Should Landlords Ever Waive Late Fees?
December 28, 2021
We’d love to connect with you.
How to Be Firm but Fair with Overdue Rent Payments
Your tenant has just come to you about a late rent payment he made last month. He’s wondering if you’d be willing to waive the fee, despite the agreement on the lease. It seems like an honest, isolated mistake.
Should you make an exception and waive the fee? Generally speaking — no, you should not.
While a single overdue rent payment may not seem like a huge deal, it is important to remember that it is a breach of a legally binding contract. Late fees, therefore, serve as a justified consequence for tenants when they do not hold up their end of the agreement. Whatever your rent collection and late-fee policies are, they should be clearly stated in the lease. Doing so is the best way to deter any miscommunication or disputes that could arise should you need to enforce them.
Waiving Late Fees Is a Slippery Slope
We all know how it goes — if you give a mouse a cookie, he will ask for a glass of milk. If you give him the milk, he will want you to waive his late fees every time he pays his rent late…or something like that. You get the idea.
If you decide to waive a fee one time, you risk making the tenant think that you are willing to do so again or that he can disregard other aspects of the lease. What may start as a request to waive a single fee for a late payment may result in the tenant asking you to overlook your “no-pet policy” to accommodate a new pet capuchin that he has adopted and has already moved into the space.
Of course, not every tenant will take advantage of your lenience (and a thorough tenant screening process should help minimize that likelihood). Still, it’s a genuine possibility, and you should always be wary of it.
Depending on the proximity of your tenants to one another, they may talk amongst themselves about how their rentals are going. If word gets around that one tenant received special treatment on a fee waiver, you can bet that other tenants will expect the same for themselves.
While being gracious with your waivers can boost your image in the eyes of certain tenants, it can appear to others that you are playing favorites. In some instances, adopting inconsistent late-fee policies may even result in liability for housing discrimination.
In addition, being waiver-happy can be extremely costly for you down the road. Should you ever evict your tenants, you won’t be able to collect judgments for any fees you’ve agreed to relinquish.
Shouldn’t Tenants Get a Second Chance When Their Rent Is Late?
Not all your tenants are looking to pull a fast one on you. You’ll have plenty who are well-intentioned and pay on time, every time, without any trouble. Now and again, however, life happens, and even the best tenants can be put in challenging situations.
So, is it fair to waive their fees but enforce them for others? On one hand, you don’t want to punish your most reliable tenants. On the other hand, they’ve still breached a contract despite a favorable and proven payment history.
Fortunately, there are compromises you can make to uphold your business’s standards while remaining an empathetic landlord.
Late-Fee Solutions for Tenants and Landlords
The key is to aim for consistency. The most applicable rule of thumb is that you should do for all what you do for one. Should you wish to implement waivers for some tenants, the best way to do so would be through a blanket policy addressed in your lease.
For instance, considering a one-time late fee waiver after a certain number of consecutive, full, and timely payments is an effective way to enforce fees while allowing your more established renters to catch a break when they need it. In doing so, every one of your tenants will fall under a strict, uniform policy.
The specifics will be up to you, but having a policy like this provides your tenants with an opportunity to prove that they are accountable enough to deserve a waiver.
Late Fees Aren’t Personal
Enforcing late fees doesn’t make you a villain. Your tenants broke a known rule, and you are simply enforcing the consequence. At the end of the day, renting is a business. Any lease terms or additional policies that you have put in place are there to protect that business, and you should approach making any exceptions to those guidelines with caution.
Of course, it’s easier said than done. It can be hard not to give your tenants the benefit of the doubt when they delay their rent payments. While it’s nobody’s favorite part of the job, it’s a critical one. Implementing a consistent late-fee policy can play an integral role in sustaining your long-term success.