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.