Tip #282: It’s Not Too Late
That’s a good excuse to review your own late fee policy to see how it stacks up against the law.
Here are a few pointers that can help you achieve on-time rent payments without risking a legal dispute with your tenants:
1. If you adopt a late fee policy, make sure you put it in the lease agreement. Tenants must be aware of the risk of late fees before they sign on. Don’t attempt to add or modify your late fee policy via an email or informal modification of your house rules. You may not be able to enforce those changes in court.
2. Review local and state late fee restrictions, and make sure your fees are below the legal limit. There may be a max you can charge, or a prohibition on charging “interest”, a/k/a a daily fee that keeps accruing. In nearly every case, the amount you charge must relate to your actual out-of-pocket losses. If you charge a fee daily, you probably still need to provide a maximum.
3. Make sure you can prove that the tenant received notice of the fee as it was accruing.
4. Don’t let chronically late paying tenants stick around. Rather than risking problems enforcing the late fees policy, show them the door and look for a better quality tenant.
5. Bolster your late fee policy by accepting a variety of rent payment methods, including electronic payments and auto withdrawal.
See last week’s Landlord Quick Tip.
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