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How to handle late rent payments

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Last editedMar 20232 min read

Managing rental properties can provide a reliable income stream under normal circumstances, but late rent payments can slow down your cash flow. Unfortunately, it’s common for tenants to fall behind on rent payments and when this happens you need to be prepared to handle the situation effectively. In this guide, we’ll discuss how to deal with late rent payment fairly and professionally. 

How to make rent due dates clear

Prevention goes a long way. One of the best ways to avoid the issue of late rent payments is to make your terms and conditions crystal clear on the lease. There should be no uncertainty when it comes to the amount due. The due date should also be clearly marked at the top of the lease and each corresponding invoice. Some landlords charge on the first or last day of each month, but you can select the most appropriate day of the calendar.

The rental contract or lease should also spell out your late fee policy. This impacts your legal right as a landlord to collect late fees, one of your most effective tools for encouraging timely payment. For late fee policies, be sure to show:

  • Amount of the late fee

  • Grace period for payment

  • The day that the late fee will be charged

  • How rent can be paid

When to send a late rent payment letter

Before sending a late rent payment letter, encourage timely payment with an automated rent reminder instead. These should be sent a few days before the rent due date to encourage your tenants to make their payment on the day it’s due.

Once the due date has come and gone, don’t hesitate to send your late rent payment reminder. Sometimes, a gentle nudge in the form of a friendly email is all a tenant needs. However, once the payment is more than a few days late you’ll want to send through a more formal late rent payment notice.

Late rent notices give written notification that rent is now late. Although the format will vary, a notice should show the tenant how much money is owed, including any applicable late fees. It should also show the date for repayment according to the grace period outlined in your lease. This helps enforce your payment policy before escalating to more serious measures.

How to deal with late rent payment

Aside from sending out late rent notices, what can you do to collect the rent? It’s important to keep the lines of communication open where possible. This will help you find a mutually beneficial solution with your tenants. You want to get paid, and they want to stay in their rental property.

With that in mind, the next step is to charge late fees. Normally, they serve as a deterrent against late payment. However, once payment is significantly past due, you’ll need to enforce your policy. Automated rent collection software can help apply these fees to future invoices automatically.

You should consult the legal guidelines for landlords in your Australian state or territory to find out what to do after sending an official late rent notice and applying late fees. If your tenant is communicating with you, you could refer them to local rent assistance programs that could help. The next step after this is to investigate legal consequences in your region, such as eviction, money judgement, or other court-ordered action. 

Fortunately, most cases won’t get this far. No landlord wants to evict their tenants, and most cases of late payment can be resolved with communication and grace periods.

Prevent late rent payments with GoCardless

Dealing with late rent payments costs time and money. It’s better to take control over the timings and amounts of payments by using a service like GoCardless. We ensure payments are received on time by automating the process using BECS direct debit. Businesses pull payments on the day they’re due, making this a perfect solution for recurring rent payments. If payments fail the first time, our Success+ tool retries failed payments automatically. This helps improve your cash flow as a landlord or property manager, all while keeping your tenant relationships positive.

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