In the business of landlords and tenants, one of the most active debates today is rent timing. Is rent considered received and on-time the day it's in the mail or the day it is received by the landlord? What about the processing delay for online payments? There is an important question of how responsible renters can be held for late rent when processing or delivery is delayed, and how much planning ahead is necessary to make rent on time.
Today, we're here to dive into the rules, the lease terms, and the timing to answer these questions and settle your debate for good.
Rent is Paid When Received
The first thing to understand is that, by law, rent is paid when received. Most landlord-tenant laws tend to favor the tenant but, in this case, the tenant is responsible for getting the rent all the way into landlord hands before it is considered legally 'received'.
Rent is paid when:
- The money reaches the landlord's bank
- The landlord is handed the check or cash
- The landlord gets the check in the mail
- The tenant gets a receipt
- The tenant gets a confirmation email
What is Defined in the Lease Contract
Next, there's what you define in the lease contract. Lease terms are legally binding, whether they relate to rent, gardening, or quiet hours. If it's written in the lease, that is how you and the tenant have agreed to handle things. So what is in the lease can be more legitimate than the law, especially if they do not overtly conflict.
- Payment Terms
If you want to be sure about how payment is sent and when it is considered 'received', define it in the lease. Tell tenants under no uncertain terms when they are expected to pay, how they can pay, and when their rent is considered safely paid on time. Most standard boiler-plate leases that landlords start from include a section about who is being paid, along with how and when tenants are to pay for their rent to be considered properly delivered and on time.
The best part is that when these terms are clearly defined in the lease, neither the landlord nor tenant has to worry about ambiguity. Go over this part of the lease with tenants and make sure they understand how to handle payments in this fashion and how to avoid processing delays causing accidental lateness of payment.
- Grace Periods
Speaking of margins, be sure to give a rent payment window. Many landlords offer a 'grace period' of five to seven days before fees and penalties start to stack up. The grace period also generally covers situations of processing delay or mail delivery delay.
Grace periods may or may not be legally required by your state, giving renters a few extra days of 'just in case' time to get the rent in or for the mall to get it to you. However, the grace period does not preclude you from taking actions based on rent being late. If rent is not received on the due date, you can legally level fees or begin processes like quitting or eviction.
Paying Rent in Person
Paying rent in person is the least ambiguous of all rental exchanges. Many landlords who live nearby or who have a building manager on site will accept rent payments in person and it is one of the most traditional ways to pay rent for obvious reasons. Rent paid in person is usually via a check, money order, or sometimes in cash. Most modern landlords do not accept cash because it's dangerous to carry around and paper trails are preferred.
Rent paid in person is considered received when the money changes hands. The tenant can be confident that rent has been officially paid because they witnessed the money going into the hands of their landlord or business manager. For everyone's records, it's best if tenants are given a receipt for their rent.
- The Money Changes Hands
Rent is considered received when it is taken from the landlord into building management hands. This is a good practical starting place with no confusion about sent-day vs arrival-day. It all happens at once.
To be clear, rent is paid in-person when the tenant pays it. If you have management staff who receive rent for you and then deliver the checks, then the rents are already legally considered paid. Any "internal processing delays" like your property manager handing checks to you, the landlord, are not factored in. Legally, the tenants paid at the desk.
- Give a Receipt
When rent is paid in person, the best thing you can do is give your tenant a receipt and keep a copy for yourself. With cash, it's a necessity. With checks and money orders, it's a courtesy. This creates another link in the paper trail and signified with no shadow of a doubt the date the rent was paid and received. The receipt signifies that rent has officially changed over into your hands.
Paying Rent Through the Mail
Paying rent by mail is a traditional method that is still used by many landlords and management teams. Paying rent by mail has been used for literal centuries because the mail is reliable and landlords aren't always nearby or available in person to be paid. However, paying rent by mail is also where the vast majority of 'rent received' confusion comes from.
With many legal mail-related issues, it is often mistakenly thought that rent is 'received' on the day tenants put it in the mailbox. Paying taxes and filing some legal documents work this way, but rent does not. Rather, rent is received when it is literally received by the landlord or landlord's agent.
- Received When Delivered
Rent is considered paid and received on the day it reaches the landlord's mailbox, not the day it is sent. This is, in fact, why the term "receival" is associated with rent rather than simply "payment". If the landlord does not receive the money, then rent hasn't been paid. In part, the law works this way because landlords have their own timely expenses that must be covered by rent payments and quite probably because of "Check in the Mail" scams of the past.
However, the way rent by mail works also means that holidays and weekends can legally cause rent to be late even if tenants put it in the mail on time. Some states have business-day dispensations for delayed rent delivery and some do not. You and your tenants will need to make plans to prevent rent from being delivered late.
- Plan for Mailing Delays
Therefore, renters will need to plan for mailing delays. Weekends, federal holidays, and shipping/handling time all matter for getting rent paid on time. In normal circumstances, the check needs to be in the mail at least 2 business days before the rent is due. Possibly more if there are weekends or holidays in between and depending on whether there is dispensation in the state law or lease for processing and delivery delays.
It can help to get tenants in the habit of paying rent early to avoid the risk of delayed payments. Consider encouraging tenants to send their checks as much as a week ahead of time to make sure they get in on time, every time.
Paying Rent Online
Then there are online rent payments. Some cutting-edge landlords have been accepting online rent payments since the 90s while others are just now adopting online payment methods or even building their own tenant web portals to provide a single controlled rent channel. Interestingly, online payments do not work in the same way that paying by mail does legally.
Rather, tenants paying rent electronically can almost always assume that their rent is legally received by the landlord the moment the payment is made. Even if it takes a few hours or even days for the payment to process on the back-end. This makes it very different from rent paid by mail, but there are legal reasons for the difference.
- Received with Confirmation
When a tenant pays rent online through a bank transfer, web portal, or PayPal, their payments are considered to be made immediately. More to the point, the rent is paid when the tenant receives a confirmation that the payment is being processed. Unlike the mail, it doesn't matter when the money reaches you, the landlord. Only that the tenant has 100% surety that the rent will be paid.
Why? Because online payments are more reliable than mailing checks. There are so many laws and regulations governing online payments that it would be near impossible for a tenant to initiate a bank transfer, to get confirmation of the success of that transfer, and then for the payment to bounce. Checks can get lost in the mail or bounce on arrival but an online payment is guaranteed to process, even if processing takes a day or two.
- Confirmation Message or Email
Rent is officially received when the tenant receives a payment confirmation message either on a web page or as an email. When the platform says the payment is approved and in-process, for all legal purposes it has been paid. Tenants who do not get a confirmation message due to system errors cannot safely assume their rent has been paid.
- Processing Delays are Not Considered
Just to be clear, electronic payment processing time does not count. Tenants do not have to account for bank holidays or the time it takes your payment processor to transfer the money to your account. According to your records and for the purpose of late rent payments, the tenant paid the date the payment was initiated and confirmed, not the date the money transfers.
Helping Your Tenants Pay Rent On Time
As a landlord, naturally you'd like tenants to pay rent on time so you can cover your expenses, dotting 'i's and crossing 't's for the month. Your tenants want to pay rent on time to be responsible and avoid penalties. With your now-detailed understanding of what on-time rent really means based on rent paying and receival dates, you can help.
Walk your tenants through your approved rent payment process, along with how they should plan ahead to make sure your preferred method of payment reaches you, the landlord, on time every month. Today, your best bet is to work with an online portal so that tenants can pay electronically (the same way they pay everything else) without having to worry about mailing checks and timing mail arrival dates with rent due dates.
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