Setting the Late Fees and Grace Periods for Rent!
Landlords and property owners are business-oriented. They may like their residents and even have friendly relationships with some of them, but the bottom line is that they expect the rent to be paid on time each month.
It is a reasonable expectation that must be backed up by consequences when rent is overdue. That typically is addressed in the lease or rental contract under “Late Fees.” However, before delving into late fees, let’s understand the “Grace Period.”
When Rent Is Due
Your standard rental contract states that all rent is due on a certain day of the month (usually the first). But as we know, things can occur that make even the best residents run short. This is where grace periods come in.
Grace periods are usually a brief span of three to five days after the rent is due when the residents can pay their rent without incurring penalties or fines. It gives them a little breathing room where, if they run short, they have time to arrange to get the full amount.
Some localities dictate that there must be grace periods for late rent. Many property owners include grace periods in their rental contracts even when others don’t because they want to accommodate their residents’ needs. When the rent is not paid in that timeframe, it triggers a late fee to be added to the rent.
How Much Is the Late Fee?
Different jurisdictions can dictate the amount that can be charged. Even if your area does not cap late fee amounts, you typically want to remain competitive with other property owners around town or risk missing out on tenants who read your lease and balk at the late fee you’re charging compared to others.
You also don’t want to make the late fee so high and make it even more difficult for the residents to get caught up, but you do want to make the late fee punitive enough to discourage residents from frequently paying their rent late. One example could be a flat dollar amount (i.e., $50) or a percentage of the monthly rent. Whatever figure you decide upon, this needs to be spelled out clearly in the rental contract or lease that all your residents sign.
Provide Ways to Make Paying Rent Simpler
One way to make paying the rent on time and in full easier for all residents of your rental property is to provide them with several ways of making payments. They may be able to drop by the office during business hours with a check or a credit card.
Finally, it’s the 21st century, and most, if not all, of your residents are familiar with conducting financial transactions online. Have a payment portal residents can access 24/7 to pay their rent online wherever they may be. It can also be designed to auto-trigger the late fee once the grace period has run out. That feature alone can eliminate uncomfortable conversations between the residents and you or the property management company you hire to deal with issues like this one.
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