As a rental property owner, it’s likely that you will eventually have a tenant that pays the rent late. Sometimes the tenant will innocently miss the due date, or they may be out of town, or their rent check got lost in the mail.
But regardless of why the rent is late, it’s important to enforce the terms and conditions of the lease agreement the tenant signed by sending a late rent notice when the rent isn’t paid by the due date.
What is a Late Rent Notice?
A late rent notice is a formal, written notice sent to the tenant by the landlord, informing the tenant that the rent is past due.
In addition to notifying the tenant of the total amount of past due rent due, the late rent notice also outlines any grace period before a late fee will be charged, and the amount of the late fee if the rent remains unpaid.
Why Landlords Use a Late Rent Notice
There are four main reasons for a landlord to send a late rent notice to a tenant:
- Serves the tenant with formal, written notice that the tenant has violated the lease agreement by not paying the rent on time.
- Provides the tenant with a specific date that the rent must be paid in full to cure the lease agreement violation.
- Documents the fact that the tenant has paid the rent late, and may be used as evidence to terminate the lease in the future if the tenant begins to habitually pay the rent late.
- Sending a written late notice is the first step in the eviction process, serving as proof that the landlord used a good faith effort to provide the tenant with the opportunity to pay the past due rent.
What is a Grace Period?
A grace period is the number of days between the date the rent is due and the date a late fee is assessed. For example, if the rent is due on the 1st of the month and the lease agreement calls for a 3-day grace period, a late fee for past due rent would not be charged until the 4th of the month if the rent has still not been received.
Many states require a landlord to provide a tenant with a grace period of between two and five days before assessing a late fee, while other states do not have such a requirement. The legal resource website Nolo.com provides a chart of state rent rules to determine when rent is due and when a late fee may be charged.
However, even if the state your rental property is located in does not require a grace period, there are several benefits to giving your tenant a grace period to pay the rent:
- People Make Honest Errors
People sometimes genuinely forget the date or overlook a bill that is due. If your tenant has a track record of always paying the rent on the 1st, but forgets to pay one time, offering a reasonable grace period may help increase the chance that your good tenant will renew their lease.
- Some Tenants Pay the Old Fashioned Way
Although many landlords use an online rent payment system, some tenants still prefer to pay the old fashioned way using snail mail. Offering a grace period allows the tenant a couple of extra days for their check in the mail to arrive before a late fee is assessed.
- Delays in Posting by Your Bank
Even with an online rent payment system, the tenant’s money may not be posted to your account until the following business day. For example, if the 1st of the month is a Saturday and the tenant pays online, you may not see a credit in your checking account until close of business the following Monday.
Guidelines for Writing a Late Rent Notice to a Tenant
The late rent notice to a tenant should be sent the day following the rent due date. If the rent is due on the 1st, the late notice should be sent on the 2nd. Some landlords delay sending a late rent notice, but there are some potential problems in doing so.
While a landlord’s intentions may be good, one problem with giving the tenant too much extra time to pay rent is that it encourages bad behavior. Before you know it, the tenant isn’t paying rent due on the 1st until the 5th, 10th, or even the 15th of the money.
Tenants sometimes also try to test the landlord, which can be the case when a rental property changes owners.
Although it doesn’t happen often, some tenants may see what they can get away with when there is a new owner or property manager. Acting fairly and enforcing the terms and conditions of the rental agreement can be a good way to let the tenant know you expect the rent to be paid when due, in full and on time.
What to Include in a Late Rent Notice
A good written late rent notice should include the following information:
- Date of the late rent notice;
- Name of all tenants on the lease;
- Name of the landlord or property manager;
- Property address;
- Amount of rent past due;
- Grace period (if any);
- Late fee amount if the rent is not paid in full by the grace period;
- Total amount of rent due to become current;
- Date rent must be paid before eviction proceedings begin;
- Acceptable form of payment for the total rent amount due (some landlords require guaranteed funds such as an online payment or cashier’s check);
- Consequences if the rent is not paid in full and for recurring late rent payments, such as a for-cause eviction by the landlord; and
- Signature of landlord or property manager.
The late rent notice should be sent to the tenant with proof the notice was received, such as certified mail return receipt requested. Proof of delivery may be required by the court in the event that you have to evict the tenant.
Can a Landlord Accept a Partial Rent Payment?
Sometimes tenants will try to pay the amount of monthly rent due but not the late fee that was assessed. Before accepting a partial rent payment from a tenant, there are a couple of things to keep in mind.
First, if you allow the tenant to pay late and less than the total amount of rent due, you may be sending a signal to the tenant that the rental due date and late fee are negotiable. When a tenant thinks they can make a late payment with no consequences, they may try to pay the rent late again and again.
Secondly, if you are beginning the eviction process, you may need to start all over again. That’s because some states require a landlord to restart the eviction process if a partial rent payment is accepted after filing the eviction with the court.
Where to Download a Free Late Rent Notice
Depending on the size of your market, there may be real estate attorneys who specialize in residential evictions.
Oftentimes, these lawyers have up-to-date forms on their websites that you can download for free. They provide these letters and notices at no cost, in the hope that you will hire them for an eviction if the tenant refuses to pay after the overdue rent notice is sent.
There are also several websites where you can download a free late rent notice template:
Should a Landlord Charge a Late Fee?
As long as the landlord-tenant laws in your jurisdiction allow, it’s alright to charge the tenant a late fee. Some of the main reasons (and benefits) of collecting a late fee from the tenant include:
- A late fee compensates you or your property manager for the extra effort of having to send a written notice to get the tenant to pay the rent on time;
- A late fee serves as an incentive for the tenant to pay the rent by the due date each and every month to avoid another financial penalty;
- A late fee helps to prevent the tenant from falling into a pattern of always paying late because they think there is no harm in doing so.
Tenants who consistently pay late can affect your cash flow and cause a situation where your operating expenses and mortgage payment may be late as well.
How to Calculate a Late Fee Amount
A late fee amount is generally calculated as a percentage of the rent due, or a flat fee equal to the same approximate amount.
For instance, let’s assume the rent is $1,200 per month. The late fee might be calculated as:
- $1,200 x 5% late fee = $60
- $1,200 flat fee = $50 – $70
When calculating a late fee amount, most landlords charge an amount that reasonably penalizes the tenant for paying the rent late and incentivizes the tenant to pay the rent on time going forward.
Charging a tenant too large of a late fee can backfire on a landlord. For example, the tenant may be financially unable to pay a large late fee plus the rent, especially if the rent to income ratio for the market is high. A big late fee may also discourage a good tenant from renewing the lease, which increases the turnover and vacancy expense for the landlord.
Make it Easy for a Tenant to Pay On Time
It would be nice if a landlord never had to send a late rent notice, but in the real world of real estate sometimes tenants do pay their rent late. The good news is that as a landlord, there are several things you can do to help the tenant to pay the rent on time and avoid charging a late fee:
- Use tools such as the Roofstock Cloudhouse Rental Calculator or Rentometer to help determine the fair market rent for your area;
- Screen prospective tenants online before signing a lease by ordering a credit report, and running a background check and rental history report;
- Complete a move-in checklist with the tenant the day they move in, and take the opportunity to review the terms and conditions of the lease including when the rent is due; and
- Allow the tenant to pay the rent online using services such as RentTrack that reward the tenant for paying the rent on time by reporting on-time rent payments to the major credit bureaus.
No landlord looks forward to sending a late rent notice to a tenant, but every now and then it needs to be done. A formal written late rent notice reminds the tenant when the rent is due, outlines any grace period before a late fee is charged, and explains to the tenant the consequences of not paying the rent in full and when due. Landlords can help to reduce the need to send a late notice by thoroughly screening prospective tenants and allowing tenants to pay their rent online.