One of the most misunderstood agreements that tenants have with Austin Property Managers and Landlords is when rent is actually due. It’s clearly spelled out in the written lease agreement, but confusion exists nonetheless. Most lease agreements require rent to be paid on or before the first of each month. All Crossland Property Management leases have a due date of the 1st, no exceptions. Many of my tenants, however, consider the “due date” to be the last day of the grace period, which is the 3rd for us. This is not correct and can lead to undesirable outcomes for tenants.
Most Texas leases include a provision that states the day upon which late fees begin to accrue for unpaid rent. The period of days after the 1st, but before the “late fee date”, is called the “grace period”. In fact, a 1-day grace period is mandated by Texas law, meaning the first day that a Texas landlord can lawfully charge a late fee is the 3rd of the month (assuming the lease states a due date of the 1st, with the 2nd being the 1-day grace period).
At Crossland Property Management, we have a 2-day grace period (giving an extra grace period day), meaning rent can be paid late on the 2nd or 3rd without a late fee, and the late fee starts on the 4th. But this does not make the 3rd the “due date” for rent, as so many tenants seem to assume. It works like this:
Rent Paid on or before the 1st – This is an “on time” rent payment. You are performing as agreed in the lease. You are an A+ rent payer.
Rent Paid on the 2nd or 3rd – This is a “late payment” for which no late fee is charged, because of the 2-day grace period. You are a B- rent payer.
Rent paid on or after the 4th – This is a late payment for which a late fee is incurred. You are a D rent payer. If I have to send an eviction notice before you pay, you earned an F. This will cost you not only in late fees, but in other ways explained below.
Tenants often mentally convert the due date to the 3rd instead of the 1st. In fact, in any given month, about one third of our rent payments are received late ON the 3rd. It’s human nature. We think in terms of consequences. A late payment each month on the 3rd seems to have have no consequences to most tenants, and many in fact consider it to be “on time”. But in fact is not correct.
You may think, “ok, I understand what you’re saying Steve, but there’s still no downside to paying on the 3rd, so I’ll just keep doing that”. This is where most tenants don’t know what you don’t know. There are in fact financial consequences to paying late each month, even within the grace period. Mainly, I don’t offer the same renewal rates to tenants who consistently pay late as I do to tenants who consistently pay on time. I also don’t provide as good a rental refernce for late payors as I do for those who pay on time.
Here’s how it works for lease renewals.
Each month I review the list of lease renewals for properties we manage. I look at the current rental rate and compare it to the current market rent rate. I also look at tenant payment history and the communication/repair history of each tenant. This might include violation letters from the HOA, complaints from neighbors and repair requests.
At present, rents are rising in Austin so virtually every renewal letter will have at least a small rent increase. Here is where tenant performance becomes very important.
I offer the most generous renewal rates to my best tenants.
If you consistently pay on time (the 1st) or early, you communicate repair requests in writing as required by the lease agreement (preferably through our online repair request form), you take proper care of your yard and the property, and you don’t cause HOA or neighbor complaints to be issued, you are one of our “best” tenants. You are an A+ tenant, and your renewal rate will reflect that. Many of my A+ tenants in fact remain at “below market” rental rates because we value the stability and good relations that A+ tenants provide. You represent an asset to our owners and you are justly rewarded by receiving the most favorable consideration possible at renewal time.
I offer the least generous renewal rates to my riskiest tenants
What is a high risk tenant? You are a high risk tenant if you pay late every month, including consistently paying on the 3rd. You are a high risk tenant if you, for what ever reason, have to be reminded of the agreements you made when you signed your lease and you demonstrate a reluctance or inability to abide by the terms and conditions of the lease agreement. If you call on the phone and argue about having to submit repairs in writing. If you slip up and pay late on the 4th, but then argue about the late fee and act like a petulant child. If I receive HOA complaint letters because you can’t follow neighborhood rules. If, on a drive-by, I see that you provide minimal care to your yard.
If any of these things describe you as a tenant, then you represent a “higher risk” to the landlord, and you create greater effort for the property manager. Your renewal rate will rightfully reflect this.
I typically don’t “non-renew” tenants, unless we have chronic problems and ongoing unresolved issues that are serious. We’d rather avoid turnover, when possible, for our owners. But what I will do is raise the rent so high that you might decide to leave on your own. If you don’t, that’s ok, you’re paying a premium rent rate which properly compensates my owner for the higher risk you represent. This is why I have some tenants paying much higher rent than others for the same floorplan in the same neighborhood.
Finally, when a tenant does move and the prospect landlord calls to ask for a tenant reference, I either report “they always paid on time, took good care of the property and caused no problems”, which is what you want me to say. You don’t want me to say “they consistently paid late and had some trouble abiding by the lease terms”.
The landlord/tenant relationship is a two way street. It’s an extremely tough profession for property managers. Because of that, as a property manager, I very much appreciate good A+ tenants who make my job easier by paying on time and communicating well, and I don’t appreciate tenants who make my property management job harder by paying late and arguing about stuff. Most importantly, our A+ tenants are often paying $600 to $1800 per year less in rent than our C- tenants because we place that high a value on the risk that C- tenants represent. Within which category would you rather reside? It’s as simple as paying on or before the 1st and abiding by your lease terms to be in the A+ category.