When rents spiked in Denver five years ago, lawmakers resisted the urge to overregulate. Instead, they encouraged developers and added more inventory — much more inventory. Over 12,000 new units — four times the previous average — were added last year alone. Rents have leveled off, and even dropped 3%.
So, it comes as a surprise that Colorado lawmakers now are looking to penalize landlords by pushing forward a one-size-fits-all rule to cap late fees for all tenants, whether high or low income, and force landlords to wait until rent is at least 14 days past due before acting.
After this two-week “grace” period, the landlord could charge the greater of $20, or 3% of the outstanding rent — $30 on a $1,000 rental.
The typical cash advance fee for a $1,000 withdrawal is $30 or higher, which provides incentive for tenants to use landlords as an ATM.
Conversely, the average grace period for a mortgage on a rental property is 10 days. The typical mortgage late fee is 5%. And, of course, there’s the time and expense of chasing down the rent. Under this law, Colorado landlords no longer would be allowed to recoup their actual out-of-pocket losses for late rent payments.
This proposed ordinance is intended to benefit tenants. A proponent posted on social media, “We will work together to empower tenants so that they have the support they need in order to thrive without the burden of housing insecurity.”
Colorado landlords are not alone. For instance, in Maine, landlords must wait for rent to be 15 days late before charging late fees. In Massachusetts, landlords must wait 30 days.
Laws like these force landlords to change existing leases and impact mortgages already in place, leaving landlords shortchanged.
With the number of states that now regulate late fees — either limiting the amount, extending the grace period, or both — the reality is that late fees no longer serve as sufficient motivation for tenants to pay rent on time. Protecting their credit, however, may do the trick.
In this era of overregulation, it’s more important than ever for landlords to use the tools at their disposal to ensure on-time rent payments.
Check both rental history and credit when screening prospective tenants. Ask previous landlords about late payments, and confirm the rental history by running a tenant credit check;
Provide as many options as possible for tenants to pay rent. Some love electronic transfers or automatic withdrawals; others like to pay in person or by check. Requiring money orders or certified funds slows the process; and
Send a reminder or invoice. Tenants are accustomed to seeing this from other creditors — and sometimes they simply forget.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.
Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.