Tips for Landlords: Rent Due Date Collection Policy - dummies

Tips for Landlords: Rent Due Date Collection Policy

By Robert S. Griswold, Laurence Harmon

As the landlord, you should always require that the rent be received in full in advance, on or before the first day of each month. This method is the most common, and many state laws require it unless the rental contract specifies otherwise.

That said, you and your resident can determine that the rent is due on any mutually agreeable date during the month. This approach may make sense if your resident receives income or financial assistance payments on certain dates.

Some owners make the rent payable on the date the resident moves in. This practice is legal and may be acceptable if you have only a few residents and are willing to keep track of each due date, but making all your rents due on the first of the month makes life simpler and avoids confusion.

If your rent due date falls on a weekend or a legal holiday, most states allow the resident to pay by the next business day. This policy may not be mandatory in your state, but adopting it is a good idea.

Although rent is traditionally paid in full at one time, you may agree to let your resident divide up the rent and pay twice a month, every week, or in some other time frame. Try to avoid accepting more frequent payments, because your goal is efficiency.

Be careful to document that any differences in rental collection terms are based on legitimate business decisions or else your actions may be seen as favoring one resident over another. Of course, you may have a resident who formally requests an accommodation in payment terms under fair housing laws. In this case, seek advice from local landlord-resident legal counsel.

In addition to fair housing concerns, think about the ramifications of accepting rent based on the resident’s scheduled receipt of income rather than your usual rent due date. By accommodating the resident, you’re tacitly acknowledging that she needs that payment plan to afford the rent.

But one of the fundamental tenets in rental housing management is to avoid residents who can’t afford the rent. If your resident needs that income to pay her rent that month, you have no safety net if the resident’s check is lost in the mail, her car breaks down, or she’s temporarily laid off from work.

To avoid surprises and delinquent rent, you don’t want your residents’ finances to be so tight that they need this month’s income to pay this month’s rent.

Prorating rent

If your resident’s occupancy begins in the middle of the month, and your rent collection policy states that all rents are due on the first of each month, then you need to prorate the resident’s rent at move-in. Following are two basic ways to prorate the rent at the beginning of your new resident’s occupancy:

  • If your resident moves in toward the end of a month, collect a full month’s rent (for the next month), plus the rent due for the prorated portion of the current month. For example, if your resident takes occupancy on June 25, then upon move-in, collect six days’ rent for the period of June 25 to June 30, plus a full month’s rent for July.

  • If your resident moves in early in a month, collect a full month’s rent prior to move-in and then collect the balance due for the prorated rent on the first day of the next month. For example, if your resident moves in on May 10, then before she takes occupancy, collect a full month’s rent that covers the period of May 10 through June 9.

    Then on June 1, collect the balance due for June 10 through June 30 (21 days’ worth). By July 1, the resident is on track to pay her full rent on the first day of each month.

Don’t let your new resident move in without making at least a full month’s rent payment.

Unless otherwise agreed, you normally uniformly apportion rent from day to day using a 30-day month. Divide your monthly rental rate by 30 to determine the daily rate and multiply your answer by the number of days in the partial rental period. (This formula applies to February as well.)

Providing a grace period

Many rent collection policies allow for a grace period that gives residents a few extra days to pay their rent in full after the due date but before incurring late charges. However, the rent is due on or before the due date. If paid after the due date, but before the end of the grace period, a late fee may not accrue, but the payment is still considered legally delinquent.

Make sure your rental contract and the resident information letter are very clear about the fact that the rent is due on or before the due date and that it’s technically late if paid during the grace period.

Grace periods are optional in most states and can be any number of days in length. However, a few states (including Connecticut, Delaware, Maine, Oregon, and Rhode Island) have mandatory grace periods or restrictions on serving a notice to pay rent or quit, so be sure to check your local and state laws.

Unless restricted by law, consider setting up your grace period to expire on the third of the month and allow an extra day or two if the third falls on a weekend or holiday.

In most states, you don’t have to wait until the grace period expires to begin your collection efforts with residents who show a pattern of being late. Your rental contract should contain a specific provision that you have the right to refuse payment after the expiration of your legal demand notice so you aren’t obligated to accept an offer of rent from the resident and can move forward with eviction.