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What Is a Rent Grace Period and How Does It Work?

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It’s important for tenants to pay rent on time and in full each month. To encourage timely and complete payments, landlords can discuss a rent grace period so tenants understand the penalties and consequences of falling behind on rent.

What exactly is a rent grace period?

This refers to the span of time from the day rent is due to the day a late fee comes into effect. Although renters can pay in installments, the full balance of their monthly tent must be settled by the end of the rent grace period. This will help them avoid having to pay for late fees.

For example, if rent is due on the first of the month and the renter fails to male a full payment, landlords can apply late fees starting on the second unless there’s a grace period specified in the lease or mandated by local and state laws.

Grace rent periods are fairly common in many places in the United States, where renters have a three to five-day grace period, giving them extra time to make rent before their landlord can legally start charging a late fee.

As mentioned, local and state laws often have provisions for the rent grace period, giving renters a set number of days to make rent before penalty fees come into effect.

If local and state laws don’t regulate the rent grace period, then the lease agreement will contain specifics on when rent is due. In cases where the lease doesn’t mention a grace rent period, landlords will customarily start charging late fees the day after the due date if rent hasn’t been paid in full.

Under Ohio law, landlords are not obliged to give renters a grace period for late payments. In fact, landlords can start eviction as soon as renters miss a payment.

However, landlords and tenants can discuss the terms and conditions regarding payment dates, but these terms should be explicitly stated in the lease agreement.

What are late rent fees?

Late rent fees are fees that are incurred in the event that the renter fails to pay their monthly rent on the due date, as stated on the lease agreement.

This fee serves two purposes. First, it’s meant to encourage renters to pay on time and in full each month.

Second, it compensates landlords for the stress and inconvenience of back-and-forth exchanges. It also helps reduce the risk for landlords who need to collect late payments.

In most rental markets, late fees are completely legal and customary. However, the specifics of late fees must be written into the lease and duly signed by both landlord and tenant.

For the sake of legal compliance, landlords should include specifics about the late fee amount and when it will be charged in the lease agreement. It is also wise to get legal counsel on this matter. Again, if local and state laws don’t require you to provide a rent grace period, you’re not obliged to do so.

Should you impose late rent fees?

Yes, it’s advisable to write late fees into your lease agreement. This will encourage timely payments and protect your rentals from the risk and inconvenience of late payments.

However, it’s important to note that landlords should never have to charge late fees. If you have screened your tenants and done a thorough background check, you should end up with conscientious tenants who make timely payments.

How to set late fees

In most rental markets, late fees range from $20 to $50. Landlords can also calculate the late fee amount as a percentage of the monthly rental price. Check local and state laws to determine any caps for late fees amounts

Under Ohio laws, a late fee of $20 for each late rental payment or 20% of the amount of each late rental payment (whichever is higher) is considered reasonable. The lease agreement can also provide for a higher late fee amount if deemed reasonable.

Keep in mind that Ohio courts are sometimes reluctant to enforce late fees if the amount is too great, or deemed unreasonable. Landlords and rental owners have the burden of proof that a higher late fee amount is justified.

Since rent grace periods aren’t mandated in Ohio, landlords can start charging late fees immediately the day after rent is due.

In any case, when setting a late fee amount, keep in mind that:

  • It should adequately compensate you for the inconvenience and financial risk of not receiving rental payments on time
  • The amount should be consequential, or high enough to incentivize your tenants to pay rent on time
  • The amount shouldn’t be so high that the court deems it unreasonable, and that the tenant doesn’t become completely overwhelmed that they are unable to pay rent plus late fees

Always be clear about due dates, the late fee amount, and when a late fee will take effect.

Contact Sundance Property Management here for home rentals in Ohio, Kentucky, Tennessee, and South Carolina. You can also get in touch with our experts at 5134893363 x126 or email MLAShells(at)sdpmi(dotted)com.

Sundance Property Management is a national company that owns, develops, and manages rentals in multi-family communities in Ohio and other states. We’d be more than happy to assist you with property management.