Grace Period/Late Fee for Tenant Rents

[Nanci Janes]

Do you have a grace period for your tenants rent? When we take on new owners/properties they often come with ... not so great leases with drawn out rent grace periods. For example, we inherited a property with a tricky lease that reads, "Rent is due on the 1st with the late fee applied after the 5th. A service charge of $25.00 will be added to the rent due after the 5th of each month until the 15th with an increase to $50.00 after the 15th until rent is paid in full." <---- See below:

From my experience, anytime a late fee isn't charged until a later date (beyond the 2nd) is encouraging the tenant to pay late. Better yet, go ahead and pay rent late and you get to skip the late fee just as long as it's paid on or before the 5th. Clearly the rent is due on the 1st so why put this "grace" period into the lease? This a nightmare for someone like myself who has to track the rents. An upwards of 234 rental payments and growing.

Clear expectations about rent should be laid out, simply, for the tenant in the very beginning. 

1. Rent is due on the 1st by 11:59 pm. (Clear expectations here.)
2. Late fee is $75. (Make it scary but not terrifying. No grace period, late on the 2nd.) 
3. If rent is not paid on the 1st of the month a 3 Day Notice will be delivered without warning. (This lets them know you are aware and watching.) Stand your ground and deliver the 3 Day Notice. Most times, we will deliver a 2nd page with the notice informing the resident that we do not want them to move, we want them to pay the rent. In which, 99% of the notices we deliver get the 2nd form. 
   

Clearly, our goal is not to turn rental properties every month by serving 3 Day Notices. (This doesn't help the owner and it doesn't help us as a Property Management company.) We serve them to inform the tenant as mentioned, that we mean business. About 95% of the tenants straighten up after getting the notice because the expectation has been set.  

To wrap up, I'm curious to know what your policy is on this and why. I look forward to reading your comments!