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Collecting timely rent payments from tenants is essential to keeping your property finances in order and promoting responsible tenant behavior. Writing
a late fee policy into your rental agreements is a good way to make
sure tenants remain diligent about on-time payments throughout the
course of their tenancy. Just as important is making sure you hold your
tenants to this policy.




Rental agreement payment policies should include the following information:

  1. The day of the month rent is due.
  2. The day the late fee kicks in.
  3. The amount of the late fee.

In a standard rental agreement, landlords provide tenants a five-day “grace period” between the day rent is due and the day the late fee is applied. Late fee penalty payments generally fall around $25. However,
before setting the fee, be sure to check state and local laws to find
out what maximum fees are allowed by law. While some landlords charge a
single flat late fee, others charge an escalating amount for each day
payment is late (for example, $5 on the first day, $10 on the second
day, etc.). If you do use an escalating scale, you will also need to cap
the late fee at a reasonable maximum amount.

Not only is it important to build late fees into your lease contracts, but it’s also important to enforce the policy. With this in mind, though, judgment and reason are called for. For example, if a
tenant has lived in your unit for eleven months and consistently paid
rent on a time but does not pay until the sixth day of the twelfth
month, you may want to give the tenant the benefit of the doubt. If you
feel it’s necessary issue a verbal warning but refrain from putting the
fee in effect until the next violation. Bear in mind that giving such
chances on a regular basis will counteract your late fee policy as
tenants won’t take it seriously. Only make such allowances on first
violations or in clearly extenuating circumstances.

Finally, remember that as a landlord you want to build good, long-lasting relationships with your tenants. Just as you want to promote timely rent payment by enforcing a late fee policy, you may also
want to acknowledge tenants who do pay their rent on time each
month. For example, when a tenant has paid rent on time for twelve
months in a row, you may consider rewarding them with a small
acknowledgement like a $10 gift card to a local coffee shop. While this
is obviously not necessary, it’s one of those little gestures that
demonstrates your appreciation of a good tenant. Sometimes positive
reinforcement is just as important as implementing negative
consequences.

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Comment by Karen McDaniel on November 11, 2010 at 7:13am
Like you said a late fee policy is USELESS if you don't adhered to it. My PM in Palm Coast FL. are wimps when it comes time to collecting a late fee. They explain to ME THE OWNER "we try to get the late fee from tenant but rarely will the tenant pay it" ..... "you should be glad you a least have a tenant". My tenant has been mostly on time but the last 3 months it's been one excuse after another. First, car repair cost, then death in family so missed work, and this month I've received less then half the rent so far. What really makes me angry is as the owner and the one taken on full responsiblity for the mortgage I get "zero" of the late fee monies. My PM said thats because they need to cover the cost of contacting tenant and any "non-payment of rent" notices going out.
Yes maybe it's true, at least I have a tenant....it could be worst, BUT I hate wimpy spineless PM that sign a contract stating they are looking out for my best interest and then do crap like this.
I have one property that I self managed and this tenant was late one time and I charged her a $35 return check fee and $25 late fee. She called me up ranted and yelling and said it was because her Husband didn't tell her about some other checks he wrote out and thats why the check bounced....bahl...bahl..bahl. I also told her to avoid this again pay by cashiers check. See agreed and I get a cashiers check every month now which is great for me.
The one interesting thing is once she found out I can't charge her a late fee until the 10th of the month (per state law), she always pays just before the 10th.
Isn't that special!!!! Such a sweet tenant!

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