Charging extra for late utility payments

Landlord seeks 'reasonable' fee for doing administrative legwork

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Dec. 2, 2010

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Landlord seeks 'reasonable' fee for doing administrative legwork

Robert Griswold
Inman News

Q: We have a reasonably good tenant in a single-family home. The utility companies prefer to keep the bills in the owner's name, so we are billing the tenant for reimbursement of the utilities. The rental agreement stipulates the tenant will reimburse us within 15 days of receiving the bill(s) from us.

In the rental agreement, there was no provision or clause that allows us to collect a late charge or administrative charge if the tenant is late reimbursing us for the utility charges. She is paying her rent within five days after it is due but is consistently late paying the utility bills.

Last month with the utility billing we included a notice to her documenting the late payments and emphasizing that it is costing us time to monitor and track these payments. We notified her that future late payments may be subject to reimbursement of administrative costs.

Can we charge the tenant an administrative or late charge when our reimbursement for these landlord-paid utility bills is not received on time? What is a "reasonable" charge?

A: I believe it would be completely appropriate for you to charge the tenant for failing to promptly reimburse you for the utility bills that you are paying on her behalf. The challenge is that you don't have any mutually agreed charges for late utility-bill reimbursements in your current lease or rental agreement.

You will need to modify the lease or rental agreement to reflect the change in terms so that you can begin charging your tenant for these late payments.

I would suggest that the charge be kept reasonable, and that you approximate your actual cost of advancing the funds and having to record and track the additional payments. It wouldn't surprise me if you determined that an amount of $5 per day approximated your costs to have to make efforts to contact your tenant and demand payment for the unpaid utility bills.

If your tenant is on a month-to-month tenancy, then you should be able to give a 30-day written notice of the change in terms of the rental agreement. If your tenant is on a lease, you are prevented from making any changes during the lease -- but any lease renewal should contain a clause that indicates you will be charging an administrative or late fee after a certain number of days.

You indicate that you allow a five-day grace period from the due date for rent payments and I would suggest that is also reasonable for the utility amounts billed.

Q: I am the owner of a small multifamily apartment building and am concerned that one of my tenants is using his apartment to teach various people acting and modeling. I have been doing work at the property and have noticed people coming in and out of his apartment every weekend.

I know he has a weekday job so this is not a formal business and I don't know if I can prove that he is getting paid for his teaching from home. Are there any criteria that I would need to establish if I want to prohibit him from performing a service from his apartment? Do you have any suggestions?

A: My first question would be: Are there any reasons to be concerned about your tenant's activities?

Whether he is conducting some sort of paid business or just having friends over should not be your concern unless there is a specific issue. You would have a legitimate business concern if you had personally observed some conduct that could be disturbing to your other tenants such as excessive noise. Or maybe the visitors are parking improperly at the property.

My only warning would be if you suspected some sort of illegal activity such as drug dealing. There are laws in many states that make it illegal for a landlord to ignore such activities. Some states even go so far that your property could be seized if you knowingly allowed and ignored drug dealing from your rental property.

You should immediately contact your local law enforcement if you have any reason to believe the activities in your rental building are illegal. Otherwise, I suggest you not be concerned about your tenant who is not disturbing his neighbors but has people over to his apartment for acting or modeling training.

In this economy, many landlords wish their tenants had an extra source of income so they could pay their rent on time. I also wouldn't be concerned about local ordinances or business license requirements, if any. Your tenant naturally should abide by all local laws, but it is not your job to be the enforcement agency for the city.

Likewise, if the tenant is not creating any problems for you, I don't see any reason to question what he is doing on his weekends.

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