Our lease states rent is due on the 5th of the month. Late fees of 10% of the rent payment are added to the tenant ledger after that. Pretty simple stuff.
Tenants seem to think that the late fee can be ignored. They pay the regular rent on the 8th of the month and ignore the follow up requests for the late fee. Most owners do not start an eviction over an unpaid late fee.
Each month though that the cycle continues, the deficit grows. The payments received from the tenant are applied to the oldest charges first. The late fee from the previous month is paid and then 90% of the rent gets covered with the remainder of the late fee. So, another late fee is charged and now the tenant is behind the 10% of the rent payment that did not get covered in the current month and the new 10% late fee. The reality is their lease is in a default status. Eviction could start at any time!
As the manager, we give the tenant notice both electronically and by mail delivery. As the balance grows the tenant usually starts to argue about the late fee. Usually after reluctantly deciding they have no argument, the tenant will make the payment required to bring the tenant ledger current. It is the tenants that decide these charges are just not right and refuse to pay them that cause a dilemma.
As an owner or manager, it is not recommended that this cycle is allowed to repeat itself month after month. As the outstanding balance grows with no collection efforts, your case to eventually crack down or receive judgement in an eviction is weakened. I would not advise anyone to try an eviction based on unpaid late fees unless aggressive collection methods have been attempted every month. I believe that the communications to the tenant need to include a clear indication that they legally owe this amount and if they continue to ignore it, a judgement will be obtained making it much more difficult in the future to lease a home.
In practice, that usually seems to resolve the situation. The tenant may complain, but they make the payment. Like a child who has learned to clean their room when asked in order to avoid the punishment of also cleaning their brother’s room; tenants make their payments before the fifth to avoid ever having to encounter the ugly late fees again.
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Tags: Indianapolis Property Management, Indianapolis Property Manager, Late Fees, Wilmoth
