Investor · Austin, TX · Member since 2013 · 113 posts · 30 votes
Hi BP,
This month I have had my first late rent (two tenants, actually). I sent a firm reminder email right after midnight asking if everything was OK and summarizing the lease's late fee schedule.
This morning, one tenant responded:
Some background: A property manager put this tenant in place over 2 years ago. The lease was renewed after the original lease expired. After renewal, I decided to start managing the property myself. I gave the tenant bank direct deposit info to pay rent directly into the bank so I didn't have to deal with postage (or hopefully bounced checks). I can't find my notice where I informed them of the new payment method
Can anyone suggest a reason why this might be valid? I will be asking for clarification about why the tenant thinks this and I will consult my attorney, if needed to clarify.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
12y
Sounds like BS. If there are insufficient funds, the tenant can't reasonably expect that they paid on time and in full. Also, if the tenant originates the payment, then the tenant could take their sweet old time (seems like this one is) and initiate the transaction later than the due date.
Now, if the landlord is supposed to initiate the transaction, then the landlord could do that late in order to collect extra in the form of late fees; I'd say this is the specific circumstance where a late fee would be a problem. Sort of a conflict of interest.
Lastly, you should address some of the points in your lease wording so that you avoid this in the future.
Real Estate Investor · Tulsa, OK · Member since 2013 · 31 posts · 20 votes
12y
No legal advice and I am not familiar with Texas law.
I assume by your post that they are to make the deposit into an account and this is not an automatic withdrawal setup by you. If so, he may be getting the two processes confused. If it was an automatic withdrawal from his account and the transfer occurred on the date that it was to happen then I would speculate that this is the date you agreed to accept the monthly payment, regardless of whether it is before or after your cutoff, and you cannot charge late fee. Although, if the transfer did not occur on the proper date because of an NSF account, then I would think a late fee and any NSF would be proper.
However, if they are to the party responsible for making the deposit/payment into the account on the date of their choosing and they fail to do so, then I would think a late fee is proper.
I would suggest that you reply that you cannot find any authority that states your late fees are voided or invalid and if he has some authority then you would be happy to review it. Otherwise, you feel the late fees are valid and enforceable and if you don't receive full payment including late fees on or before [date] you will be forced to ________________ i.e. use any legal action your are entitled up to an including giving him notice, eviction, send it to collections. Then see what he responds with.
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
12y
I don't see how changing where/how they pay rent makes the late fee clause invalid. Sounds like BS to me too. I'm not sure about in your county, but in mine, they strongly suggest you have verbiage that says late fees are treated as "additional rent". Although not all judges have looked at my lease to verify this.
Anyway, you could let them know they either pay the late fee or they will have to also pay court fees when you file for their rent court (and win).
Investor · Austin, TX · Member since 2013 · 113 posts · 30 votes
12y
Thanks for the replies, all!
The tenant has pointed to a clause in the lease which says "...postmarked by the third of the month..." which she says doesn't make sense in the context of a direct deposit. This is language left over from the property manager that I must not have caught when I took over. I will work on amending that out of the lease.
For the record, the tenant arranges the deposit, not me. I can see how late fees could be problematic if I debited the tenant's account. This tenant and her family have been in the house about 2.5 years. This is the first late payment I've seen (or heard of) from her in that time. She claims an out-of-state death in the family and I have no reason to disbelieve her.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
12y
The reason that the postmark is used: Landlord gets mail on time but says it is late to get paid extra. Or landlord does receive it late but tenant insists it was on time. How to prove that - burden of proof - is the issue. Of course we receive many pieces of stamped mail that have never been postmarked, so that is another complication.
Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
12y
This is not legal advice....just my opinion.
I think the issue here is the lease says one thing and you claim to have told the tenant a completely different way to pay rent but have no evidence of that. If it came down to going to court my guess is that the court would end up siding with the tenant. According to the lease the tenant can drop a check in any mail box as long as it's postmarked by the 3rd without a late fee. Now they have to go into your bank and stand in line to make a deposit. They are confined to specific bank hours and locations rather than dropping a check in a mail box at a time that is covienient for them.
It's not the same as just giving the tenant notice as to a change of address for the check, you are now requiring a specific payment method different than what's in the lease. You stated this was done for your convenience and obviously not for the tenant's. The time to make these changes as when the lease is signed (or renewed) not in the middle of a lease.
If you're so worried about bounced checks and postage then why not use an online rent payment system? There's a number of them that range from $1-3 per payment and it's way easier for the landlord and the tenant. I use erentpayment (one of the more expensive at $3) and the tenants can setup recurring payments on certain dates rather than having to mail a check or drive to a bank.
I see what you're saying, but she has been paying to the bank for the last several months without issue. In fact, I gave this tenant the option of a P.O. Box, which I also checked before sending a "late payment" email. I did get one check that way since I got rid of the property manager.
Another tenant previously was required to drop her payment directly at the property manager's across town. She was thrilled to have the option of several more convenient bank branches.
The tenant herself does not dispute what the payment method is. Only when/whether late fees ever apply for that payment method. In any case, I plan to amend the lease to clarify this confusion.
Postmarks also don't help on days where the post office doesn't deliver. (For example, a Sunday followed by a holiday Monday).
Thanks for providing those specific resources and for your perspective.
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
12y
In CA, we used to offer our tenants several different ways to pay. I would be very careful about demanding any tenant pay by direct deposit into a bank account. That is a sure fire way to potentially end up on the wrong end of an ADA lawsuit because it places a hardship on the tenant. We gave the option to mail it (even though it was collected and logged at the same building location) or walk it up to the manager's door and put it through the slot.
I can't comment on TX law with respect to late fees but when we went to court for judgements/possession in CA, we would back the late fees out because the judge would dismiss and make us refile without them. It was his view that they were additional rent, and thus not enforceable. We still collected them whenever we could in all other situation though.
Investor · Austin, TX · Member since 2013 · 113 posts · 30 votes
12y
Hi @Account Closed , I believe I can amend the lease if the tenant agrees (and she would like it to be clarified on this point). I have waived the late fee since she paid promptly today (1 day late). Fortunately, my business model is not contingent on collecting fees.
Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
12y
Sounds like a slick tenant....if she's always been timely and there has never been a problem, give her the benefit of the doubt this time and waive the late fee. You can certainly amend the lease if both parties are agreeable to it and you may wish to do an amendment with this particular tenant. I believe a local magistrate would interpret the day-3 postmark as also meaning she'd have til the 3rd to get the payment in the bank. We have late fees in all of our leases but rarely apply them.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
12y
The only problem with a tenant claiming it was postmarked by the due date .........The LANDLORD has the envelope with the postmark on it , I dont save envelopes .
Thats why I take post office money orders , the date is on the money order . If they buy it late , its late , If they buy it early they have no benefit in waiting to get it to me .
Rental Property Investor · Houston, TX · Member since 2013 · 74 posts · 40 votes
12y
Once rent is late only the full amount will be accepted including fees(that's what my leases say) anything less with be returned and the rent is still late and not recieved. Postmarks, delays, weather, method, etc do not excuse the tenant fulfilling their obligation and paying on time.
Serve notice to pay or get out. It's your business, your the boss, the customer is not always right and definitely not the tenant!
This tenant thinks they are smarter than you and will begin pulling all kinds of BS from the
professional tenant academy.
Rental Property Investor · Houston, TX · Member since 2013 · 74 posts · 40 votes
12y
Your business model should be based on enforcing the contract your end and theirs. If it is not enforced it might as well blow away in the wind and just run your business on a handshake.
SFR Investor · Dallas, TX · Member since 2011 · 604 posts · 243 votes
12y
The person hasn't been late in 2 1/2 years, says they were out of town due to a death in the family, and you are worried about late fees?
Please send them to me, I'll happily put them in a house,,,sound like a good tenant, I would tell them what happened was automated and of course you wouldn't charge late fees because of their history and the situation they were in.
I don't want to win every battle, I just want to win the war,,,,I would never bring up the mention of late fees being right,,,just drop it unless it is a problem going forward
Las Vegas, NV · Member since 2014 · 1 post · 0 votes
12y
not legal advice or an attorney-
but many states do not allow late fees as a penalty - they can however reflect liquidated damages to the landlord to handle and process a late payment and the expenses incurred to collect the late payment. so the language in the lease agreement should reflect that.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
12y
Exactly as @Chris Masons says. Have an attorney in your state that's skilled in landlord/tenant law write your lease - because they will be defending it in court. Ask me how I know ;)
I can't comment on TX law with respect to late fees but when we went to court for judgements/possession in CA, we would back the late fees out because the judge would dismiss and make us refile without them. It was his view that they were additional rent, and thus not enforceable. We still collected them whenever we could in all other situation though.
I've spent a couple of mornings in UD court in one of my California farm counties a couple of years ago. It was edifying (and totally news to me) how judges view late fees. Landlords must treat non payment or late payment of the late fees just like un-paid rent. Which means essentially filing a quit or pay and UD every time the tenant pays late but fails to include the late fee. So you'd have to file a quit or pay for a $25 late fee. The judge in my court didn't make anybody re-file. He just re-did the judgment math without the late fees. Every single time.
The take-away for me was use it or lose it. File a timely quit or pay every single time the rent and/or the late fee is not paid in full. To be honest, that's pretty good tenant training (not to mention landlord training), and should be considered a best practice anyway.
Nanticoke, PA · Member since 2014 · 6 posts · 0 votes
12y
Years ago I eliminated late fees in my leases and changed to "discounted rent" if paid before the 1st of the month. This "discounted rent" equalled what the normal rent would be and the discount was earned by paying on time. Paying late meant you lost your discount - not a late fee. Even tenants paying late didn't blink twice at paying the non-discounted rent.