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Tip #209: Good Tenant Discount, or Bad Landlord Policy?

One popular way to get tenants to pay on time is the “good tenant” discount. Landlords offer to “reduce” rent for each month payment is received by the due date. Tenants get a break, and landlords don’t have to stress about rent. Seems like a win-win.

But, unfortunately, there’s a catch.

The early payment discount may not be legal. In the eyes of the law, the discount is nothing more than a late fee in camouflage, and it may be subject to all the same restrictions — the amount cannot be excessive, and must bear a relationship to the actual out-of-pocket losses the landlord suffers if the rent is late.

Rent discounts also have been challenged as discriminatory — penalizing those on government assistance or the poor, who are often minorities or families.

There are less-risky options for collecting rent on time. Encouraging automatic withdrawals or electronic payments may be a safer strategy for landlords.

See last week’s Landlord Quick Tip.

American Apartment Owners Association offers discounts on products and services for landlords related to your rental housing investment, including rental forms, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.joinaaoa.org.

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