Rental Property Investor · League City, TX · Member since 2016 · 97 posts · 32 votes
Hello BP. I currently self manage my properties using Buildium and I love it especially the resident portal and ability to accept ACH rent payments. Recently after over a year of succesful payments a tenant payment was reversed for insufficient funds, according to buildiums (R01) return code, but they are certain the funds were available. An NSF Fee was charged as well as additional daily late fees. There was a direct deposit on same day as the payment which would have made the balance enough to cover the rent payment. Her bank says that the deposit was there in time and there was no sign of a withdrawal attempt or rejected payment. Has anyone ever had this type of an issue and if so how did you resolve it? What proof If any can I request from the tenant to prove this? Thanks in advance.
I’ve definitely seen this, or rather one part of the bank saying it should be fine and the back office part having a different trip wire for return.
Doesn’t mean the tenant didn’t cut it awfully close but I’d let it go as long as it was resolved immediately and the tenant paid any overdraft fee. Treat it as you would a processing error from a valued vendor and u are in a good spot.
However, I’d be on a sharp lookout for any signs of a deteriorating situation.
Thanks for your response @John Underwood The bank is saying that her deposit posted on that day but not verifying the end of day balance. Forte payment system explained that it would not have processed until 6PM CST so it is dependent on balance at that time. Has anyone experienced a transaction being wrongfully reversed by there payment system?
I’ve definitely seen this, or rather one part of the bank saying it should be fine and the back office part having a different trip wire for return.
Doesn’t mean the tenant didn’t cut it awfully close but I’d let it go as long as it was resolved immediately and the tenant paid any overdraft fee. Treat it as you would a processing error from a valued vendor and u are in a good spot.
However, I’d be on a sharp lookout for any signs of a deteriorating situation.
Our company, Smart Property Systems used to use Forte for payment processing of rents. Most banks pull payments at midnight and also credit payments into the account just after payments are pulled. So if the payment did not process until midnight but Forte pulled the payment at 6PM (they used to pull ours at 4:30 PM until we changed to to midnight for the reasons listed above) there were occasionally failed payments that the bank would have not known the reason why. That may be what happened to your tenant's payment. In this case, I would recommend that you inform your tenants of the fact that payments made are pulled at 6 PM instead of the usual midnight closing so they should have funds available the day ahead going forward. Forte pulls the payment on the last grace day that is allotted to Buildium. (Ours was 3 days for ACH.) You probably know that because you can see the day that the payment comes into your account. If not I suggest that you call customer service to find out. Grace days are the number of days the processor holds the payment to hear back from the bank or not as to whether there are sufficient funds to cover the transaction. This information is also important to give to your tenant(s) so that they can plan and manage their payments accordingly.
I would agree that the best way to manage this situation is to forgive any late fee incurred and eat the NSF fee as well this one time.
First, your tennant is valuable, even if they are getting their deposit in at the last minute. Vacancies are expensive and destroy your cash flow. You need a compelling reason to dump a tenant. Specifically the tenant needs to be costing you more than the vacancy is going to cost you. Make sense?
Second, stuff happens. Water heaters need replacing, bank errors occur, tenants move out, real estate bubbles happen, etc. Complaining, or (overly) worrying, about these things is counter-productive. Just do what needs to be done to rectify the situation, and proceed to the next issue. My wife and I got this piece of advice early in our investing career and, to this day, we both look at each other and say "NEXT" in unison whenever one of these myriad annoyances occurs.
Tenants lie. It is not your responsibility to be a detective and determine why. I would simply tell the tenant that their rent wasn't paid on time. If the post office loses their check next time, is that your responsibility? My lease states I am not responsible for collecting the rent, the tenant is responsible in making sure I receive the rent.
I had something similar happen in September. We use Cozy for rent and the tenant changed their account when they paid the rent, so I received it 3 days late. I charged them 1 day late rent fee and asked them to make sure any new accounts are verified prior to the 1st in the future.
If these have been great tenants with zero payment issues for over a year I typically give them a one time "get out of jail" card for a single late payment....one time only. Especially if there is reasonable evidence that there was some glitch I cant full prove one way or the other....not worth the fight over a few $$ for a one time issue. They just need to be made aware its a one time deal.....they need to work out whatever issue with the bank about having the $$ available when rent is pulled. Not my problem to solve...
@NaTarrio Jones
After having this occur to me too, I’ve since written in changes to my leases. if after 48 hours of “bank hold” or NSF on end of tenant, and timeframe is already beyond grace period, late fee or returned chk fee gets applied. Our lease reads rent must be “received” and I should probably change to “received, cleared, and credited “
I have had similar situations. I always charge the tenant what ever is owed whether it be late fee, NSF or what ever. I prefer to keep all my dealings strictly business, no personal decisions when ever avoidable. My lease says late is late and fees apply. It is not my problem and not for me to figure out who is wrong. I advise they take it up with their bank and make sure they tell the bank the costs they have incurred.
Surprisingly good tenants always seem to take it in stride and the PITA tenants always get upset when I impose a fee. Like they are POed I don't believe their lies.
Late is late, I am not a social worker and don't care why. A contract is a contract and as soon as you start ignoring that contract you are on a slippery slope.
Thanks for you responses @Timmi Ryerson@Jonathan R McLaughlin@Thomas S.@Ned J.@Renee Potoczny@Anthony Wick@George Pauley Update: I requested that she furnish proof from her bank showing that the funds were available and remained sufficient through the processing period. Initially she stated that the bank told her it was a breach of privacy for me to request a statement from her and it was illegal. After submitting edited transactions and other inadequate proof I simply stated that the all charges were valid, but we were willing to review any information she chose to provide as proof. I also informed the tenant that the past due balance needs to be paid immediately or we would take legal actions per lease agreement. The full balance including all daily late fees and NSF Fees were paid just days later.
@Timmi Ryerson I did contact Forte and it turns out that payments process the next business day after it is made. The tenant's balance did actually fall below the payment amount on this day. Also note that we have waived a previous NSF fee as well as daily late fees for this tenant as a courtesy in which we made sure she understood it will not be granted again. So we had to be firm.
So, the tenant lied to you. That happens. And, it sounds like you gave them a chance in the past. I don't mind that, but I love the fact that you charged the late fee this time. One of my tenants asked for me to hold their check two business days before cashing. They asked ahead of time. I told them I would give them this one time courtesy. They have never been late again. But, if they are, it's $20 a day, up to $100 a month.
@naTarrio Jones. I think you did the correct thing here. Since we all have had a long history of listening to the excuses some tenants use because they used their rent money for something else and got caught, this is not a new scenario. Your goal is to get paid and not have this happen again. Hopefully, knowing that the fees will no longer be waived in the event of another NSF payment, you may have convinced her that she cannot get over on you. I do hope that you also charged a late fee as the rent would not have been received on time. That action further supports the training process for getting tenants to pay on time.
Finally, I am glad that you called Forte and learned that you can now do that right away to find out what actually happened. I recommend that you do that in the future. Your rent processing company, over and above your software company for property management can be a real asset.
Hello BP. I currently self manage my properties using Buildium and I love it especially the resident portal and ability to accept ACH rent payments. Recently after over a year of succesful payments a tenant payment was reversed for insufficient funds, according to buildiums (R01) return code, but they are certain the funds were available. An NSF Fee was charged as well as additional daily late fees. There was a direct deposit on same day as the payment which would have made the balance enough to cover the rent payment. Her bank says that the deposit was there in time and there was no sign of a withdrawal attempt or rejected payment. Has anyone ever had this type of an issue and if so how did you resolve it? What proof If any can I request from the tenant to prove this? Thanks in advance.
IMO drop it. Bank has said the money was there. So has the tenant. If the tenant has paid every time on time with no issues it’s a simple mistake probably a electronic timing glitch. What I learned is sometimes the most mild mannered people get upset over the smallest things. Then it starts eating at them. You really wanna lose a good paying tnpenant over a few hundred bucks? I wouldn’t even blink when I called the tenant and said let’s forget about this little misunderstanding.
In the 24 years I’ve done rentals I think I charged two late fees. And that was simply because I got tired of the excuses. I had a few instances where rent was late for some reason or another. I have great tenants. Once in a while it happens they don’t get the rent in on time. They call and tell me. It happens. I’m not gonna sweat a tenant for $50 when theynpaid the whole year on time. People do make mistakes.
My late fee clause is there for the habitually late payer. Not the guy who once every 12 months is a day late.
Thanks for your response @Rob D. The matter has been resolved. The tenant has paid all fees. This was not an instant where a great paying tenant had one NSF. We typically will waive a fee for a tenant as a courtesy with good reason however we are already past that point with this tenant. We have waived several fees in the past even though the excuses then weren’t the best. We are beginning to see a pattern of a priority shift with a once automatic paying resident. At some point we have to ensure they realize that this a business and we have to run it as such. Nothing personal. Also that they are responsible for prioritizing their finances. For instance if they chose to pay their cable on time instead of their rent, it’s their decision but it comes with consequences clearly spelled out in our lease agreement. Sometimes even good tenant needs to be brought back a on track. This was the case here.
Thanks for your response @Rob D. The matter has been resolved. The tenant has paid all fees. This was not an instant where a great paying tenant had one NSF. We typically will waive a fee for a tenant as a courtesy with good reason however we are already past that point with this tenant. We have waived several fees in the past even though the excuses then weren’t the best. We are beginning to see a pattern of a priority shift with a once automatic paying resident. At some point we have to ensure they realize that this a business and we have to run it as such. Nothing personal. Also that they are responsible for prioritizing their finances. For instance if they chose to pay their cable on time instead of their rent, it’s their decision but it comes with consequences clearly spelled out in our lease agreement. Sometimes even good tenant needs to be brought back a on track. This was the case here.
Ok. That makes sense. It sounded like it was a one time only deal from the original post, but it doesn’t seem to be the case. As in your case my late fees would apply also if the tenant was habitually late. But for a one time I usually waive the late fees.
Thanks for you responses @Timmi Ryerson@Jonathan R McLaughlin@Thomas S.@Ned J.@Renee Potoczny@Anthony Wick@George Pauley Update: I requested that she furnish proof from her bank showing that the funds were available and remained sufficient through the processing period. Initially she stated that the bank told her it was a breach of privacy for me to request a statement from her and it was illegal. After submitting edited transactions and other inadequate proof I simply stated that the all charges were valid, but we were willing to review any information she chose to provide as proof. I also informed the tenant that the past due balance needs to be paid immediately or we would take legal actions per lease agreement. The full balance including all daily late fees and NSF Fees were paid just days later.
@Timmi Ryerson I did contact Forte and it turns out that payments process the next business day after it is made. The tenant's balance did actually fall below the payment amount on this day. Also note that we have waived a previous NSF fee as well as daily late fees for this tenant as a courtesy in which we made sure she understood it will not be granted again. So we had to be firm.
Wow! She doesn't even "get it", smh. Of course she doesn't have to show you that proof. But the late and NSF fees aren't getting waived without it. Her choice. Per your update, I realize she was in the wrong anyway and paid the fees. However, her trying to turn the favor you were doing her into a "you're the bad guy" is laughable.
I have had similar situations. I always charge the tenant what ever is owed whether it be late fee, NSF or what ever. I prefer to keep all my dealings strictly business, no personal decisions when ever avoidable. My lease says late is late and fees apply. It is not my problem and not for me to figure out who is wrong. I advise they take it up with their bank and make sure they tell the bank the costs they have incurred.
Surprisingly good tenants always seem to take it in stride and the PITA tenants always get upset when I impose a fee. Like they are POed I don't believe their lies.
Late is late, I am not a social worker and don't care why. A contract is a contract and as soon as you start ignoring that contract you are on a slippery slope.
hey, just letting you know it’s 2023 and everyone hates slumlords. get your money up broke boy