Collecting late fees on backdated rent

Rent it Right

Thumbnail

Q: If a tenant owes rent on the first of the month and late fees start on the fifth, how can we enforce late charges if tenants backdate their checks to the fourth or even the first of the month? –Monica M.

A: Your problem is not collecting late fees; it’s accepting backdated checks. No law requires you to accept them, and careful landlords refuse to do so. If every landlord accepted them, no one would ever collect late fees.

When you tell your tenants that you will not accept their check, they have a choice: They can date it properly and avoid a three-day notice; or they can refuse, at which point you are entitled to consider the rent unpaid. That will enable you to send a three-day notice (or five-day, if required in your state) to pay or quit. On the other hand, if they date the check accurately, you can impose your late policy.

The trick your tenants are attempting to pull off is a common one. This type of backdating conceals the time that an event actually takes place, in order to secure benefits that the person would otherwise not be entitled to (or to avoid consequences that would otherwise ensue). Such conduct is a type of fraud.

But there’s another kind of backdating that is not illegal; in fact, it’s practiced all the time. This type of backdating is done to memorialize an earlier event. For example, imagine a board of directors meeting with their lawyer, at which they agree to take certain actions. The lawyer drafts the minutes weeks later, but properly enters the date of the meeting, because that’s the date the action was taken.

In sum, backdating that fabricates — dating a document prior to the time the act occurred — is wrong; but backdating that memorializes — creating and dating a document after the date the event occurred — is generally OK. Sometimes it’s hard to draw the line, but in your case, it’s pretty clear that the tenants were backdating in order to avoid the consequence (the late fee) that they agreed to when they signed the rental agreement.

Article continues below

Q: Our son rented an apartment with a one-year lease. When it was over, he stayed on, paying rent as usual. After a few months, he got a job transfer, and gave one month’s notice, as required by law. But the landlord is demanding three month’s rent, and has begun collection efforts. Is this legal? –Virginia R.

A: The answer depends on how your state characterizes the tenancy that your son created, with the landlord’s apparent consent, after the end of his one-year lease.

When your son remained on the premises, he became what’s known as a "holdover tenant." The landlord could have evicted him, or demanded that he sign another lease. But he did neither, it seems. Instead, the landlord continued to accept rent. In many states, this arrangement would create a month-to-month tenancy. And, if your state requires only one month’s notice to end it, your son would have had the right to do as he did, without future liability for rent.

But not all states take this approach. Some adhere to the old common law rule, which developed in agrarian England. There, tenancies were agricultural, and few tenants (or landlords) were interested in tenancies for a matter of months: If you’re operating a farm, you can’t get much done and make any money in such a short time. In practical terms, it made sense to bind both landlord and tenant to a full year when the tenant-farmer overstayed his initial year and the landlord seemed to accept it.

Modern life, obviously, is not lived in one-year chunks. In England, as the Industrial Revolution hit and people moved to the cities, creating the first example of urban tenants, it quickly became apparent that this rule worked a large hardship on city-dwelling tenants, who would suddenly find themselves bound for an entire year when they overstayed but a month or so.

Landlords didn’t fare so well either: Tenants who had to leave usually just left, and collecting rent from them became a nuisance at best, and more often an impossibility. Far better, many reasoned, would be to create a monthly tenancy in this situation, unless the parties expressly decided to renew the lease. In America, many states thus adopted the rule explained above, but there are still some holdouts.

Whether your son’s resulting tenancy was month-to-month or for an entire year will depend on your state’s approach. But even if he is now facing a year’s lease (which he has broken by moving away), the landlord’s demand for three month’s rent may be excessive. In many states, landlords must take reasonably prompt steps to re-rent the premises; once the landlord finds a new tenant, the prior tenant’s liability for rent ends. Consistent with this rule, the landlord cannot simply demand an arbitrary amount, which has no relation to how hard he tries to re-rent the place or how quickly he succeeds. That’s what seems to be going on here, which could give your son some legal firepower.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord’s Legal Guide" and "Every Tenant’s Legal Guide." She can be reached at janet@inman.com.

Contact Janet Portman:
Email Email Letter to the Editor Letter to the Editor

More from Janet Portman

Recent Stories Email Janet Portman Send Us a Tip

Comments