What to do when rent is late and when is it late?

Question

Hello,

I have just purchased a six unit last month.

Rents were due on the 1st. I have installed a rent drop box on the first floor and passed out a letter to all of the tenants to deposit checks in their.

I check the box yesterday and 0 checks were there.

According to their rental contract, rent is due on the 1st but they have a week to pay before late charge kicks in.

What do you think I do at this point?

Should I wait for the rent to come in by the 7th or should I go in there and individually ask each tenant why they haven't made a payment?

Any ides would be great,

Thank you!

Account Closed · Answer

Mark, I have to say, that having a rent drop box in the building that you rent out is asking for trouble.  It won't be long before someone finds a way to get inside that little box,  and take all that wonderful money.

Get a Post Office Box and have the tenants send their rents to your Post Office Box.  So many Landlords treat tenants like babies instead of like adults.

Our homes cost us hundreds of thousands of dollars, and yet we don't expect the tenants to even have the knowledge or the capability, of putting a check in the mail and getting it to us on or before the due date.

A lease agreement is a Contract with a due date.  If tenants don't have their  rent in my office on or before the 1st of the month I send them a Notice to Quit.  During the signing of the lease I go into great detail about how rent should be paid and how and what will happen if the rent is not received in my office at that time.

Time is of the essence when you are a landlord.  You can't even file for an eviction until that Notice has been sent to the tenant that their rent is late.  I explain all this very nicely with the tenants at the signing of the lease.  I tell them that the Notice to Quit will be sent if rent is not in my office on or before the 1st of the month, but don't be offended because it's just a notice.  It doesn't become a legal document unless you (they)  don't pay their rent and I have to file it in a court of law.  But up until that time, it's just a notice.

I tell them what they should expect from me as their landlord, that I will take care of their repairs immediately within 24 hours for emergency and for minor repairs, in the order the work order has been received.  And I tell them what I expect from them.  I build a Landlord/Tenant Relationship.  When we have understanding of what each others roles are, it prevents chaos.

I choose tenants by doing a credit checks.  I choose tenants who are collectible.  I choose tenants who pay their bills on time.  Therefore, I expect them to pay their rent on time because I felt and feel  they are responsible, and that means they are capable of getting their rent  in the mail in time.

I refuse to pickup my rents from them, when my time is busy. If I can pay my mortgages, my bills, take care of rentals, go to court to do evictions, paint houses, take care of my work crew, and take care of the finances, then, they certainly are capable of sending me their rent in the mail, plain and simple.

I don't reward tenants for paying their rent on time.  My mortgage company doesn't reward me when I pay my mortgage the day I receive the bill.

Being a landlord is not like any other business.  No other business trust their investments that cost thousands of dollars to another human being and hope they keep it in as good a condition as they obtained it.

Not only that, but no other industry, other than doctors are responsible for other people's lives like we are.   We are responsible for the lives of everyone who lives in our homes.  Building Codes, falling down stairs, gas leaks, fires, and are held accountable.

We have to fight for our rent, go to court to get our money, and wait months to receive a judgment if we are awarded one at all.  And yet, we are looked down  upon by the media, and sometimes even our family and friends.

How many times have we sacrificed our money and time, and family time, and worked ourselves to the bone, fixing up a house, over and over again, because a tenant destroyed it, and yet we get no sympathy, nor do we want it.  Just some respect.

Is it too much to ask, that after all this, that our tenants at least get off their butts, walk down to the mail box and send us that check, without us having to pick it up for them or provide a drop box.

Nancy Neville

Account Closed · Answer

@Mark Malevskis

Going forward, I would revise the lease to state that rents must actually be "RECIEVED" on or BEFORE the 1st of the month.  Also, include that the definition of RECIEVED is that they are actually posted to your bank account.  That way tenants can't claim it takes their bank 3 days to process, so they're off the hook.

The other thing you can do, which I did for a while was provide a "good tenant discount" in your lease agreement.  When you advertise the listing, include in the listing and your lease agreement that "rent includes a $20 good tenant discount" if all rents are paid ON or BEFORE the 1st of each month.

Aly W. · Answer

Brilliantly stated, @Nancy Neville! I agree completely. I actually felt comforted by what you wrote, especially about how we trust our investments to almost total strangers, receive no financial rewards from the banks we borrow from for being timely payers, and repair properties over and over again. We're in business, and this is our livelihood and retirement, but we're often seen as villians for insisting our tenants abide by the rules. I'm going to print out your post :)

I also have "the rent talk" with the tenants at lease signing. I actually go over the lease by phone prior to signing, and then reiterate the rent payment process and what happens when it's not paid on time, and what my landlord obligations are. They initial each page of the lease.

The lease does say the rent is due on the 1st, considered late after the 3rd with cumulative late fees, but most tenants almost always pay on the 1st. If a Pay or Quit Notice has to be posted, the lease states they will be charged a service fee, which is considered additional rent.

If I don't have the rent in my business account at the bank by the 2nd, they get a text to remind them. I don't take checks, and nothing is mailed, ever. TD Bank is open almost every single day, so that's almost never an excuse. For those tenants who use www.erentpayment.com, the rent is auto-debited on the 1st, and they need to make sure the money is in their account. If it bounces more than once, they will have to pay at the bank going forward.

It's very true that most people will hold onto their money as long as possible; I don't pay bills more than a day or two before they're due, although I know people that pay the day they get them. But if a tenant has a one week grace period, they will almost certainly take it.

Account Closed · Answer

@Mark Malevskis

@Jon Holdman

Yes, it's human nature, especially of those who are financially responsible to not pay until you're required to.  So you better believe when I owe a bank $$$, I use my FULL grace period.  It is unreasonable for you to expect your tenants to do anything differently.  So if you'd like them to, I would suggest proving an incentive (ex. "good tenant discount").

Steve Vaughan · Answer

I wouldn't be too worried about 0 checks being in there on a Saturday.  Hopefully the previous owner provided you accurate rent rolls so you kind of know what to expect.  Definitely be on them the day after the late date.  My late date is after the 5th.  I had a drop box at one of my multi's once.  Someone fished em out one month about 2 yrs in.  No $ lost except for a few stop pmt re-imbursements to banks but what a pain.  Changed to giving the residents deposit slips to put in the local little bank down the street.  Small town, small bank that doesn't mind even if the tenant doesn't have a deposit slip.  If that's possible for you, it's working great for me.  They can use cash if they want to and they get a receipt from the bank directly.  I see online who deposited what basically in real time.  17 less units of pick-ups, cash, envelopes, receipts and deposits to make!

Account Closed · Answer

@Mark Malevskis

I would suggest honoring your lease agreement, but you might send a "courtesy email" notifying them that the rent was due on the 1st and late fees will be charged if not received by the 3rd.

Joel Owens · Answer

Hi Mark,

Before buying this property you should have had a chance to review the leases. If it showed the landlord gives them 7 days to pay it without penalty before being in default then what do you think most tenants will do??

They will pay electric, cable, cell phone, etc. that is fixing to get cut off THAT DAY and say they have 1 week to pay the rent. People want to hold cash as long as possible no matter who they are. My mom's friend owns 40 trailers. She waits until she has errands to run and pays the electric the very last day it can be paid.

The question that should have been asked before buying is if you as a landlord having a mortgage can go seven days into the month when the mortgage is likely due on the first and still be okay?? If all do not pay by the 7th and pay even later you are mid month with maybe 75% of the rents collected. You need to define your breakeven occupancy after down payment if you have a mortgage. Is it 2 of the units paying, 3, 4 ??

No legal advice.

Jon Holdman · Answer

My tenants pay by direct deposit or by Chase quick pay.  I also have paynearme set up, but none are currently using it.  The requirement is I have to see the money by 9:00 PM on the 1st for the discount to be effective.

Yes, it shouldn't be necessary.  However, I too get stressed if I'm past the 1st and the rents aren't paid and I've not heard from the tenant.  This is enough of an incentive that the rents are almost always paid on the 1st.

Jarrett Harris · Answer

Hey Mark I just noticed you are in Addison. I used to work out that way. Anyway I give my tenants a 5 day grace period. Yes your tenants know their rent is technically not late yet because there are no penalties at this point. In the future you may want to shorten your grace period per the law. I am in cook county. Things are probably different for you in DuPage county.

Nicole A. · Answer

I somewhat disagree with a discounted rent if paid on/before the 1st. Firstly...it is too much to keep up with than you already have on your plate..and sets up for disagreements. What if you don't check the box that day?

Also, they're adults. The amount is the amount and that's it. You just know in your mind that just because the lease says rent is due on the 1st, what the renters read is it's not late until the 6th (or whatever day you have)...so that means, rent is due on the 6th! Just expect your money by that date.I second having another way to pay rent...especially if anyone is putting cash into the box. Even if no one is putting cash in, others might assume there is and break into the box. Have them mail it...or offer the PayNearMe service...or an online service to pay...or go to your bank and deposit it.

What to do when rent is late and when is it late?

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