3rd November 2009

New Late Fee Strategy

So, recently I had the realization that the late fees I charge tenants are obviously not high enough. I have a few tenants who consistently, every single month, are late on their rent.

Handling Tenant DepositsOf course, the reasons range from car trouble to an occasional dead grandmother but that’s irrelevant. The point is that these people are obviously living month-to-month and do not keep any money in reserve for “emergencies.”

The standard terms in my leases are, “…rent is due on the 1st of the month and late on the 4th…” Additionally, “…late fees are $25 on the 4th and $5 per day after that.” So, basically, if a tenant is 1 week late with the rent, it will cost them $55 extra for the month. I guess $55 is not a lot of money these days and the tenants see this as “no big deal.”

My plan next lease renewal is to raise the fee on the 4th to $50 and $10 per day after that which will put them at $110 extra for being late one week. I mean, late fees are supposed to be an incentive to not pay the rent late and with rents so low, I risk losing the tenant if I raise the rent.

However, the next problem becomes that if you go to eviction court, the judges in their infinite foolishness wisdom, could very well pronounce the amount of late fees “unconscionable”  (the exact term in the Florida state statute) and negate the whole amount.

Well, I’m going to risk it and raise the late fees. In my opinion, these people need to be more responsible.

There are currently 13 responses to “New Late Fee Strategy”

Why not let us know what you think by adding your own comment! Your opinion is as valid as anyone elses, so come on... let us know what you think.

  1. 1 On November 4th, 2009, Chris Wark said:

    You know you can pretty much put anything you want in a lease,
    whether it’s legal or not. It’s essentially a bluff, but if the the tenants agree to it,
    and never compare your lease to the landlord tenant law, you’re fine.
    What is critical is that you are firm but fair, fix things quickly, and don’t be a jerk.
    Because if you are, they will start complaining to their friends and family about you.
    Once that happens, they are going to get a lot of advice, and someone is going to tell them “he can’t do that”. Then they start doing some research and the jig is up.

    You the blogger in particular need to be careful with this strategy.
    You are putting yourself out there for everyone to see with this blog post and cannot claim ignorance before the judge. Should the tenants figure this out and show this post to the “foolish” judge, he/she might give the tenants extra leniency and even some legal advice.
    I’ve seen it happen. In Tennessee courts tenants can ask for a continuance which buys them another two weeks in your house costing you more money,
    fortunately most tenants do not know that.
    Judges do not usually inform the tenants of their legal options, but I’ve seen them do it to landlords that were late, or didn’t show up, or that they didn’t seem to like.

    🙂

    Chris

  2. 2 On November 4th, 2009, TheLandlord said:

    Hi Chris,
    I know I need to be careful but this is why my name does not appear anywhere on the site. My picture does (about page) but I think my identity is adequately obscured. Domain is registered private, etc.

    The “foolish” comment about the judges is that they only follow the state statute when they have no other choice. Even then they are still too lenient with the tenants.

    They may as well not even have a statute seeing as how the judges apply the law.

  3. 3 On November 4th, 2009, Justin Palma said:

    Totally agree! I especially think that the fines per day are much more motivating then a Flat Fine. If the tenant doesn’t pay the rent by the 5th, they have no motivation to pay the rent by the 10th, vs “go get drunk” and pay on the 20th as my father says lol.

    I also am going to start charging $10 if I have to go physically pick up the rent, to help motivate them to buy stamps and mail in rent!

    Motivation is key!

    In Florida are the “unconscionable” late fees defined by the State as a percentage of the rent? I feel like I remember reading in NY it’s something like up to 10% of the monthly rent… also, if the late fees are much higher then those allowed by the State, I wonder if the Judge will ‘ok’ the full allowed late fee amount (for example $75 of the $110), or none at all?

    If it’s the former then I say charge away! lol

  4. 4 On November 4th, 2009, Chris Wark said:

    Sneaky indeed. I like it!

  5. 5 On November 5th, 2009, Sydney said:

    I had one tenant that for over a year would pay the late fee of $50 almost all the time. I started getting used to the extra money, so during the few rare months when he was on time I was a little disappointed (but not that much). I had other reasons for evicting him, which I eventually did, then had all the extra late fees went into fixing up the mess he left behind.

  6. 6 On November 5th, 2009, TheLandlord said:

    Hi Justin,
    To answer your question, in Florida the statute says the following:

    “If the court as a matter of law finds a rental agreement or any provision of a rental agreement to have been unconscionable at the time it was made, the court may refuse to enforce the rental agreement, enforce the remainder of the rental agreement without the unconscionable provision, or so limit the application of any unconscionable provision as to avoid any unconscionable result.”

    Nice how the term “unconscionable” is not defined in the statute AND notice how the statute gives the court completely unrestrained latitude as to remedy.

    In effect, you could eliminate most of the landlord/tenant statute and replace it with “…and the court shall deal with it.”

  7. 7 On November 27th, 2009, Chris Compton said:

    I manage a number of properties in Georgia. All of my leases require a 10% late fee after the 5th. I have one tenant who consistently pays on the 15th. I think it;s a fair trade off. She’s happy, I’m happy and since she is basically paying the entire management fee, the owner is happy.

  8. 8 On December 31st, 2009, ZenDarb said:

    Hmmm… My leases state that the rent is due on the 1st and is late on the 2nd. There is NO ‘grace period.’

    They have 30 days each month – how much more of a grace period does a tenant need?

  9. 9 On January 16th, 2010, George C. Torres said:

    All,
    Here’s what I’ve put in my leases in Texas. I hope it’s useful.
    “Tenant agrees to pay a late charge of $50.00 to Landlord if the rent is not RECEIVED by Landlord the fifth day of the month, plus $10.00 every day after the fifth of the month until the rent is current. It is understood by all parties to this lease that monies paid to Landlord will first be applied to late charges, then outstanding balances, before being applied to newest to oldest rent charges. Cash payments will incur a $10.00 processing fee. Furthermore, an additional $10.00 convenience fee, plus 55 cents per mile round trip from office address to the Tenant’s location, will be charged if the Landlord must undertake a special trip to the Tenant for the sole purpose of collecting rent or partial rent monies, and/or late charge(s) in person.”
    v/r
    George

  10. 10 On January 17th, 2010, TheLandlord said:

    George,
    Wow! I wholeheartedly agree with raising the late fees but I tend to think that until the “procesing fees” part holds up in court, it might be too much overkill. In my experience, tenants don’t read (far less follow) all the fine print. But, good luck anyway. Please let us know how it’s working out.

  11. 11 On January 26th, 2010, The Importance Of Record Keeping » The Successful Landlord Blog said:

    […] let’s see what happens when, upon lease renewal, I raise the late fees. I’ve always thought, more so recently, that the tenants have rationalized (and budgeted for) […]

  12. 12 On September 28th, 2010, Jeff said:

    Florida law doesn’t go into any more detail than “unconscionable”? I thought most laws had a restriction as a total percent of the rent. In any case, I wouldn’t mind late payments if it meant an extra 5-10% in my pocket. It certainly beats the rate I’ll get having that money in the bank for a week.

    Some of the landlord software out there will automatically email your tenant to let them know they’re late on their payment. That takes care of your work and let’s you keep earning extra from late fees. Sounds like a win-win to me.

  13. 13 On September 28th, 2010, TheLandlord said:

    Jeff,
    Your suggestion about using to email the tenants when they’re late would work well if these people even HAD email. Most of mine do not.

    The Landlord

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