Incentive for Paying Rent on Time?

What do you think of adding a clause to the lease that states:

"If you do not pay your rent on time for two months in a row, your rent will increase by $100 for the remainder of the lease term."

:ohmy:I don't think it'd be a good idea at my complex. I'd lose all tenants that bring in that extra money for those fees as opposed to having them bring their payment on time. Some tenant's pay schedules are just not fit to pay within the first 5 days of the month. In my opinion, late fee is sufficient enough.

I think rather than charging them more rent perhaps reward those who do pay on time. Maybe with a drawing to win an Ipad or something?

I'd check with an attorney before I put that in. It may be unenforceable.

I came across a property in Michigan that was having so much trouble getting people to pay on time. The did the drawing idea. Everyone who paid on time got their name put in the fishbowl, and the winner got 1 month's free rent! They claimed it really worked, and they saw a big increase in on time payment after that.

We used to do an early bird drawing. The prize was only a $20 gift card. So few people paid on time that the same person won every month. We can't afford to give away an ipad or a month worth of rent.

I generally prefer positive reinforcement but in this case, what convinces residents to pay on time is the negative consequences.

Rent is due on the first. "Rent is Late" door hangers put out on the 4th. Late fee applied on the 5th. Charge notices for the late fee are posted on the 6th. 72 hr notice to vacate posted on the 8th. Late fee final notice posted on the 11th. Court eviction filed on the 12th. If they pay late repeatedly or fail to pay all of the late fee or utility charge, For Cause Termination notices are posted on the 15th.

Our policy each month was:

RENT---
Due on the first.
Late on the sixth.
Delinquent on the tenth.

On the 11th, you need to be getting some cardboard boxes because you will be moving by the 15th.

(Of course this was a subsidized property).

Yeah, I have a problem with incentives for paying on time--even a $20 gift card. I think the reverse is best. First, if you have a high number of resident email addresses, you can send an email before the 1st with a reminder. Then another on the 1st, and one only to lates on the 6th. Or you can do this with paper notices. One thing I've tried, and it was controversial, is that on the 6th I sent the late residents a note with names of local currency exchanges, payday loan places, etc., with addresses, contact info and phone numbers for them. Whether this embarrassed them or just provided guidance I don't know, but it helped.

I prefer the paper notices to emails. When residents get the bright colored "LATE RENT" notice on their door, they are embarrassed that all their neighbors know.

When I was a leasing agent, I worked with a manager who demanded I tape a letter to their door, message facing out, with all four sides of the paper taped to the door. It was designed to embarrass them and make it hard to get off! That was too far for my taste. BUT, you can't nag enough in situations like that.

@Chuck Actually, that's how you're suppose to post notice in CA, notice flat on door with tape on all four sides. However, I do agree with you and I prefer to put it in an envelope.

My original post is what a friend of mine's owner put into their lease. I believe it is a violation of our State Laws about changing the terms of the lease, even if the tenant signed and agreed to it before they moved in.

I think it is more of an incentive for a tenant not to renew their lease.