Tenant always late, what to do?

[Bob Romano]

My tenant has been in since Nov 2018. Out of the 4 months, he has been 15 days late for 3 months. My lease states rent is due on the 1st. It is late as of the 5th and there is a $50 late fee as of the 5th. He consistently emails me on the 10th saying he knows he's late and he will pay the rent ( including  late fee) in a few days. So im getting paid on the 18-20th each month now. How do I stop him from keeping paying me this late? This will be the 2nd 5 day demand of payment notice he has received in the last 4 months. He always pays me like 2 days before my lawyer goes to the courthouse to file for non payment of rent. I getting sick of it now. My lawyer says " your main goal is to make sure he pays, so if he is paying late and is paying the late fee each time, just take it and accept it . I don't like this idea . What would you guys do?

[Thomas S.]

The bottom line is whether you choose to operate as a professional business or as a sideline hobby. Those that prefer to avoid operating as a business are not pressed for money, in fact the income is not particularly important, which means doing nothing is easier than doing something. For a small time investor that basically dabbles with investing in rental property income they only see the late fees as a benefit. A benefit makes it easier to over look the inconvenience and justifies not streamlining their business. They will continue to believe the tenant will keep paying up to the day they don't. At that point in time they will hope to get paid, probably lose a couple of months rent then decide there only option is to evict. Turn over of every tenant is inevitable, putting it off places the decision in the hands of the tenant which reduces the operating decisions a landlord has to make.

A properly run business can not function in this manner but, aside from the concept of real estate  investing being a business, most prefer not to see it that way. The mantra "the less work the better" works both ways. Hobby landlords will avoid facing issues to avoid having to work their business and a business will follow strict enforcement of their lease to lessen their work load down the road. They know ignoring problems does not make them go away it makes them worse.

Additionally for a hobby landlord tenant turn over is far more expensive than for a business operation due primarily to lack of proper business protocol. It makes scenes they will opt to choose to keep a bad tenant over replacing them since replacing tenants is their greatest fear. Avoiding ones fears is far easier than having to face them.

[CJ Ashton]

Novice landlord here, but it sounds like I'm pretty heavy on my late fees.  $50 if not paid by end of day on the 5th, and then $50 each additional day it is late.  I rarely have payments late more than a couple of days, if at all.

Truth be told, I usually give them a break if they are up front on the communication.  Had one recently tell me ahead of time he would be 2 weeks late which entitled me to ~$400 in late fees.  I knocked it down to $200 which he gratefully paid.

[Ben G.]

@Bob Romano, I am in a similar situation, though not as extreme. My lease states rent is due the 1st, with a 5 day grace period. As soon as the grace period is up, I hit them with a 20% late fee (IL's highest allowable late fee) and I send out the Pay or Quit notice the same day.

I have had a tenant since June 2018 and she has paid on time only once or twice. All other times she pays during the grace period, and this month was her third time paying past the late fee/pay or quit deadline.

I'm not sure what your laws in Rhode Island say you can do, but in Illinois it works the same as what your lawyer is telling you. As long as they pay their rent balance (including late fee), you are stuck with them until the lease is up. Then you can simply just not renew the lease and they will have to leave. If they don't leave, you can evict them because they are staying there without a lease.

My recommendation is increase your late fee. You can't do it on this lease because the $50 is already instituted. But on future leases, get that late fee up to whatever the maximum is that your state will let you.

$50 bucks is cheap.

Hope this helps. Good luck!

[Ben G.]

Originally posted by @Irving Keighley:

Bob if you ask ur tenant why he is late it could be he gets paid every two weeks.

I have found this in the past and re wrote the lease to read rent is due on the 10th 

U have to pro rate for the 10 days 

Reach out to them and see if this is the case

 My personal opinion is that a lease is a lease is a lease. My mortgage is due on the 1st every month, and the bank doesn't care if I am lousy at budgeting. I would say the same thing would apply in this situation. If the tenant is lousy at budgeting and can't keep enough in their account to pay the rent on the 1st of the month then that is their problem and not yours (well, it is a problem for you, but you know what I mean). I wouldn't go re-inventing the wheel for them.

Now, if you are a nice person and don't have that many properties to manage, I'd say go ahead and revise the lease for them if you can. But the more properties you acquire, the more of a headache special treatment is going to be. It is a lot easier to give all your tenants the same treatment across the board.

[Jason Boulay]

Originally posted by @Bob Romano:

Can I add the new late fee to his existing lease or do i have to wait until his one year is up?

You can't change the lease terms in the middle of the lease unless you amend the terms and are both agreeable to it.  You'd have to wait until the lease is up.  I can't imagine he'd be agreeable to a higher late fee.

In Rhode Island, you do have the option to evict as the tenant loses their right to cure the 5 day demand if they have received two 5 day demands in a six month period.  Although I think a conservation of some sort is the best option before eviction as paying late has been established as an acceptable behavior.

[Anthony Thompson]

@Bob Romano you'll have to check your lease, but it likely says that any changes to the lease have to be agreed to by both parties. And if it doesn't, that might be implied anyway, that both parties would have to agree to changes. It's a good question for an attorney (which I am not).

You could try to institute a late fee policy after the fact, before the lease is up, by notifying the tenant, but until you can actually change the lease (when it's up for renewal) it will be an empty threat - I don't believe you'd be able to evict if the tenant didn't pay the late fees.

Further, I've been told in the past, and it seemed to be corroborated in the few evictions I've done, that in Rhode Island you normally cannot evict for unpaid late fees anyway - you can only evict for unpaid rent.

So it's important that, should you decide to use late fees, you specify in the lease that any funds received get applied FIRST to unpaid late fees, bounced check fees, etc. and only LASTLY to rent. That way, such fees effectively get paid first and you'll only be out at most one month of such fees (assuming you don't let late tenants drag on of course - always a good practice, not to do that).

Also I've been told that generally judges in Rhode Island consider a late fee that is 5% of the monthly rental amount to be reasonable, and anything above that to be unreasonable.

(And as a practical matter, you might think, always set it to be exactly 5% to maximize the late fees. That works until you have a ton of units and then it becomes a nightmare always trying to remember/re-calculate the late fee. Though I haven't tried Big Time Property Management Software to see if it will handle such a percentage. Generally though I'd say KISS and choose a "standard" late fee for all your units, just like you choose a standard paint color, to keep your life simple and manageable.)

Of course, the best thing you could do would be to consult whatever attorney you would eventually use to do an eviction with. S/he will certainly have an opinion about what you can do, because s/he will have to present that lease (and your rental practices) in court.

[Ryan McKelvey]

@Bob Romano

Does the tenant take care of the property? What class Property is it? If it is a C class property and consistently late but keeps the property clean and communicates then hey looks like you are getting an extra $50 every month.

On the other hand why is the attorney filing for nonpayment of rent instead of breech of contract due to continuous late payments. He’s been late at least three months and a pattern has been established. I understand many states are different, but in North Carolina this is enough to warrant an eviction.

[Bob Romano]

@Ryan McKelvey It is a Class B property. He is responsible for upkeep.  He' s only been in since Nov 2018, so he didn't have much to upkeep  since its the winter. I will be filing this week to evict. I am done with his lateness and I can get that place rented quickly being Spring is around the corner and its in a great neighborhood.

[Bob Romano]

Update: We went to court last week. The tenant did not show so I thought I had a slam dunk case to evict. The judge saw we served him properly, sent the notices as by law, and at the last minute, the judge dismissed the case because in my 5 day demand letter I tried to get the $50 late fee in with the back rent and the judge said I cant do that. I can only get the back rent without the late fee! I tried to argue that it does not say anything about that in the Landlord handbook and at this point i just want the property vacated, but she didn't want to hear that and she dismissed the case. Now I have to wait another month for him to be late and start the process over again. WTF!!! The tenant just paid his April rent and low and behold, it came back insufficient funds, so the 5 day notice will be mailed soon.

[Caleb Heimsoth]

@Bob Romano best to have an attorney do these things so that doesn’t happen

[Theresa Harris]

@Bob Romano  Sorry to hear that.  If the April rent cheque bounced, hopefully you can get him out sooner AND you get a different judge.

[Bob Romano]

I was with the attorney! He’s never heard of that either he said. Must be a new clause because he was the one to argue that it wasn’t in the handbook. 

[Caleb Heimsoth]

@Bob Romano I imagine NH is pretty tenant friendly if you just got bad luck on this one

[Bob Romano]

Update: We are going back to court May 7th to get this bum out. I know he won't show again, so I'm hoping I will win by default. Will keep you updated.

[Bob Romano]

Update: I won by default, I lined up the movers for Wed to evict. I can't wait to see the expression on his face.

[Anthony Rosa]

Your lawyer is right. The tenant pays the rent late with the late fee, there is no problem.  The tenant is within his "late payment guidelines" Luckily, you get the payment with the late fee and no riff raff,  it could be a lot worse.  Would you rather lose that tenant and take a chance on a new tenant that you may have to evict?  

[Bob Romano]

Update: Bad tenant is out! I had the sheriff literally wake him up out of bed and made him move out. I have a new tenant within 2 weeks and she loves the place! I learned a lot from my first eviction, no I know what to do. I'm glad that the first eviction is behind me now and looking forward to the new tenant for many years.