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What to do when “Good” Tenants are Late

While I wouldn’t exactly consider myself an “agony aunt”, I am here to offer advice for you on any topics that you need help on. Therefore I encourage you to contact me with any questions and I’ll do my best to help you answer them. All questions and answers will be posted on our site so as to help others in the future.

Dave W. from Michigan writes:

“I only own a couple of properties, and an issue has cropped up that I’m unsure of how to deal with. I’ve had a set of tenants in one property for 18 months now. They’ve been great and have never been a problem. However on November 1st they approached me to say they couldn’t make their rent payment for a couple of days, and if that would be okay. I said yes but I’m having doubts that I handled it correctly.”

Hi Dave,

Well the first thing you need to consider when it comes to allowing late payments is whether or not you are violating any fair housing laws by showing any tenants preferential treatment. This varies depending on the State.

I’ve read over the Michigan Fair Housing Act and legally you are okay. However allowing late payments even once without any sort of a penalty, especially if it is written in your rental agreement form is an extremely bad business move.

I know that in this economy, it can be tough to penalize people for late rental payments, especially if they have some sort of “sob story”. But if you don’t remain consistant with penalties, then the tenants are liable to exploit your good nature. They may be good people – however it is just human nature. If they realize they can “get away” with making rental payments a week late then they can factor that into their budget.

What may start as a “few days late” can turn into multiple weeks. What was once a regular payment on the first of the month can end up in you having to hunt them down on a regular basis just to get rental payments.

If you are going to set any sort of “grace period” for your tenants make sure it is all in writing beforehand and is not longer than five days. And make it clear that if after the grace period they haven’t paid, then they will be handed a late-payment penalty in addition to what they currently owe.

Most importantly – the day after the rent is due and the grace period has surpassed, get the eviction process started by giving your tenants a notice informing them that they have to Pay Rent or Quit, or an Unconditional Quit Notice.

People pay their credit card payments on time because they don’t want to be hit with a large fee. People pay their television and internet bills on time because they don’t want the service cut off. People should also be paying their rental payments in time, and you have to remain strict about that.