We spend a lot of time discussing Late Fees here. I'm curious: what is the purpose of the late fee, really?

MYOB/GA says they generate a lot of extra income for him/her, but I would think they also generate a lot of uncertainty: if tenants routinely pay late enough to generate that much income, how do you know if they are going to pay at all this particular month?

Magistrate routinely toss out late fees here - judgments are awarded for damages, financial or otherwise, but late fees are often not included because, I guess, the LL has not really been 'damaged' by late rent, only by NO rent, and for that the tenant is evicted.

My version of Zero Tolerance amounts to no late fees for us. The last time I collected a late fee, I ended up evicting the tenant the next month when he again came up short (bad dude, it wasn't just the money.)

Because I accept that things happen and tenant may need to pay late. The late fee serves to discourage that from being common.

Late fees serve several purposes:

1) Like David said, they are a deterrent (to some degree). I get it that some folks with be late no matter what. It's how they live life. Ok, fine, but that doesn't mean it does not deter anyone. And since I never know whom they will or won't deter (and to what extent they deter), I charge to everyone.

2) Recoup collection fees. When I evict someone, I get a money judgment. I do not have time or expertise to handle collections on my own unless I know where they work already, so I outsource those collection to a collection agency. They typically charge 40% of the amount collected. If I'm able to tag on late fees in court, that helps reduce the costs I pay for the collect agent. Our court will NOT enforce collection costs, even if built into the lease. Their view is that cost is outside the termination of the lease period, so the lease terms no longer apply.

3) Standard Business Practice. Tell me what business of any size DOESN'T charge a late fee at some point. My bank does if I don't pay my mortgage. My lawyer does if I don't pay his bill. My utility company has a 10% late penalty. My HVAC guy has 18% interest built into his contract after 15 days. They typically phrase these as "finance charges", but it amounts to the same thing. If I do not pay $X balance due after so many days, it now costs me $X + Y%. Maybe a Ma an Pa Kettle lawn mower repair shop won't charge a late fee, but I can't think of why there's a good reason NOT to charge it.

Oh I get that part, David. I'm just saying that for us, we want paying late to be SO infrequent that it's a non-issue.

Having a late fee at all seems to be saying, "You can pay late sometimes."

In fact, had a tenant try to use this excuse once: "It says not late until the 5th." No it says "No late FEE until the 5th day after it is due, the RENT is due ON or BEFORE the due date." (NC law says I can't charge a fee until the 5th.)

I too accept that things happen sometimes, but I don't want that to be the norm. That's why I went to NO grace period, it's due when it's due.

" Having a late fee or grace period (i have both) doesn't preclude filing if rent not paid on the first. "

Not so.

A grace period precludes you from filing or even serving a notice that rent is late until the grace period has expired.

Thats what a grace period is. Rent is not late until the grace period has expired.

So they will pay rent and if they have to skip one payment. It will be another bill and not the rent.

Right now I have tenant that has been with us for about 15 years. Really keeps the place nice. But the past 7 years has always paid late.

Pays by the end of the month and always includes the extra 10% late fee each month. In this case I dont mind the extra income.

In the past I had another one always late. That one paid an extra $142.00 each month for over 5 years.

A $50.00 late fee. What a joke.

After four years of me paying on one of my loans (auto draft from another bank so i didn't look at it much) I noticed on my bank receipt they sent me "$160.00 late fee if payment over 15 days late".

I thought that was pretty stiff. I ask them about it. They said it cut way down on people paying late.

I bet it did!!!

David, How will a judge interpret your giving a grace period for a late fee? If you charge a late fee only after a grace period, does it mean that its not late? I don't mean what it means to you? How does the judge think that it means to a tenant, that you don't consider the rent to be late otherwise you would charge the late fee? All this, in the face of how I understand MI law to be very vaguely written (thus leaving A LOT of interpretation to the judge).

Late fees are anyway disfavored in court, because Common Law of Real Property does not allow for penalty for breach of a lease, as would Common Law of Contracts.

W,

My judge says a late fee is "to encourage prompt payment and should not be a harmful penalty".

I disagree. They will not be encouraged to pay without the fear of a consequence that hurts. I am not allowed to "hurt" them physically but the law DOES allow me to cause financial pain.

You bring up a great point about having a late fee might imply one can pay late. We have it to

-encourage prompt payment

-pay for our time to collect

-pay for the use of OUR money to cover th ehome's bills until they catch up.

We collect extra fees for the 3 day notice period and during the time for eviction. The judge just gave our recent evictee an extra week. I can't change that but we DO pick up an extra 7 x $5/day = $35. $5/day is fair to everyone.

But lately I'm seeing that $5 per day on $1000 /mo rent is nothing, not any kind of encouragement.

I used to brag how we put 3 kids thru Purdue on late fees. Truth. But looking back on the numbers we lost MORE in unpaid rent than we gained in late fees.

And all the aggravation and stress of numerous phone calls and agonizing over more sob stories thru the month TRYING to get the money, only to repeat the whole thing again the next month.

Pay or leave - and they PAY!

All these discussions about grace periods and sometimes allowing folks to be late are a HUGE reason we are totally ZERO TOLERANCE on lates.

David,

Stuff happens to EVERYONE! I'll betcha a milkshake most of those "troubles" are inflated excuses. I stopped playing god and trying to decided which excuse or sob story or lie was worthy of sliding on the rent. LLs accept too many sob stories. It's like fake news.

"Had to go to a funeral" ALWAYS gets LL sympathy. I pressed once and discovered the funeral was LAST MONTH! and only an hour away.

My new theory: this is related to everyone getting a trophy. Nobody did anything wrong...or fell short of the goal... or did not get the job done...it's nobody's fault the rent is unpaid...we don't want Joe to feel bad...we don't want to look "not nice"...don't hold people accountable...

How many times have I heard the LL say they did nto want to "bother" the res by asking for (or TELLING!) them the rent was late. Who are we kidding!?! The res KNOWS he did not pay!

Some of the greatest champions and victories rose out of horrible defeat.

If the bank or stock fund failed to pay you the interest owed you'd be all over it. If the job failed to deliver your paycheck you'd be on the phone NOW!

LLs: grow a backbone! Protect your investment! Stick to the lease and you'll be AMAZED how people actually pay!

W, You got me fired up!

BRAD

I'm with David. I Upped my late fees a couple years ago. The $25 wasn't enough to discourage anyone, in fact I had one tenant that just added It into their bills.

So now $50 +$5 dollars a day. In Illinois we have to serve a five day. (Plus one day for service). My lease says due on the first late after the third and on the morning of the fifth I serve five day. Which means, if they play this game, they have a essentially until the 11th of every month before I can file for eviction. I had one tenant building the $25 late fee into their budget every month. They paid late every month for about five months until I got sick of it. Since they had gone to the month the month, I gave them a change in terms of tenancy notice. And I upped the late fee to 10% of the rent + $20 day. So suddenly the late fee went from $25 to at least $80+ $20 a day. That stopped the late fees very abruptly. I'm sure it was cutting into their cigarette money.

I think it was WHC who said in here that she explains Her three rules are "pay your rent pay your rent pay your rent." I tried that and it works well! I also tell them "I don't want your late fee I want your rent on time." And "I don't own this place the bank does."

They can identify with that.

Blue,

Consider serving the late notice the day it's late.

And eliminate those grace periods. I had to read your post 3 times to figure out when the rent was truly "late".

Due on the first, late on the second, late notice (text) on the second, start that 5 day timeclock.

We can't just up our late fees, they are written into law. $15 or 5% of the rent, whichever is more (for us that's around $55.) Charged once per month only, and not until the 5th day after rent is due. Any money received must go first to rent, not late fees. Etc.

It seems NC prefers that you move to evict when someone is late with the rent, not rack up endless late fees.

It sure seems to be a topic with different thots, I'd say? Ga judges have never thrown out the 10% fee payable after the 4th then $10 daily every day past the 8th. RR78 keep those late paying tenant relationships going. Don't rid yourself of them as you've got them trained! It adds up. $25 penalty is laughable. Too small. If the tenant pays you late then he pays more. It's so ez. And tenants know the game, too.

late fees are penalties. they take you out of your typical daily tasks and force you to deal with someone else's BS. rents are due on the first and late on the second. no grace period.

i tell the tenants i'm NOT in the late fee business and don't want their late fee's but a few years ago i started telling them that i'll gladly take their money and buy the same good beer and steaks they could buy themselves. since then i've only had to take two late fee's and then it was my pleasure to dine on their dime. i also have a "notice fee that i charge for every time i have to swing by their home to post a notice.

Our tenants pay rent directly to the bank, rent is due on the 1st and overdue if not posted by the bank by the 5th with a $35 late fee. The same ones are often late and think rent is due on the 5th. A while ago, I also started charging $10 a week starting on the 12th until paid in full because some tenants who were late, didn't pay until the end of the month. My new lease says, due on or before the 1st with no grace and $50 late fee with $10 a week starting on the 8th. Most of our rents are $375, so that's a pretty hefty late fee.

Because tenants pay the bank, I log in and see who paid how much and when. If they're late, I have to check again and again to see and record when they paid. This takes my time that they need to pay for. The more we enforce the late fee & post notices to quit the day after rent is late for those who haven't paid or texted me they were going to be late, the more they pay on time.

Late fees are not limited in GA and we don't have a set amount of time to wait to post notice or how long we have to wait to file dispo on them, so we usually file the next day. Any monies due are considered rent and applied to oldest owed first. I only put how much they owe as rent when I file, no late fees.