Offer Tenants A Rent Sale

ChecksIn my years as a landlord, I’ve learned some tenants have no sense of time.

Rent would be due on the 1st. But that came and went, then it was the 5th, the 10th and, before I knew it, I was certain I was going to have to start eviction proceedings.

It’s always  just about then I finally get a rent check. The tenant had the money all along; he simply hadn’t gotten around to paying me.

Years ago, I thought I discovered a relatively easy fix to this problem; late fees for rent checks delivered after the 5th.

Minnesota law states when a tenant pays the rent late, the lease can require that the tenant to pay a late fee. Of course, the lease has to say how much the late fee is and when it’s due.

But here’s the catch. The late fee has to be for a “reasonable” amount that compensates the landlord for the actual damages resulting from the tenant’s late payment.

The late fee can’t be punitive.

For example, the landlord may incur late fees because the delayed rent caused her to be late on her mortgage payment. The landlord must also be able to substantiate this claim.

A landlord may also not assess punitive charges. An example might be a $10 a day late fee. This figure is in all probability illegal  because it doesn’t have any correlation with the extra expenses incurred as a result of the late payment.

In other words, the penalty resulting from actual expenses incurred probably isn’t going to be significant enough to inspire anyone to action.

But what if you offered a discount for early rent payments?

Some landlords include language in their leases that states the monthly rent is $950. However, if the tenant pays before the 1st of the month, he receives a $50 discount.

In effect, perhaps you wanted $900 for rent all along. Offering a discount entices the tenant to pay on time.

After all, we all rush to the store to take advantage of sales or coupons on the brink of expiration. The stores know discounts inspire us to action.

Wouldn’t the same be true of rent?