On-time rent payments are crucial to maintaining a profitable rental property, and should a tenant fail to pay, you must enforce lease terms and apply late fees to discourage future missed payments. However, it might not be as simple as you think. For starters, you must adhere to the laws related to local landlord-tenant laws to determine the amount you can charge.
How Much Can You Charge for Late Rent Fees?
You can charge for late rent payments with a maximum late fee of $20 per month, or 20% of the monthly rent for each month, depending on which is greater. Keep in mind that this code only applies to lease or rental agreements that were entered into, extended, or renewed, and the late payment of rent occurring on or after July 1, 2019.
Be careful not to violate any state or local laws, as it can lead to more expensive problems like legal trouble. If there are additional fees that the tenant has to pay, issue this penalty separately, such as unpaid rent or property damage costs.
When Should I Collect Late Rent Fees?
Your lease agreement should state the circumstances under which you can charge a late fee, as well as the rent grace period during which the tenant can correct the missed payment. It's usually a three to five-day grace period to make overdue payments before you can charge a late fee, but there are no local laws in Atlanta, Georgia, limiting how long a grace period can last.
Payment Methods for Late Fees
Online Payment
Like online rent payments, you can accept late fees online to provide convenience for your tenants. The more convenient the payment method, the more likely tenants are to pay promptly. It could also be beneficial for you since online payment platforms often keep records of transactions, allowing you to keep accurate records without manually writing them down.
Cash
Given that the amount is not as significant as the monthly rent, you can choose to accept late fees in person. This increases your administrative workload since you'll have to keep records. Documentation is a necessary aspect in property management, since you will need to analyze your cash flow and taxes.
Rent Check
While you can choose to accept checks to pay for late fees, it is generally not recommended since you will have more problems on your hands if the tenant's check bounces. You will then have to charge bounced check fees on top of late fees.
Tenant Portal
If you have a tenant portal or if a property management company gave you access to their in-house system, you can also collect the payment through the mentioned platform. Depending on the system, it usually indicates whether the received amount is for monthly rent or late rent fees, which makes it easier for bookkeeping.
ACH Transfers
ACH transfers or bank transfers can also be an option for late fees, especially since many major banks now have their own apps, making it easy to transfer money to other accounts. Similar to online cash apps, however, the sender may need to pay transaction fees for the convenience.
Outlining Rent Payments in a Lease Agreement
A clear lease agreement should state the necessary information for paying rent, as well as a late fee clause to encourage timely rent payments. Some of the information would typically include:
- Rent Price: Indicate how much the monthly rent amount is, not just for the sake of transparency, but it can determine the late fee amount you can charge.
- Due Date: Specify when they are expected to pay rent. The due date is usually the first of the month, but you can always set a different date.
- Grace Period: If they fail to pay rent on time, they should know the standard grace period before a reasonable late fee is incurred. It is typically a three-day grace period, but you can extend it to a five-day grace period to provide tenants more time to gather the needed amount.
- Late Fee Amount: Late fees vary between landlords, so you have to specify whether it's a flat fee or a percentage of the monthly rent price. The typical late fee is the greater amount between the two.
- Payment Methods: The lease agreement should list the payment options your tenants have, whether it's for rent, late fees, or other charges.
- Further Consequences: If the tenant fails to pay the late rent fees, state the potential consequences, like eviction or legal action.
How to Avoid Late Rent Payments
Landlords can take proactive steps to reduce the likelihood of late payments. You can avoid having to charge a late fee for rent missed, as well as dealing with tenants who might not want to pay the incurred costs.
Use Property Management Software
A property management tool can help you automate recurring payments whenever rent is due. It could also detect when a tenant misses rent and send a notification stating the beginning of the grace period. If the tenant still fails to pay their rent, the system will notify the tenant to pay late fees as well.
Hire a Property Manager
Handling both rent payments and late fees can be overwhelming as you juggle other property management tasks. Property managers can be flexible about late fee rules. They can extend grace periods depending on the circumstances, as well as handle collecting rent on the property owner's behalf.
Screen Your Tenants
Conducting tenant screening will help you determine whether they are prone to paying rent late. You can base it on their rental history, credit score, and employment verification. This is among the most effective measures to avoid charging tenants a late fee or going through an eviction process.
Outline Late Fees
Stating your late fee policies in a written lease can encourage on-time payments just to avoid charging late fees. Be sure to check local and state laws regarding the maximum late fee amount to avoid disputes or legal repercussions.
Require a Security Deposit
A security deposit can be required for both long-term tenants and residents who sign monthly leases. It won't just pay for charged late fees and unpaid rent when a tenant moves out. Of course, you are legally obligated to provide an itemized list of any deductions as per landlord-tenant laws.
Enlisting the Help of a Professional
These matters can be complex even for seasoned landlords. You must know how much to charge for late rent fees, legal obligations of the tenant, when to provide a written notice, how long a grace period should be, and more. Our job is to make sure that your tenants pay their rent on time.
If not, then PMI Georgia will conduct the necessary actions to ensure that you have a steady rental income, as well as financial compensation for loss of rent. Let us help you maximize your rental income! Contact us now to learn more about our services.
