Duringer-Legal Corner | November 6, 2008
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05 November 2008
A: Your residents pay their rent late because you have trained them to pay that way. Your rent collection techniques are lax, and your residents are all too aware of your procedures. Many residents live paycheck to paycheck, and will wait until the last possible moment to pay their
obligations. Your residents apparently know that you “try and work with them” and that you don’t even start looking for the rent until the tenth. Your phone calls and reminder notes are nice but not legally sufficient to ensure timely payment. Your residents know the drill, phone call, letter,
and then the notice. They pay when they absolutely have to in order to avoid being evicted. A tighter rent collection policy, coupled
with a good rental agreement, will eliminate your problem of late payments. Consider using a rental agreement that includes a properly drafted late charge provision. It is important to note that not all late charge provisions are enforceable. The language used in the agreement must characterize late charges as “liquidated damages,” that is, it must state that the damages sustained by the landlord are difficult or impossible to ascertain, and that the parties agree that a certain sum, the late fee, is the amount of compensation due the landlord. Your rental agreement will define when the late fee is incurred. Typically, the late fee is incurred if rent is not paid by the third of the month. Remember, this clause does not provide a “grace period” to the resident; it merely defines when the late charge is incurred. Late charges can not be punitive, rather they must reasonably relate to the costs incurred by late payments. Don’t
charge a variable fee, one that increases by a certain amount each day the rent is late. Although the law is silent on the subject, courts generally allow late charges of 6% of the rental installment. Additionally, consider adding a clause in your rental agreement requiring the
resident pay a “notice service fee” in the event the landlord consults an attorney and serves a notice of default. Again the fee must be reasonable rather than punitive. If your primary goal is to just get the rent paid timely, you should send all of the residents a notice reminding them of their obligation to pay their rent on or before the first of the month, and they should budget accordingly. Let them know that you intend to strictly enforce the terms of the rental agreement. If you have allowed the late
payments over a long period of time, provide the residents at least thirty days warning of your intentions. Late rent payments in a rent-controlled unit are opportunities for vacancy decontrol. Rent controlled jurisdictions require aggressive rent collection techniques and strict enforcement of the terms of the rental
agreement. If the rent is due on the first, and the first falls on a weekday, a three-day notice should be served immediately, on the second of the
month. Failure to pay the rent in full by the expiration of the notice will support an eviction. Remember, you set the tone for your
buildings. If you allow your residents to ignore the terms of your rental agreements, you can be
assured that they will do just that.
