Motivating Slow Payers in States with Late Fee Limits

I am in the process of reviewing North Carolina's eviction laws for possible management there. I've been talking with a property manager who tells me they can only charge 5% of the rent for a late fee and "court costs."

I know there are other states who operate this way and I am wondering how you motivate late payers to get their rent in. I don't think 5% and an eviction process that takes about 45+ days would be a good motivator.

I read an eviction handbook that states what a landlord can charge a tenant, as an expense related to the tenant's moving out, a landlord can charge for "Cost of re-renting the premises after a breach."

Along with an eviction notice, could there also be a notice of putting the unit on the market and bringing customers in to see it with proper notice?

What about advertising costs added to the account? Actual cost of staff to advertise the particular unit online daily at their salary rate? Or, a flat "re-marketing fee?"

I am interpreting this statement in the handbook as being permissible if there is a breach of contract for non-payment of rent.

If so, along with a late fee of 5% and a daily "re-marketing" fee of $$$$ until it's pre-leased or rent is paid, is that an option?

What do you think?

Sandy

There are normally little things you can throw in which will motivate them to get the rent in on time every month. Like upgrades, lock in on rental rates and so on. But, then there may be a need for a personal bugdet class to be given as there may be other issues, or a health one to consider.

Yes, it sounds like you could charge a re-let fee for breach for non-payment of rent. However, in my experience, what needs to happen and what may be effective is retraining your residents to understand rent is ALWAYS LATE if not paid on or before the first of the month. Even if your company offers a Grace Period, rent is still late if not paid by the first and this should be stated in the lease. Personally, I think we wait too long to send that 3-day or 5-day or 10-day notice. I personally believe it should be sent on the second if there is no Grace Period because oftentimes, residents fail to communicate with the office and two, they have been educated to know nothing will really get done until mid-month. The sooner residents understand you are "not playing" they will either move or pay up or make payment arrangements. By the way, allowing payment plans is not effective techniques for most residents either because most of the time it prolongs the inevitable.

Next, for those who simply do not understand how to manage their money, you can educate them by bringing in a Volunteer from the banking industry, the accounting field, home extension or economist group (in rural areas) to teach people how to make and stick to a budget. They can show them how to call car finance places to have the payment due dates changed, etc. Those payments can be changed - rent cannot since it is always due on the first.

Third, you can offer Early Bird contests with varying prizes. You can really build this up in your monthly newsletter. You might be surprised how many people love this. You can offer special drawings, too. For example, those who have paid on time for six months may earn Bonus Points for a ticket to a drawing for a TV or apartment upgrade.

I manage a property in NC and I changed my collection policy to the following:

1. The 3rd time I have to file court papers on you I will not accept your rent. You must move.

2. ANY month you don't pay by my fiscal closeout (usually 25th of each month) I will not take your money and you must move. Whether it is your first month as a tenant or your hundredth month as a tenant you gotta go. After 1 resident got evicted for each of these things I zero out on delinquency 10 out of 12 months a year. I file eviction papers maybe 4 times a year. I work a low to middle income property. These people are told when they move in if you don't pay you go. Holding that firm approach has been very successful for me.