When is rent late? & How to collect the rent!
When is the rent due? How do I collect the rent? When should I start an eviction? These are all common questions by property owners.
The lease agreement sets the terms for when rent is late. There’s a lot of variations out there, so please read the lease contract carefully. Most leases are going to have the rent set to be due on the 1st day of the month. That means January rent is “due” on January 1st. That means on January 2nd the rent is late.
Tenants should get in the habit of paying rent early, near the end of the prior month because rent is technically late after the first. The law has no “grace period”, but most leases do charge a late fee if the rent is paid after the 3rd day of the month. For example, rent is due January 1st, it’s late if not paid on the first, then a late fee will be applied to the tenant if not paid by midnight on January 3rd.
Typical late fees range from 5% to 10% of the rent.
As the property owner, you should have a standard procedure for when a tenant doesn’t pay. Here’s what we do: On the morning of the 4th, we call, text, and email the tenant notifying them that a late fee has been applied to their account and that rent is late.
We will contact them everyday that rent is unpaid, until the 8th. On the 8th day we post a 3-day notice to pay or quit. This is a legal notice informing the tenant that we start the eviction process if they don’t pay within 3 business days.
The goal here is to get into contact and have communication with the tenant. If there’s no communication, that’s a sign things are going to go poorly. They will tell you their excuses. You can be empathic, but also set expectations and communicate clearly what happens if you post 3 day notice and the three days expire.
We find that 99% of tenants will pay without having to do an eviction.
There is a difference between a tenant that has one late payment and a tenant that continually pays late. A tenant that consistently pays on time, but communicates that the rent this month will be late, is not a big problem if it only happens once and there’s lots of communication about the issue.
A tenant that repeats late payments is a problem. In this situation I recommend following my suggested procedure by contacting the tenant daily until the rent is paid. On the 8th day, post a three day notice to pay or quit. After the three days expire, start an unlawful detainer action, also known as an eviction.
Since we’re on the topic of collecting rent, let me give you a few other recommendations. Don’t accept cash and I encourage you to arrange electronic payments. This is much faster and safer. Accepting checks can cause lots of problems with bounced checks and time delays in the mail. You also need to keep an accounting of your rent collection, this becomes important when you need to do an eviction.
Communicate from the beginning the expectations of rent. When the renter moves in, it sounds something like this: I’m really happy you’ve decided to make this your home. I’d like to get the relationship started off by reviewing the lease agreement to make sure we are on the same page and avoid misunderstandings. The first section is about rent. Rent is due on the first day of the month and late any day after. There is a late fee applied on the fourth day, so please arrange to make payments early to avoid the late fee.