No one likes to pay late fees, but they are a great way to encourage on-time payments. Unfortunately, many new apartment owners try to avoid charging late fees because they don’t want to anger their tenants. However, this is never a good enough reason for not charging this fee. Charging late fees is something you absolutely should do as a landlord. In addition, making sure your lease agreement contains a late fee clause, is equally important. Your tenants know up front exactly what is expected, and you are protected if your tenant is late on rent payments. While you don’t have to charge a late fee, you should always have a late fee clause in your lease agreement.
When it comes to late fees, there are many variables that often intimidate first time landlords. Knowing how and when to charge a tenant can be difficult to determine because laws vary among states and cities. Also, knowing how much to charge can put many on edge. With tools from ValencePM, the complexity of late fee calculation is simplified. Today, we’ll take a closer look at how late fees and ValencePM help with getting your rent paid on time without any trouble, and how to charge late fees wisely.
The biggest benefit of charging late fees is on-time rent payments. When tenants know up front, that fees will be charged for late rent payments, they are encouraged to pay on time. In this way, you can think of your late fee as your hired muscle, there to enforce the rules. If your tenants don’t follow the rules and continuously make their payments late, you are well within your rights to charge a late fee, as a means to cajole them into paying. The threat of a late fee makes for a good incentive for paying rent on time each month. If you aren’t sure about a fair or reasonable amount to charge for late fees, we have tools to help you. With ValencePM’s handy late fee calculator included as part of the apartment management software suite, the hard work is done for you. Sending out your resident enforcers will be easier than ever.
Everyone has an excuse for paying rent late, and you may be tempted to “let it slide” for some tenants in your building. One reason late fees often get waived is that tenants with a previous late fee may not realize that the late fee and the monthly rent are due, in full. Instead, they continue to pay the normal rent amount, leading to an outstanding balance. When it comes to bookkeeping, no one likes having to carry that balance over every month. Which leads to the waiving of fees. However, ValencePM software is equipped to handle these common annoyances and eliminates the need for waiving late fees. Because, even though it simplifies your accounting, it sets a precedent that late fees are optional. Your tenants may come to expect you to waive the fee in the future. This could result in late fees being incurred more often. ValencePM helps you stand firm when charging late fees. You won’t have to worry about late payments in the future.
If you do have a late fee agreement in your lease, you probably specified a grace period, too. This is the short period of time right after the due date, in which a tenant can pay their rent without being charged late fees for it. Often, tenants knowingly take advantage of this. For example, many tenants pay on the 7th of the month, even though the rent payment deadline is on the first at one building. This is because the grace period states that late fees will apply starting on the 7th. If you find yourself with multiple tenants doing this, begin issuing notices reminding them about the real payment deadline and possible consequences if the late payments continue. ValencePM’s apartment management software allows you to set automatic rent payment reminders. You can send these to repeat offenders of late payments by email or text message, and remind them when the real rent deadline is coming up.
Late fees are a great motivator for paying rent on time, but they are also very fragile creatures. If you charge too much, you might find yourself getting sued by your tenants. They have the right to sue you if you tend to go overboard with fees. First, check the limits for late fees in your state – the law for landlords in different states varies. Then, decide on a fair amount to charge your tenants on the first day they are late. However, a one-time fee is not enough to motivate some tenants. To truly incentivize them into paying their rent on time, you need to introduce recurring fees as well. This is where ValencePM software helps you the most. Trying to calculate and add up percentages per day, for certain days, and a certain amount of days gets complex, leaving plenty of room for human error. For example, your tenants are charged 4% of their total rent on the 7th of the month (the first day after the grace period). If they don’t pay up by the 12th, you could charge an additional fee, and so on for a daily, weekly or bi-weekly basis. Making a mistake with these numbers could lead to headaches and the possibility of waiving the fees to deal with it. By using the handy calculator in the ValencePM software, all of this is simplified. Faced with mounting fees and charges, your tenants will have no choice but to pay their dues on time.
Tenants are more likely to pay up if you treat them with respect. Don’t be the landlord everyone hates. Let late fees hang as a veiled threat if they don’t pay, but try positive reinforcement to get them to pay on time. ValencePM apartment management software allows for electronic rent collection and automated rent notifications that work to encourage on-time payment in a positive way. Your tenants are far more likely to pay their rent if they can pay online. Charge the right fees, at the right time, but be firm about it when you do. Don’t waive your late fees if they are deserved. Remember, they are there to protect you! If you don’t want to deal with the hassle of manually calculating late fees, use the integrated late fee feature in ValencePM, so you can manage your tenants with ease!