Late Rent & Library Books: What’s the Right Approach?

 

I remember approximately five years ago when the Charlotte Mecklenburg area libraries stopped charging late fees for overdue books.

 

My first thought was, “How will they ever get their books back on time?”

 

To be fair, they put some checks in place.  If a book was two weeks overdue, no other books could be checked out on the account.  If it was a month overdue, the cost of the book was charged to the account.  But if the book was brought back within a year, the cost of the book was refunded to the account so there was no charge (it just created more work for the librarian!).

 

So if I checked out Calvin & Hobbes and got really into it, I’d have 364 days to get it back to the library without incurring any type of monetary penalty.  That is really borrower friendly!

 

Local governments thought this “no late fee” policy for libraries wouldn’t materially affect their book returns as there was adoption throughout the country.  And I don’t know of any libraries that stopped operating because of this policy change.

 

Would this policy work with rental payments?  It would definitely be more tenant friendly!

 

As Charlotte property managers, we are not strangers to late rent payments.  It is part of the rental home game.  Rent is due on the 1^st of each month and it is considered late if not received by the 5^th of that month.

 

The biggest problem with late rent payments is that it slows the payment wagon.  Rent money typically goes to the property manager who pays any vendor bills (if applicable) and then deducts their own fees (we need to eat too!).  Then the money is sent to the owner. 

 

The owner has mouths to feed as well.  There are usually mortgages and other loans tied to the property that need to be paid.  Then there is money that needs to go to property tax bills, home insurance, and sometimes an HOA. All these funds then feed other people and entities.  The economy goes on.  But it all starts with a single tenant making their rent payment!

 

So getting the rent on time is paramount for everyone downstream.  If too many tenants decide to wait a year to pay their rent, the system crumbles.  And for most landlords, if one tenant does not pay for months, it has a noticeable effect on their ability to pay others.

 

If this is the case, what should landlords do to facilitate on-time rental payments?

 

1. Screen applicants well upfront: talk to past landlords (paying rent on-time is a habit!) and make sure the underlying tenant finances show they have that ability to afford their rental payments
2. Send late letters and always charge late fees: there needs to be some sting.  On-time rent is important!
3. File for eviction after the 2^nd payday: if there is no money then, it is really hard to catch up.  Cutting losses on the earlier side will curtail longer term lateness.

 

I remember during COVID we allowed penalty-free late rental payments for months.  The late rents shot up during that time, even with all the government money flowing in.  With no penalty there was a relaxed effort, even for a few historically good payers.

 

Libraries have the luxury of being non-profit entities that have local government as a financial backstop to continue to operate.  Smart landlords know they have a lot of mouths to feed (with no taxpayer back-up!) and need to be proactive to make sure tenants are doing their part. 

 

Happy Landlording!