Collecting Fees

Posted in Blog  
  on Jul 17, 2015

As a landlord, you know the expense and time-consuming nature of rental applications, background checks, and credit checks. To offset these issues, you must ask tenants to pay fees so you can hire people to process the forms and ensure their information is handled quickly; you also need to cover the surcharges for all necessary service checks. However, despite the initial hurdle, these fees end up helping everyone in the end.

Application Fees
When you charge an application fee, make sure you are within the bounds of state and local laws. For instance, prospective tenants in Florida have paid application fees up to $550 per applicant, since Florida has not yet regulated how landlords collect application fees. If you are renting out property there, you can charge as much as the market will bear.
Other states are not as liberal with how they regulate application fees. California, for example, limits application fees to $35 for each applicant; this state also requires any funds not spent on background or other checks be refunded to the applicant. States such as Massachusetts do not allow any application fees whatsoever. You are thus cautioned to check into the legalities surrounding rental agreements.
You might want to investigate how your local municipality governs rental agreements. A landlord in San Diego may be able to raise rents according to his or her view of the market, but a landlord in San Francisco is bound by rent-control statutes. San Franciscans also have a robust rent board that oversees landlord-tenant relationships.

Late Fees
Late fees can crop up nearly every month. It is vital to ensure your tenants understand the due dates for rent and the implications for late rent. After all, if it's not in the contract, there is no way a late fee can be enforced. While rules vary from state to state, most will require a certain reasonableness behind a late-fee agreement. For instance, state regulators like to see a grace period before a fee is applied. Generally, a grace period of three days after the due date is acceptable. You might extend that up to five or 15 days, if you like.
When creating a late fee schedule, keep the fee under 5 percent of the rent. This rate is generally considered reasonable, and landlords who ask such a rate are likely to be seen as acting in good faith. However, if your state allows, you might increase that rate to 10 percent if the tenant is unduly late; after 15 days, you might want to increase the late fee percentage. To stem a chronic problem, consider implementing a fee escalation for repeat offenders; the first late fee could sit at 1 percent of the rent, but you could add a percentage to that figure for every late payment thereafter. Again, be certain to check state and local laws.

Fees Versus Deposits
In general, a fee is non-refundable. While there may be cases where a fee is miscalculated, misapplied, or even negotiated to a lower rate or waived altogether, a fee is a considered permanent payment. When a fee is considered refundable, you can consider that a deposit. With this in mind, you may wish to avoid confusion around items such as a pet deposit and rename it a pet fee, so that your tenants don't seek reimbursement upon move-out.
Fees and deposits are a normal part of business as a landlord. When you ensure you are in compliance with the law, you will be able to rest easy and focus on important parts of your job, such as marketing and maintenance.


Most Important Landlord Tenant Laws in Texas

When it comes to having a tenant for the first time, it can be pretty daunting because you are going to be the corresponding landlord and a new relationship will emerge, which will need time to grow... More

The Landlord Tenant Board: What it is and When it is Needed

Many times, there are issues between a landlord and a tenant that need to be resolved but are failed to do so, because both parties have gone too far with their actions, and have retaliated in the... More

The Landlord Tenant Laws in California

The landlord and tenant laws in California are literally the same as they are in any other state. These laws, rules and regulations are put into practice because they uphold an order, a discipline,... More

Understanding the Landlord Tenant Laws in Illinois

People are aware that there are different rulings in each state with reference to the landlord/tenant laws. The state of Illinois also has a set of laws. These rules and regulations are basically... More

How to Create a Residential Lease Agreement

Where there is a landlord, there will also be a tenant, and it is no surprise that these two parties can only work together once there is some sort of agreement, contract or a binding deal in place.... More

The Best Sites for Rental and Lease Agreement Templates

Many landlords find it difficult to write and draft a lease agreement. Since every State has its own general template, it can also be difficult to make sure your lease agreement meets all the criteria... More

The Landlord Tenant Act: What Landlords Need to Know

All landlords know that before they can formally become a landlord there are a lot of things they need to understand. Landlords and tenants cannot act as such without any legal bodies involved. That... More

5 Landlord Forms that Every Landlord Should Have

When it comes to being a landlord, one should know that it is not for the unprepared individual. This should be clear that being a landlord does not simply mean that you will be taking the rent and... More

Landlord Obligations: The Responsibilities of a Landlord

Becoming a landlord is a major deal and no one can simply get up and think, “well, yes I think I should be a landlord and rent out my flat.” If you are thinking that you would like to be a landlord,... More

The Best Landlord Associations for Landlords to Join

If you’re a landlord and want to manage your business in a better way, you should endeavor to get in touch with those industry experts who have the experience and the skills to help you do it. This is... More