Should I renew a habitually late tenant that pays the late fee?

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Should I renew a habitually late tenant that pays the late fee?

Amy W.
Member since 2018 · 10 posts · 12 votes

I currently manage 8 rental properties in Grand Rapids, MI and all of my tenants habitually pay on time except one. I've had her as a tenant for 9 months now and she has only paid on time twice. Her credit wasn't terrible nor awesome, but it was all due to medical bills and student loans that she makes regular, monthly payments toward with something like 97-98% on-time payment history. Her lease end is coming up and I have to decide whether to offer her a renewal or not (I'm pretty confident she'll stay if I do).

My issue is this: I send a notice end of day on the 4th if rent hasn't been received. I have never made an exception on this for her ever so it's not like I allowed bad habits to form. She typically receives this notice on the 6th and the weird thing is, she pays the rent along with the late fee that very same day. Usually within an hour of mail delivery time at that house. Once I have reached the point of sending a Pay or Quit and she paid the same day and thanked me for the reminder, haha! She deposits rent to our bank directly, but I have offered her free ACH payment options and Pay Near Me. I've also offered to align her rent payments with her paycheck schedule, but she always politely declines. I don't want to send a reminder before rent is due, because that's the same amount of time for me as sending a late fee notice (only an hour or so in total, but still), but with no late fee to compensate the time. Also, I don't do that for any other tenant so it would feel preferential. 

Would you offer her a renewal? Should I offer a renewal, but just up the late fee? ( 4.25% of rent currently) I like to charge late fees that tenants can actually afford so that I actually receive them when necessary. 

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Stephen Akindona
Investor · Memphis, TN · Member since 2013 · 741 posts · 845 votes
7y

You should try and automate your system. would this tenant pay in the same manner if you sent her an email instead? There is software that is FREE, that will email tenants when they haven't paid by a certain date. 

Think about your bottom line when making these types of decisions. How much will it cost to turn the unit? How long will it take to re-rent the unit? Is it worth the cost to do that work to get a new tenant who will pay 2 days sooner?? In my opinion it is not! She is paying every month on the 6th then just keep her paying on the 6th. 

Most definitely up the late fee!

46Reply
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  • Christine Kankowski
    Real Estate Broker · Temecula, CA · Member since 2014 · 992 posts · 782 votes
    7y

    I would up the late fee, the steeper it is, the more motivation she has to pay on time. 

    16Reply
  • Tyler GibsonBusiness Member
    Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    @Amy W. I would increase the late fee some and make sure she is aware. I would also pre print the late notices for the next 12 months have them stuffed in an envelope waiting for a stamp. Habits die hard and I doubt she will miraculousley start being on-time. 

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    14Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    7y

    @Amy W.

    This sounds more like the sort of hands-off policies used to run A or B-class housing at a distance, not the C/D units I run, but still, let me ask. During the entire lease period last year, did you talk to this tenant about her problem behavior? Did you pick up the phone and exchange a few direct words with her to determine the situation better and ascertain why this was happening or if it could change?

    13Reply
  • Patricia Steiner
    Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
    7y

    My recommendation would be NOT to renew.  Rent is due on time.  (And, that's a period after that sentence).  Find yourself a tenant who won't need a notice before paying you.  You deserve nothing less. 

    10Reply
  • Amy W.
    OP
    Member since 2018 · 10 posts · 12 votes
    7y

    @Christine Kankowski Thanks!

    @Tyler Gibson Lol, I actually started pre-printing notices and envelopes for a few months at a time once she paid late the 2nd time (her 3rd month of tenancy). I definitely don't expect her to suddenly start paying on time! I just don't know if she's worth keeping when I successfully get all of my other tenants to realize I stick to the lease from day 1. 

    0Reply
  • Amy W.
    OP
    Member since 2018 · 10 posts · 12 votes
    7y
    Originally posted by @Jim K.:

    @Amy W.

    This sounds more like the sort of hands-off policies used to run A or B-class housing at a distance, not the C/D units I run, but still, let me ask. During the entire lease period last year, did you talk to this tenant about her problem behavior? Did you pick up the phone and exchange a few direct words with her to determine the situation better and ascertain why this was happening or if it could change?

     I would call this a C-class unit. I've spoken to the tenant both in person and on the phone. She says that she just forgets, and I honestly think that's part of it coupled with the fact that she just has poor organization skills, because like I said, she usually pays the same day she receives a late notice. I don't feel like I can offer too many suggestions to her about what to do (cross the days off a calendar, set a reminder in your phone...) because I don't do that for any other tenants.

    3Reply
  • Amy W.
    OP
    Member since 2018 · 10 posts · 12 votes
    7y

    Thanks, @Patricia Steiner! That's how I feel, especially because ALL of my other tenants are trained to pay on time, but was torn because of the fact that she always pays the fee without asking for an exception. 

    0Reply
  • Stephen Akindona
    Investor · Memphis, TN · Member since 2013 · 741 posts · 845 votes
    7y

    You should try and automate your system. would this tenant pay in the same manner if you sent her an email instead? There is software that is FREE, that will email tenants when they haven't paid by a certain date. 

    Think about your bottom line when making these types of decisions. How much will it cost to turn the unit? How long will it take to re-rent the unit? Is it worth the cost to do that work to get a new tenant who will pay 2 days sooner?? In my opinion it is not! She is paying every month on the 6th then just keep her paying on the 6th. 

    Most definitely up the late fee!

    46Reply
  • Amy W.
    OP
    Member since 2018 · 10 posts · 12 votes
    7y

    Thanks, @Stephen Akindona, all helpful advice and great things to consider! She actually does receive automatic emails when she hasn't paid on time, but she still just prefers to pay by making a deposit at the bank instead of online--makes me scratch my head, but it's within her rights!

    0Reply
  • Wesley W.
    Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
    7y

    I'm not sure I understand this correctly, but it sounds like you are mailing her "reminders" to pay the rent.  Stop this immediately!  This is a waste of your time.  She is an adult.  You are enabling poor tenant behavior.  ;)

    Only post "Pay or Quit" notices on the day your grace period expires, and as others have said, increase the late fee to compensate for your hassle.

    And lastly, put her on a M2M so you can terminate her tenancy if things go further south.

    5Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    @Wesley W.

    I would agree that if you do renew her do it month to month and I’d inform her in writing the Late fee has just doubled so from now on it’s going to hurt . Your facilitating this bad behavior by your loose standards

    1Reply
  • Kevin Phu
    Rental Property Investor · San Diego, CA · Member since 2016 · 507 posts · 171 votes
    7y

    I wouldn't renew at all and replace her with an on time tenant. The excuse that she just "forgets" in b.s in my opinion. If she really does in fact "forget" to pay her rent on the same day of every single month, she would've taken up the ACH/auto pay options you've given her. I'm willing to bet if you don't remind her at all, she'll be perfectly fine with "forgetting" to pay the rent until you say something. 

    4Reply
  • Amy W.
    OP
    Member since 2018 · 10 posts · 12 votes
    7y

    @Wesley W. I mail her an invoice for the late fee. The late fee is legally chargeable before I'm allowed to serve the Pay or Quit. I've definitely considered taking her M2M so thanks for the suggestion. 

    @Dennis M. Hmm, I don't exactly have loose standards. I've never made an exception for her on the late payment and the one time that her payment wasn't received by the legal Pay or Quit date it was sent that exact day. 

    Thanks, @Kevin Phu. I agree that she should take the automatic options. She has a (confirmed) brain injury which I guess is why I err on the side of maybe she truly does forget or possible just not even know what day it is. Thanks for the input. 

    3Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    I don't see a problem.  If she takes care of the property and always pays the rent and late fees I would automate the late notice and be happy to collect additional income.  

    I average about 1% of annual revenue in late fees.  To me the decision is what is the highest amount I can charge without discouraging the tenants from paying late.

    33Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Amy W.

    While I find late tenants annoying, I do like the $40 late fee I impose and they pay. I’ll take it every month.

    17Reply
  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    Also, my lease automatically goes month to month after the initial year.  Just let her go month to month and keep collecting the late fees.

    5Reply
  • Heather Schmidtknecht
    Rental Property Investor · Winona, MN · Member since 2018 · 87 posts · 90 votes
    7y

    @Amy W. — my answer is dependent on more info. Is she a good tenant otherwise? If so, and she pays (but predictably late, and then with the late fee), can you plan around this so that it doesn’t cost you time and money? If you don’t renew her, you take the chance of getting someone who does not pay at all and/or is not a good tenant otherwise. If she’s taking care of the place, I might be inclined to keep her and just plan on the rent (plus the late fee) coming on the 6th. ;)

    6Reply
  • Mike Blackwood
    Investor · Charleston, SC · Member since 2017 · 14 posts · 16 votes
    7y

    We love late fees.  We charge $40 if rent is paid past the 5th.  About 5% of our tenants pay late. We can afford for them to be late, we are not waiting on their money in order to pay our bills. However, with the ones that pay late every month what has worked for us is to tell them how much they have paid in late fees year to date. Surprisingly they aren't aware of the amount. It easily could equal a months rent. It usually will have an immediate effect...may not last, but it does give them pause to how the money could be better spent. 

    7Reply
  • Amy W.
    OP
    Member since 2018 · 10 posts · 12 votes
    7y

    @Jacob Sampson definitely agree about the amount. If it gets to a point where I have to charge the fee, I want it to be collectable, but worth my time. 

    @Matt M. lol, it's true, the extra is nice. A whole year of late fees equates to over half a month's rent. 

    0Reply
  • Amy W.
    OP
    Member since 2018 · 10 posts · 12 votes
    7y

    Thanks, @Heather Schmidtknecht. Yes, I definitely try to take all factors into account. 

    @Mike Blackwood lol, funny timing as I had just posted about the fact that a year of late fees is over half a month's rent. I too can afford for her to be late. Definitely an interesting idea to show them the fees they've paid. 

    1Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Amy W.

    My last tenants late fees paid my homeowners insurance :)

    5Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Amy W. I would probably renew assuming it never gets to the point of eviction. If they pay late on time every month, then that’s usually okay, (as long as it’s a few of them not all of them) and they pay consistently on the same time, but that’s just me.

    I also have lower income tenants so you just have to be aware of it. Since I Use PM, I get the money the same time anyways

    1Reply
  • Jeff Bousquet
    Rental Property Investor · RI · Member since 2017 · 94 posts · 52 votes
    7y

    If the tenet is current then it's real just a nuisance that she's paying late. If you don't renew then you have to deal with the unknown. The next tenet may not pay at all or destroy the property. Or they may be perfect. Personally, I'll take the late rent plus the late fee over the unknown.

    5Reply
  • Account Closed
    Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes
    7y

    We deal with many at tenants several locations and collecting the rents is fun and a pain at the same time. We have very strict policies we adhere to. Our rents are due on the 1st and late at 5 pm on the 5th. After 5 pm on the 5th the tenant is charged the late charge regardless of the excuse.

    As for evicting tenants who are late, we never evicted a tenant as long as they pay the late charge because we earn a nice little profit of $85 and sometimes a little more. So, what do you have to complain about as long as they are polite and willing to pay for your inconvenience and your time.

    While I am a hard butt when dealing with tenants I a little bit of heart because I know what it feels like to be short on the rent money and stressed out.  Show some compassion and accommodate tenants who are late as long as they are polite and and nice people.

    There are many articles in apartment association magazines about how landlords devise payment plans to accommodate their tenants needs. Every landlord does not have to be a hardliner. Some landlords devise rent payment systems where their tenants pay every week or every two weeks. This helps the financially unfortunate tenants with their cash flow.

    4Reply
  • Account Closed
    Financial Advisor · CA · Member since 2012 · 128 posts · 76 votes
    7y

    I hate tenants like this.  That's all I can say.  I guess it depends on how much it gets on your nerves.  I finally had enough once and am glad she left after I raised the rent!

    0Reply
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