Assigning late rent fees? Check state laws first.

DemandforPayment

We talk a lot about late rent fees and incentives at RenterUp and sometimes I forget that people live in different states with different laws pertaining to late rental payments, fees, and discounts….

In California, Equity Residential, a property owner with about 25,000 units is currently undergoing a class action lawsuit for excessive fees, which alleges the landlord generates profit from the tenants’ fees. The tenants also complain they have no way of knowing their late-fee balances and that the late-fee policies are not clearly documented. According to a Chicago Business Journal  article by Lauren Hepler, the late fees in this case can “pencil out to more than 1,000 percent interest.”

This opens up a can of worms, right? Why should anyone pay rent on time if the state is going to protect them from paying any late fees? However, should property owners be able to realize 1,000 percent interest on late rent fees?

Let’s look at an alternative way to consider the problem, through discounts. Many property owners choose to offer a refund or discount for early pay or even payment on time. For example, your rent might be $1,000 when the landlord only needs $950, so they might say “pre-pay your rent before the 1st and get $50 off your rent.” This takes fees out of the discussion and certainly should look good to a judge, right? Wait! In many states, including Connecticut, “No penalty or discount of any kind can be assessed or offered as long as the landlord is paid by the 10th of the month.” Ouch.

Conclusion? I’m glad I live in Georgia and…..you might do well to look at your state’s laws before getting creative with your fees and discounts. Take a good look at your leases to make sure all fees are clearly documented and consider using a software application, like RenterUp, to help automate communication of any unpaid rent and/or fees which might be accruing.

What about your state? Any good stories of discounts or fees?

Cash is dead.

heres-how-much-the-giant-pile-of-money-on-breaking-bad-is-worth

OK, Cash is not really dead, but undoubtedly, the usage of cash is diminishing. In our quest to simplify rental management, we talk with a lot of landlords and property managers and they love to talk about the challenges of dealing with cash. Yes, cash for rental payments.

The numbers are interesting. Approximately 10% of the US population is unbanked, with no checking or savings account. When asked why they don’t have an account, 49% say they either “don’t have enough money” or “don’t need or want an account.” (source: Federal Reserve Board’s Consumer and Mobile Financial Services 2014 report). Honestly, at an average cost of $268/year, it is easy to understand why many people choose not to have a checking account.

For rental payments, cash has its pros and cons. Let’s explore a few:

Pros:

  • A bird in the hand is worth two in the bush. Cash can’t bounce like a check or be charged-back like a credit card.
  • It is immediate. No need to wait for it to clear.

Cons:

  • Shrinkage! A friend of mine insures a property management firm that has recently discovered they had lost thousands of dollars of cash rental payments and now they want to file a claim to their insurance company to cover the losses. Sticky fingers in the property manager’s office! Uh, oh……it’s completely untraceable….so, did it really happen?
  • From a property manager’s perspective, it is seriously time consuming. Collect the cash, manually record all the transactions, find a deposit slip, count the cash, drive to the bank, and avoid being mugged! I’m exhausted thinking about it.

Without a doubt, cash is here for a little while longer. I imagine that most independent landlords don’t have a problem handling cash payments, but what about property managers with 10 units or more? How do you handle it? What are your thoughts on cash as a form of rental payments? Is it more of pain than it’s worth?