Lawmakers Tinker With Late Rent Fees

by Chris on February 10, 2020

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.

The best strategy available to landlords is to Report Rent Payments to a credit bureau. This method assists good tenants by allowing them to earn credit for what is likely their largest monthly payment.

At the same time, tenants who inflate income to secure a rental they can’t afford, blow their money on other things, or fall into the habit of paying the landlord last, will need to reconsider their priorities.

Landlords can take additional steps to encourage on-time 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;

When screening tenants, check the database at Landlord Credit Bureau. This list includes tenants who have paid on time each month, along with those who have paid late;

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.

{ 2 comments… read them below or add one }

Mike February 11, 2020 at 7:30 am

There is no other business that is hampered as much as rentals! Why aren’t mortgage co’s controlled They have rights to outrageous penalties for 1 day late payments. In Ontario the Landlord has to pay interest on deposits to tenants that are tied to the % of increase in the yearly rental, which is traditionally higher than the pitiful interest of half a % and I can compare a whole slew of other onerous conditions on the landlord! It’s time someone did something to balance , particularly the small landlord of up to 3-5 units to allow him to have more control of the property he sweated all his life to get

kg February 11, 2020 at 3:26 pm

We’re down to 4 single family home rentals now. Not sure if we want to get anymore. We just wanted to upgrade the houses in the area where we live and provide decent housing. It would actually be easier just to move rather than to try to make our neighborhood better. We’re working class people and are very close to retirement age. We’re not sure that the risk and hard work is worth the small reward anymore. At the rate that laws are changing, rentals may have to be provided by large companies that have deeper pockets.

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