Can I charge interest on the past due balance ? If yes, how much ?

[GALL]

What is the name of your state (only U.S. law)? GA

I have these tenants in my old residence, for about a year now and since day 1, they are paying late few days, or make payments few dollars short here and there and lately, after a long sob story letter, they missed the last 2 month's payments by a big discrepancy from what they should have paid.

They now owe me something in the order of several thousands compared to few hundreds in the recent past. I do not want to evict them. They have a newborn and they are trying to make ends meet. I understand and I am not driven by money. I just want to build a nest egg and may be a retirement residence while I will be working for another 15 or so years.

But, since I have witnessed, being forgiving when it comes to late payments and what not, people start to take advantage of that. So, as of Feb 1st, I am putting them on notice to bring their balance to current in the next 2 months and I want to charge them interest on the outstanding balance. I want it to be as high as possible so that they have a motivation to pay it off.

My question is, what is the highest monthly interest rate can I charge on the outstanding balance of payments in the state of GA, other than the late payment penalty. Or am I even allowed to do that ?

Thank you

 

[cbg]

What does the lease say about interest on late payments?

 

[STEPHAN]

Whenever you are week as a LL tenants will find out and take advantage. Always.

 

[Gail in Georgia]

"So, as of Feb 1st, I am putting them on notice to bring their balance to current in the next 2 months and I want to charge them interest on the outstanding balance. I want it to be as high as possible so that they have a motivation to pay it off.
My question is, what is the highest monthly interest rate can I charge on the outstanding balance of payments in the state of GA, other than the late payment penalty. Or am I even allowed to do that ?"

Seriously? You suddenly see yourself as a bank now?

Do you believe that these folks whom (it appears from your posting) have been living hand to mouth and perhaps worse now with a new infant will suddenly have all the back rent plus the late fees AND interest on this?

And what do you plan to do if they don't? Sue them for this? If you try it is likely a court will tell you that you have accepted the rent both late (without late fees) and at a lower rate perhaps not happily but at least (in the courts eyes) contentedly and unless you have some WRITTEN documentation between you and these tenants regarding some "pay back" plan your idea of having them pay back their balance with interest is, well, legal nonsense.

Forget this interest business. Tell them that rent is due on the first of the month (or whenever the lease states it is), it is late on the date listed on the lease at which time the late fee kicks in and failure to pay the full amount will result in you initiating the process of eviction.

Of course you are driven by money. This is what landlording is. No one wants to evict a tenant unless they have to. It's a pain to go through it and a pain to try to find a suitable replacement. Far easier to do nothing and let things slide. However, one then cannot complain when this happens.

Gail

 

[GALL]

What does the lease say about interest on late payments?

In the lease, there is no mention of interest rate. Just a $75 late payment penalty, if the rent for the month was not deposited by the 3rd of said month, which I was overlooking and not enforcing about 8 or 9 of the past 12 months.

 

[Zigner]

What is the remaining term in the lease? If they are now month-to-month, then you can give proper notice for a change in the terms of the agreement. As Gail pointed out, though, to what end? You have to decide if you are a business person or a charity (or some combination thereof). I'm not saying that sarcastically. I am totally serious. If you decide to be charitable, that is your choice, but it's a decision that needs to be made.

 

[GALL]

Whenever you are week as a LL tenants will find out and take advantage. Always.

I am painfully realizing it. I tried to be the nice guy, assuming everyone is like me. I live on the other end of the country and renting myself and never been late in my rent payments. Obviously, when there are no consequences, the rent payment can be deferred indefinitely. This must be what my tenants were thinking. I can not find any other explanation.

 

[STEPHAN]

the rent for the month was not deposited by the 3rd of said month, which I was overlooking and not enforcing about 8 or 9 of the past 12 months.

If you ever decide to evict them you might have a hard time based on late payment, as you have clearly agreed to late payments.

 

[Zigner]

I live on the other end of the country...

Do yourself a favor and hire a reputable professional property manager. The money you spend will save you tons down the road.

 

[GALL]

What is the remaining term in the lease? If they are now month-to-month, then you can give proper notice for a change in the terms of the agreement. As Gail pointed out, though, to what end? You have to decide if you are a business person or a charity (or some combination thereof). I'm not saying that sarcastically. I am totally serious. If you decide to be charitable, that is your choice, but it's a decision that needs to be made.

Okay, you need to understand one thing: Renting this place at the current rent rate is making me about $150/mo cash flow negative. So, I am not in it to make money. Again this is a long term investment. As much as I want to help people, my job is subject to fluctuations and I am living with the fear of finding myself unemployed. With my unemployment assistance and my significant other's paycheck, we can make the ends meet and can absorb that $150/mo negative cash flow, but not much more than that. So, I can not be a total charity. I definitely am not a business person, as far as being a LL goes. I think this puts me somewhere in between. I just want my tenants be fiscally responsible like I am to my LL. The interest I want to charge them is basically to scare them about the consequences. If they live up to their word and pay on time from now on, I might even consider returning the interest charged (if any, as I already gave them a 60 day option to bring their account to current and they will incur no interest charges) at the time of returning their deposit, if they and their 4-legged creatures, leave the house in decent shape.

And they turned to month to month as of November 1st. And even though I made clear that I gave them $75/mo break for the first year, I did not want to jack up the rate what it was supposed to. But, under the circumstances, I am seriously thinking about giving thema 30 day notice to increase the rent, to cover my bases if this late/missing payment thing goes on from this point on.

 

[Zigner]

Okay, you need to understand one thing: Renting this place at the current rent rate is making me about $150/mo cash flow negative. So, I am not in it to make money. Again this is a long term investment. As much as I want to help people, my job is subject to fluctuations and I am living with the fear of finding myself unemployed. With my unemployment assistance and my significant other's paycheck, we can make the ends meet and can absorb that $150/mo negative cash flow, but not much more than that. So, I can not be a total charity. I definitely am not a business person, as far as being a LL goes. I think this puts me somewhere in between. I just want my tenants be fiscally responsible like I am to my LL. The interest I want to charge them is basically to scare them about the consequences. If they live up to their word and pay on time from now on, I might even consider returning the interest charged (if any, as I already gave them a 60 day option to bring their account to current and they will incur no interest charges) at the time of returning their deposit, if they and their 4-legged creatures, leave the house in decent shape.

And they turned to month to month as of November 1st. And even though I made clear that I gave them $75/mo break for the first year, I did not want to jack up the rate what it was supposed to. But, under the circumstances, I am seriously thinking about giving thema 30 day notice to increase the rent, to cover my bases if this late/missing payment thing goes on from this point on.

As a LL, you MUST be a business person.

Based on what you have posted, it sounds like your best option may be to sell the property.

 

[STEPHAN]

Renting this place at the current rent rate is making me about $150/mo cash flow negative. So, I am not in it to make money.

Sell the property before the tenants trash the place. The way they handle your payments will be the way they handle your property.

 

[Gail in Georgia]

"The interest I want to charge them is basically to scare them about the consequences."

Want to "scare" them more? A "Pay or Quit" notice threatening an eviction will go further than any threat about interest charges.

Gail