting late fees from the security deposit. Need to be careful here, as laws on the security deposit can be pretty specific. Taking anything out beyond actual repair/clean up costs probably won’t fly with the judge if your tenant takes you to court.

  2. Not doing repairs while late fees are unpaid. Again, the law puts certain requirements on the landlord, which you can’t just waive if the tenant won’t pay their late fees.

#4

Re: Late Payment Fee as leverage… - Posted by Brent_IL

Posted by Brent_IL on April 07, 2002 at 16:24:18:

I don’t believe is a good idea to accrue late fees. If anything is ever litigated it could be a mess. I would send all notices on the first day it is legal to send them in your state. When the tenant sent the check in for the following month, I’d telephone them to explain, in a pleasant manner, that I couldn’t accept partial payments because their check didn’t include the late fees and that eviction procedures would have to continue. I’d bet you would receive a new check and on-time payments from then on.

#5

Re: Late Payment Fee as leverage… - Posted by jeff leonard

Posted by jeff leonard on April 07, 2002 at 14:52:10:

if you have a set balance that is financed or a final purchase price on a L/O, then you can put it in your contract that all unpaid late fees will be added to the balance and accrue interest with the rest of the balance. and the final pay-off payment at the end of the term will consist of the remaining balance, unpaid late fees, and interest on both. that way you get your money, and since it is the last payment to end the note you have a good chance of getting paid for all of it. If over time, the payment got huge then at that time you can sign a promissory note for the remaining amount and charge more interest on that and itll be alot smaller payment than the first set of payments youve been collecting, so they wont have much trouble paying the new payments. and if they dont pay the end amount, then the note is not finished and you still have all the past checks that theyve made over the years, and its eviction time. now you got the property back to sell again all over a thousand dollars late fees.

#6

Re: Late Payment Fee as leverage… - Posted by Randy_OH

Posted by Randy_OH on April 07, 2002 at 13:39:19:

Frank,
I have the same problem and am also trying to figure out what to do. I send out the late notice with the late fee and also show the total to date. I have not pursued it beyond that. The tenant has not paid the late fees and has not contacted me about it. My plan is to discuss it with the tenant when she calls about a repair problem. I am going to ask her why she is not paying her late fees. I am planning to tell her that I cannot do the repair work until she brings her account current. Of course, this will depend, to some extent, on the repair problem involved. My attitude is if you want to pay late, you pay the late fee. If you don’t pay the late fee, then we have a problem. You are not following our agreement. If you don’t follow the agreement, then I don’t have to follow it either. You be a good tenant and I will be a good landlord. That is my thinking at this point. I would appreciate any and all comments from the group.
Randy

#7

Re: Late Payment Fee as leverage… - Posted by Frank

Posted by Frank on April 08, 2002 at 13:31:21:

If you send the check back saying that you can’t accept it without the late fee, mine is only $25, perhaps it should be more, you run the risk of setting that tenant over the edge mentally and have them say… oh yeah a**hole, then go ahead evict me. Consider the fact that you may only have 3 months to go to the end of the lease and you are in the clear or risk losing a month’s or at least a part of a month’s rent. Isn’t there something worth a little assessment for each situation to a point.

#8

Re: Late Payment Fee as leverage… - Posted by Randy_OH

Posted by Randy_OH on April 07, 2002 at 17:28:38:

I thought about doing that and it may very well be the way to go. But I do not think it would go as smoothly as you suggest and I believe you would end up with an eviction on your hands. I try to avoid evictions as much as possible. They are very messy and very expensive. I am willing to put up with a tenant who pays a few days late to avoid the eviction hassle. But I still think you should enforce the late fee. It is in the agreement they signed and they are legally obligated to pay it. And if they don’t pay, you don’t have to be such a great landlord. Sooner or later they will need your cooperation on something. I think that is a better time to call it to their attention. But, again, your way may be better. What works is better. I have not had to push my approach to the limit, so I really cannot speak from experience. Have you had any experiences with your approach? Also, is it in your lease agreement that the late fee will be applied to their next rent payment? If not, would it be legal to apply it that way? Any further info appreciated.

#9

Re: Late Payment Fee as leverage… - Posted by Terry Lape

Posted by Terry Lape on April 08, 2002 at 14:35:26:

Try putting in your lease that if they are two months in a row late then the rent will increase by(X). X=50,75 whatever you think you can get.
Terry

#10

Re: Late Payment Fee as leverage… - Posted by Brent_IL

Posted by Brent_IL on April 09, 2002 at 23:21:14:

What you say is true, and I probably wouldn’t get bent out of shape at the end of a lease. What I have found is that when I was easy-going or lenient at the beginning of the rental relationship, I established a pattern of acceptance that was hard to change later on. By fussing at the first late payment, I was able to establish the rent as a priority.