What grace periods and late rent fees mean for properties
Around 15% of renters in the U.S. aren’t caught up on their rent payments, a number that’s expected to increase as rent prices continue to rise.¹
For renters, higher rent means added financial stress and less flexibility to rent a home they desire in the location they desire. For properties, this could mean more late rent and a less predictable cash flow, especially for residents who don’t have a consistent pay schedule.
In this post we’ll take a look at grace periods and late rent fees, and how properties can collect more rent on the first of the month.
Grace periods for late rent
Rent has always been due on the first of the month, or within the grace period allowed by a property owner. Offering a grace period is especially helpful for residents who live paycheck to paycheck, or for those who have irregular pay cycles.
Residents who don’t pay rent in full within this period are typically charged late rent fees, with the idea that fees charged will compensate the property for their time spent chasing down delinquencies, and motivate residents to pay rent on time.
Grace periods are usually between one and five days, with late fees applied the day after. For example, if a property has a standard five-day grace period then late fees for missed rent will be charged on the sixth. Laws around this vary state by state, so in most instances, properties determine what their individual grace period will be.
Late rent fees applied after the grace period
When a resident doesn’t pay their rent in full within the grace period allowed, a late rent fee will be applied to their account. Fees on late rent payments typically fall between $50 and $100.² Some states have limitations on how much properties can charge a resident for late rent, while others don’t.
Giving residents the option to pay rent flexibly throughout the month with a rent payment program can help reduce late rent (and late rent fees) by making sure properties get paid on the first of the month. While late rent fees are meant to act as an incentive for residents to pay rent on time, not all residents can.
With more than 50% of the U.S. workforce predicted to work either independently or within the gig economy by 2023, more renters will likely have an irregular pay cycle.³ To operate more efficiently and collect more on-time rent, a flexible rent payment program might be the way to go.
Sources:
- “More Than 8 Million Americans Are Late on Rent as Prices Increase,” Bloomberg (https://bloom.bg/3aORvq6)
- “Late Rent Fees and Grace Periods,” Avail (https://bit.ly/3ccsipI)
- “Gig Economy Statistics: The New Normal in the Workplace,” Fortunately (https://bit.ly/3cmCPie)
