by Mary Anne Ragragio
Posted on 2019-08-01 20:17:02
Late Rent Fee
Implementing late fees rule to tenants is one-way landlords do to avoid late payments and to motivate tenants to pay rent on time. Most landlords impose this kind of fee as a penalty for paying their rent late. By enforcing a late payment fee, it encourages tenants to keep their rent on time.
There are important matters that landlords have to consider when charging late fees because this is the common dispute between landlords and tenants, and so here we will discuss it.
Can a landlord charge a late fee if rent is late?
In most states it allows landlords to only charge late payment fees if it is written in the lease agreement. There are only a few states that do not allow landlords to charge a late fee. If it is not written in the lease, the landlord cannot impose a late payment fee, which is why it is important to add a clause of all details about charging late fees in the lease agreement called “late payment penalty clause”. This is to compensate the landlord for all the inconvenience and risk of the tenant for not paying the rent on time.
Can late payment affect credit score?
When a tenant pays rent late, sometimes it could affect their credit score. Typically late payment has to be at least 30 days before it gets reported to the credit reporting agencies (CRAs). The level of late payments that may affect the credit score depends on multiple factors. Late payment is evaluated based on how serious it is, how recent and how frequent the late payment.
Some landlords are very considerate and just consider some arrangements with their tenants. Reporting to the credit bureau is a very little chance for some landlords as long as it's not a recurring problem.
How to avoid or at least lessen the chance of getting late payments?
One of the best ways to avoid getting late payments is by performing a screening to tenants thoroughly. It will help the landlord determine which application you will approve to help find reliable tenants and the ability to pay. It also helps enables automated payment set-up to make it easier for the lives of the tenants to keep their payment on time. Some tenant’s reason for paying late is simply because they forget it, so this one is a great idea.
Modern property management software like Smart Housing provides products and services that allows residents to make a payment online. It is also essential to the success of landlords business as more renters prefer online payment. There are increasing numbers of landlords who prefer collecting rent online and let tenants set up automatic payments to avoid or at least lessen late rent. It is a lot safer and easier than sending a check. This is beneficial to both you, the landlord, and the tenants because it helps minimizes past due accounts.
During the lease signing process, it would be good to ensure that tenants understand and aware of all the policies by communicating with your tenants. Encouraging tenants to pay their rent on time will not only help them get a positive rent payment history on their credit report but also help both landlord and tenant to build a good relationship.