Process for collecting late fee and when to collect?

Question

Hi There- I am currently house hacking a duplex. There is a small family that lives upstairs and they are mostly good tenants, but they consistently violate the lease in minor ways. The latest is that they have been bringing me rent later each month, with last month's being delivered to me on the 18th. Here in CT, the law says that rent is due on the 1st but is not considered late until after 9 days grace period. If it is late again this month, I intend to ask them to include a late fee with payment as per the lease agreement. My question is this: When should I request payment of both rent and late fee by? The laws on this, that I have found, say to provide a clear written notice of how much to pay and by when. But when is when? If I give them too much time then they will just be unable to pay on time again next month.

I should mention that they live paycheck to paycheck and don't have a bank account, and hand deliver cash for rent each month, often coming in multiple partial payments. I would have preferred to have tenants with more steady income and record of finances but they had already lived in the house for 3 years when I bought it last year and I decided to give them a chance.

Thanks in advance, any advice would be greatly appreciated

I should mention that they live paycheck to paycheck and don't have a bank account, and hand deliver cash for rent each month, often coming in multiple partial payments. I would have preferred to have tenants with more steady income and record of finances but they had already lived in the house for 3 years when I bought it last year and I decided to give them a chance.

Thanks in advance, any advice would be greatly appreciated

Nathan Gesner · Answer

1. Get rid of them as soon as you can.

2. Apply the late fee immediately and it becomes due immediately.

3. When they make a payment, apply it towards the oldest charge first, late first before rent. If they owe $600 rent and $50 in late fees, a payment of $600 would be applied to the late fee first. This leaves them $50 short on rent and subject to eviction for non-payment of rent.

4. Be consistent with enforcement.

They are unlikely to get on track and stay there. I would consider giving them notice, turning the unit around, and renting it to tenants that can pay on time, every time.

Jill F. · Answer

I agree with @Nathan G.

...unless the property is in a (D) neighborhood where anyone you rent to is going to be in the exact same broke & no credit situation. In those neighborhoods, I have a written process for extending credit and applying late fees. For these tenants, I only apply late fees when people fail to notify or fail to follow through on a plan. My process in these types of properties requires tenants to notify me in writing (by text) of how late they will be and how much they can pay and when. A plan is not accepted until I acknowledge it; I will usually accept plans that keep tenants up with the daily rent if the entire amount cant be paid by the middle of the month. In these kinds of neighborhoods, most of my tenants have 0 access to credit or family assistance. This policy keeps my turnover very, very low-- my average tenancy at the end of last year for 8 units in a "D" neighborhood was 51 months. Not one tenant in the almost 6 years I have owned these buildings has screwed me on a payment plan. Having software to keep track of who owes what is essential for me to do this; I use Buildium.

Joe Splitrock · Answer

I would request the late fee at the time rent is paid. We have a fixed fee plus $5 per day, which encourages rent payment as soon as possible.

I would also be very careful with accepting cash payment. The tenant could claim they paid rent that they did not pay. Every cash payment should get a receipt from a receipt book. Mark clearly on the receipt what month you are accepting rent for and what portion is late fees. The receipt book has carbon copy and numbered receipts. If there is a dispute in the future, this receipt book is your proof of what was or was not received. It would be best to collect online rent payment, but that could be difficult without a checking account. Another option is money order or cashiers check.

Just be careful because cash means your word against theirs.

Kenny Dahill · Answer

@William Shea, do yourself a favor and follow the lease agreement firmly.  Afterall, both parties signed and agreed to adhere to its terms.

A few thoughts/suggestions:

-  Send all notices according to the Lease, on-time.

-  Do not accept push rent payments if it's a consistent behavior.  One-time, I'll live with it.  Monthly, too much risk.

-  If you do decide to give them a break, still follow all the legal documents and processes.  Meaning submit the late notice and potential eviction notices.  By doing so, you're in control of whether to exercise your right or not.

-  Set higher standards for how you want to collect rent.  Cash is risky: in-person, no records, etc.  I'd use electronic payments so a) there's proof, b) easier on you, and c) if you use landlord software, it'll apply the late fees for you.

Process for collecting late fee and when to collect?

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