Should Landlords Ever Waive Late Fees?

Should you waive late fees as a landlord? There are some cases where waiving a fee isn’t a horrible idea. However, the answer is generally “no.” Below are some of the reasons why. 

Waiving Late Fees Can Have a Domino Effect

Once you push the first domino over, the rest cascade down in the blink of an eye. How does this compare to waiving late fees? 

Tenants Could Ask for Other Favors

Although you want to be as accommodating as possible, sometimes tenants ask for too much leniency. If you overlook someone’s rent payment for March, come April they may be asking if you’d waive the fee for their parking spot, for example. Some people are good at getting what they want, and it can be difficult to learn how to say no, especially when that person has evidence of your kindness from their prior request. 

If someone is late with rent payment, it’s best to have a blanket policy of saying no to any requests of waiving their fee. After all, you have your late policy written clearly in the lease they agreed to. You’re upholding a legal document and maintaining respect as a landlord and for your property. Tenants have to be consistent and timely with their rent payments, so a late fee is the justified consequence of breaking the policy in their lease. 

You Could Be Accused of Favoritism

Word travels fast—if Heather from Unit C catches Tony from Unit A in the hallway after Pilates and tells him about how you waived her late fee for February, Tony just might tell Tom, who tells Rachel. And Rachel remembers how you denied her request for a late fee waiver in that very same month. Suddenly you have a scandal on your hands.

Federal fair housing laws are extremely strict about any instances that could be taken as discriminatory. Landlords are to be completely unbiased when accommodating their tenants, and fee waivers are no different. Although you may have simply had an off day when Rachel approached you and you denied her request, it can be tricky to prove that, and you could end up with a lawsuit. Although this case is unlikely, it’s important that you are exceedingly aware of the risks. 

If you prefer to continue to waive rental late fees, make sure you have a documented, airtight policy in place before doing so. It should be included in your lease and explained to your tenants before they sign. For example, perhaps after a year of perfect tenancy and no prior overdue rent payments, you allot one late fee waiver. But, again, make sure you are consistent in implementing this plan and have it written down. Also, have each tenant’s payment history easily accessible so if you ever need to double-check whether someone qualifies, you are able to. 

It’s Breaching a Legally Binding Contract

Bottom line, it’s both of you and your tenants’ jobs to uphold the promise you made when signing the lease. As mentioned earlier, you’re not being the bad guy by keeping up your end of the bargain and dealing out the consequence you set out in the rental agreement. 

However, if you don’t want to repeatedly feel like the “bad guy” for enforcing late fees, you can use property management software to do it for you. When a tenant is late on their rent, a late fee will automatically be posted to their account without any direct action from you. All you have to do is put your preferences into the software, like how long you want the grace period to be and how much you should charge for the fee, and everything else will be taken care of. When facing an angry tenant who wants their fee waived, you can tell them the software automatically applies the late fee. 

Conclusion

If you’re wondering whether to waive late fees, the general answer in most cases is “no.” Tenants agreed to certain terms and conditions before moving in, and paying on time was one of them. 

However, as mentioned above, there can be circumstances in which you allow someone to pay rent late without charging a fee. These circumstances should be regulated, though, and consistent across all your renters by implementing a policy in your lease. To make it even easier on yourself, invest some time into figuring out which property management software is best for your company, and input your policy into that application so you don’t even have to think about it.