Mind Your Own Business: Volume 4 Help! My Renter is Constantly Late!

Welcome to Mind Your Own Business Saturday where I try to answer your business related questions. Gale C. writes: 

?I have a tenant that is constantly 30 days late. I?ve never charged them a late fee, and have even given them a month?s free rent because they take good care of the property. What should I do??

Gale, I hope you are doing well today, and I have to say that you sound like a nice landlord. I think most people would be thankful to have a landlord that would allow them to get 30 days behind without starting the eviction process. I know that I was late once while we were on vacation(by a couple of hours) and I had a Notice to Cure on my door the next morning, and then one waiting in the mail when we got home. 

It?s time for you to treat your property or properties as a business, and if you can?t, it might be advisable to sell the property or hire a property manager. 

It?s easy to be taken advantage of as a landlord, especially if you honestly care about your tenants. I know I have been too nice on more than one occasion, and to be completely up front, I have a tenant right now that is always 3 weeks late. She too takes good care of my property, and she communicates well so I?ve just changed her due date to match when her paychecks allow her to pay. 

It would be easy to think she is taking advantage of me, but she?s been really cool when I needed her to be, so I try to give her the same level of understanding. 

You?ve clearly been understanding. You wrote off a month?s rent, and haven?t been charging late fees.

First, Communicate with your tenant. 

There might be something going on causing the problem. In the case of mine that is always late, the first time I moved her due date was due to a loss of employment during covid. The second was a car accident that put her behind. She still makes the payment during the month, so it wasn?t a big deal to just move her due date. 

Anytime one of my tenants is running late though, I assume that they?ve made the payment and that my bank has made an error. I then send my tenant a message reminding them that rent is due. I let them know that if they?ve already made the deposit send me a copy of the receipt so I can work with the bank on correcting it. 

I don?t think the bank has ever made such a mistake other than to drop it in the wrong account of mine, but it gives them the opportunity to correct the issue and save face. There is no need to embarrass or berate them. 

The other thing that I have done is to offer some financial counseling with my renters that have more frequent issues. 

Tenants that take good care of your property are often hard to find, so when I have one I try to keep them too. One of the best ways I know to keep such a tenant is to help them improve their lives. Beyond that? 

It?s time to take a look at your lease, and the law. 

Your lease should be able to answer how you should proceed, but that is only true if you have a lease. Your lease, if written properly, should include a provision where late fees can be applied. If it doesn?t specify that you can, then you are probably out of luck because typically any ambiguity in a contract favors the one who didn?t write it. 

State and local laws usually dictate how much you can charge for a late fee, but basically it amounts to ?reasonable? fees. What?s reasonable? I personally use 5% at 5 days late, and if they got in 6-7 days late, but it was there before I did my accounting work, they were on time. Some experts think that scaling up to 10% might be reasonable at 10+ days late, but I?ve never gone that far. Whatever the case, it must be spelled out clearly in the lease, provided you have one. 

If you don?t have a lease, it is time to get one. Your tenant needs clear expectations of both what you expect from the tenant, and what they can expect from you. It protects both of you from emotional decisions. For instance, if your late fee policy triggers at 5 days (check your local laws) then you need to charge late fees at 5 days. The same goes for your eviction policies, pet policies, subletting policies, care policies, insurance policies (I require renter?s insurance), and so on. 

From there you can decide if you want to work with the tenant or not, but put it in writing. If they get behind and you want to give them a payment plan, write up an agreement that reflects it.