Late Fee System and the Innago Solution
July 27, 2017
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How Innago Can Help You Effectively Manage Your Late Fee System
A late fee system is an important part of the management process for any landlord worth their salt. It only takes a line or two in your lease agreement to grant yourself a significant ally in your monthly rental collection. In fact, aside from an eviction notice, the threat of a late rent fee is often the only impetus strong enough to compel delinquent tenants to submit their rent. Yes, there is little doubt – late fees are a good thing. But late fee enforcement is often anything but.
A Familiar Flaw
Let’s see if this sounds like a familiar scenario: you included a late fee clause in your lease agreement that grants the tenant a five-day grace period, after which they are assessed a $50 late fee. It’s May 1st and Tenant Bob hasn’t paid his $500 rent. Five days later, still nothing and no word from Bob either. So you do everything at your disposal: you call Bob, tell him that in accordance with your lease agreement he now owes you fifty extra dollars for a total of $550, and threaten that if you don’t receive those funds prior to the 10th of May, you’ll start drawing up an eviction notice.
That gets Bob’s attention, and he quickly cuts a check and drops it off. All is right. But when you open the check, you find it’s just for the original rental amount of $500, no late fee included. You have two options: continue to spend your time pursuing Bob for money you’re unlikely to collect and for which you have even fewer enforcement resources, or… you can call it a wash. You received the $500 after all – didn’t the threat of the late fee do its primary job?
Perhaps it did, but now Bob knows he’s got five days of leeway every month and the threat of a late fee is an empty one. Multiply this scenario by 30, 50, 100+ tenants and you’ve got a real administrative nightmare. But things don’t have to be that difficult. Enforcing and collecting late rent fees can be a simple, efficient, and effective process. A better solution exists! Here’s how Innago’s late fee system works for you.
Flexible and Intuitive Late Fees
We at Innago partner with a wide variety of landlords and property managers, each of which often has their own specific late fee structure. Because of this, we’ve worked hard to produce a late fee system that is flexible and intuitive enough to work with every one of them.
You can charge your tenants a percentage of their total rent due, a percentage of the outstanding amount, or a flat fee. You can set the fee to repeat and designate an interval, stack fees, and charge tenants individually. By setting a default, your fees will apply to all properties. You can also go to an individual property and override the defaults for a custom structure. This is perfect when you purchase a building or unit that already has tenants under lease with a late fee structure that differs from your own. And of course, you can waive or reduce the late fee when needed. Your flexibility and control hasn’t changed, just the way it’s presented to the tenant, and that’s the important part.
Late Fee Enforcement that Works
In the scenario laid out with Tenant Bob above, the issue is two-fold. Firstly, when you call your tenant and request collection, the responsibility shifts from the tenant to you which can create long term issues. Secondly, the tenant quickly recognizes gaps in the system that they can exploit (e.g., paying rent late every month and skipping out on the late fee). Innago eliminates both of these issues. On Innago, late fees are automatically assessed, and an email notification is sent to the tenant. You don’t have to worry about reminding them that they’re late or requesting the funds yourself.
Additionally, the tenant cannot pay their next invoice until their current invoice and the associated late fees are fully paid. But let’s say this was the first time the tenant was ever late. And let’s also say that they had a passable excuse (their paycheck came in late, there was a death in the family, they had an unexpected expense). If the tenant wants the late fee waived, they must reach out to you, and that gives you an opportunity to evaluate their request, and – if you do choose to waive the fee – inform them that next time, you may not be quite as accommodating.
A Better Late Fee System
In almost every respect, it’s best to have a personal relationship with your tenants. But when it comes to late fees, being impersonal pays off. Innago helps you make late fees feel automatic and inescapable – even though you’re in full control. Innago makes the threat of late fees real and with it, drastically reduces your monthly delinquency rate and raises the amount you’ll collect in late fees.
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