Late rent payments can really impact a small rental business. Here’s how to deal with late payments as a landlord. Late fees benefit landlords by encouraging tenants to make timely rent payments. They financially protect the landlord and encourage good payment habits among renters.
While no landlord wants to be “the bad guy” by demanding late fees be paid, the bottom line is that it’s necessary to not only enforce late fees but also help renters avoid accruing them whenever possible.
Check What State Laws Say About Late Rent Payments
There are state and local laws regarding late rental payments, and they vary depending on location. Some states declare an exact amount that landlords are allowed to charge, and others don’t address the issue in any way.
Many states, however, issue suggested guidelines for reasonable late fees that can be charged. There are also many general legal principles that prevent landlords from charging unreasonably high late fees.
Verify the Wording in Your Leases
One of the most important things you must do to protect your legal right to collect late fees is to make sure your late fee policy is clearly spelled out in your rental lease agreements. If there’s no information on a late fee in there, you cannot legally impose one.
Details regarding late fees that lease agreements should include are:
- The amount of the fee that will be charged
- Any grace periods that are allowed
- Where and how rent should be paid
- The exact day that a late fee will be imposed
Rent doesn’t have to be due on the first day of the month, although that is the most common due date. The rent could alternatively be due on the day of the month the renter moved in or any other arbitrary date as set out in the agreement.
How to Handle Late Payments
The single most important thing to keep in mind when it comes to tackling the issue of late rent payments is that communication is essential. Open communication is the best way to find a solution that works for you as well as for your tenants.
When you want to learn how to handle late payments, keep these tips for communication in mind:
Send Rent Reminders
An excellent way to handle late payments is to help prevent them from happening in the first place. Sending a quick monthly rent reminder might be all it takes to keep a tenant on track. PayRent automatically sends payment reminders 3 days before rent is due so that renters can review their accounts, submit payments, or schedule a future payment.
Enforce Late Fees
Another helpful habit to get into is actually enforcing the late fees that are written out in your lease agreements. Using a rent payment program online, like PayRent, that automatically charges and collects late fees is the simplest, most non-confrontational way to enforce and collect those fees.
Encourage Renters to Pay on Time
There are ways to motivate and encourage tenants to do their best to stay current with their rental payments. Landlords can incentive renters to make their payments on time by offering an early pay discount. When rent is reduced for early payment, your renters will be making their best effort to pay early to receive that discount. PayRent allows landlords to offer reduced rent automatically in the platform if rent is paid before the due date.
Another way to encourage on time payments is to use a rent payment app that reports payments to credit bureaus. Informing (and reminding) tenants that paying on time will benefit their credit rating is positive reinforcement doing its work.
Sometimes it isn’t about the motivation to pay on time. Life happens and some unexpected expenses could arise that limit your renters ability to pay their rent. Give your renter some resources to pay can go a long way. PayRent offers short-term interest-free loans to renters that have a consistent payment history to help them pay on time, every time.
Another option you can give your renters is the ability to pay rent with a credit card. While there are typically fees associated with this type of payment, they are often less than a late fee and can really ease tenant cash flow issues.
A third way to encourage on-time payments is to use a system that offers rewards to renters that accrue for each on-time payment. Maybe the reward is reporting to one credit bureau then reporting to all three bureaus after six on-time payments. Or perhaps after nine or twelve on-time payments, they might qualify for forgiveness of one late fee.
Communicate to Find a Solution that Works
Make sure your renters know that you are there to help them! Even something as simple as changing the due date to align better with their paydays can make a world of difference for them. You could also offer to split the rent payments into two payments to ease the burden that one larger lump sum would put on them.
Use an online app to make it as easy as possible for renters to pay their rent. This way, they can pay it at any time, from anywhere. They can also sign up for automatic “set it and forget it” payments and easily keep track of every one of them.
Remember that communication is paramount, and many people fall upon circumstances from time to time that makes paying rent difficult. The main idea is to help your renters prevent late rent payments from becoming a habit.