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Thread: Late Fees

  1. #1
    Umbrella's Avatar
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    Default Late Fees

    Another "elephant in the living room" topic. In researching what changes might be necessary in our contacts, this controversial issue came up. If you want to see one side of the issue, take a look at this article: http://www.selfstoragelegal.com/arti.../late_fees.asp
    by Jeffrey Greenberger. Note that I am not an attorney and don't presume to know more than Mr. Greenberger. What I see in numerous examples of contracts that can be found on the web, and in many comments by Managers/Owners, are people not following Jeff's advice. The proposal to "offer" credit card processing is fine, and we do it, but "requiring" credit cards is not remotely a viable business alternative here in Oregon. We currently have the following in our contract, quoted verbatim:
    ---------------------------------
    10 Day Late Charge (If rent not paid within 10 days of Due Date). $10
    20 Day Late and Inspection Notice $20
    30 Day Pre-foreclosure, Advertising & Inspection $30
    40 Day Foreclosure, Advertising & Sales Prep $40
    Dishonored Check $25
    Auction, Clean Up & Hauling Charges $ As Incurred
    Hourly Labor Charges $35/hr
    ---------------------------------
    Late fees can add up to $100 in a month, regardless of size of unit. Reading Jeff's article, it would appear that he says we can NOT charge multiple fees in a month, at least in some states. Further he appears to say that the above charges for 20-40 days are unreasonable and could lead to lawsuits.
    Are there any other thoughts on this subject? What do others do in this forum?

  2. #2
    Storman's Avatar
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    Default Re: Late Fees

    The late fees we can charge in CA are spelled out pretty clearly, and although I am "allowed" to charge more late fees than I do on larger units, I just charge $10 across the board for everybody. I don't like to think of late charges as a profit center, more as a pointed reminder to pay me on time. I also use it when it's advantageous for me to be the good guy. Changing a customer's perception of you to one of a caring, regular guy type of business is well worth the waiving of a $10 fee.
    Thanks for posting this question, I'm always glad to go back over the CA law periodically to refresh my memory and make sure I'm in compliance.

    21713.5. (a) The owner of a self-service storage facility may assess a reasonable late payment fee if an occupant does not pay the entire amount of the rental fee specified in the rental agreement, subject to the following requirements:

    (1) No late payment fee shall be assessed unless the rental fee remains unpaid for at least 10 days after the date specified in the rental agreement for payment of the rental fee.

    (2) The amount of the late payment fee shall be specified in the occupant's rental agreement.

    (3) Only one late payment fee shall be assessed for each rental fee payment that is not paid on the date specified in the rental agreement.

    (b) For purposes of this section, a "reasonable late payment fee" is one that does not exceed the following:

    (1) Ten dollars ($10), if the rental agreement provides for monthly rent of sixty dollars ($60) or less.

    (2) Fifteen dollars ($15), if the rental agreement provides for monthly rent greater than sixty dollars ($60), but less than one hundred dollars ($100).

    (3) Twenty dollars ($20) or 15 percent of the monthly rental fee, whichever is greater, if the rental agreement provides for monthly rent of one hundred dollars ($100) or more.
    In no way affiliated with Storman software.

  3. #3
    peten is offline Senior Member
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    Default Re: Late Fees

    I like to go with one late fee per month and then if it gets to 45 days we charge $25 for a certified letter containing the auction notice. Each state is different in NC you can charge 15% one time in Kansas 20% or $20 whichever is more.

  4. #4
    Gina6k's Avatar
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    Default Re: Late Fees

    Umbrella, just to be clear, in CA we can charge the 'late' fee and the Preliminary lien fee in the same month. So depending upon what constitutes a fee in the debate, it could be stated that we charge 2 late fees per month, one late, one PLN. I know, that's splitting hairs, but when you're dealing with legal issues we all need to be clear to call them precisely what they are.

    So as Storman stated it is ONE late fee per month, and per unit! So if a customer has 5 units, they have the privilege of paying FIVE late fees if they're not current at day 10.

    We are also allowed to add the late fee again each month that the rent remains unpaid, but only one PLN and one Lien fee per unit until the account is brought current or it goes to auction.
    Last edited by Gina6k; 5th August 2010 at 11:41 PM.
    Gina 6k
    Cochrane Storage dot com
    Morgan Hill, California
    twitter.com/CochraneStorage

    You only live once, but if you do it right, once is enough!
    I am not an attorney, just an experienced manager who is willing to share what I have learned. Your thoughts, practices or opinions may vary and neither of us may be right.

  5. #5
    SMSSId's Avatar
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    Default Re: Late Fees

    I don’t understand why would requiring CC NOT be a viable alternative in Oregon?

    Late fees can be a real can-of-worms. Some states dictate what you can or cannot charge for late fees, there you have the state statue working for you. If it’s not covered in your statue, I would not even consider trying to plug late fee into the profit area. My understanding for late fees; They MUST be justifiable and MUST NOT be punitive in nature.
    We charge:
    $5 late fee @ 10 days, (covers follow-up, phone call and 1st late notice )
    $9 overlock fee @10 days
    $20 Pre Lien Letter after the 40th day (regular mail)
    $30 Lien Handling after 60 days whether or not sale occurs (Inventory & lockcut)
    $20 Lien sale notice (Certified Mail)
    $60 Lien Sale Fees & Expenses (advertising, overtime, extra employee, paperwork processing)

    We haven’t figured out what to replace the words “late fee” with yet. We would like to do away with late fee wording.

    As far as “No late fee” we market or try to sell the customer to set up for CC auto-pay. It’s their choice. It’s surprising how many set-up for CC auto pay after they get hit with the first late and overlock fee.

    I would follow Mr Greenberger's recommendations
    Last edited by SMSSId; 6th August 2010 at 12:29 AM. Reason: added info

  6. #6
    astro is offline Moderator
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    Default Re: Late Fees

    As a replacement for "late fee", try "late rent". I know of more that one property in more than one state that has used this.
    Bob Taylor (Astro)
    Blue Ridge Self Storage
    Cashiers, NC

    Disclaimer: What Gina said....'cause the the cheese fell of my cracker.

  7. #7
    JAMiAM's Avatar
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    Default Re: Late Fees

    Not a lawyer, but my advice is to first of all, know what your statute allows, or specifies.

    If only one late fee may be charged, be very precise in your contractual verbiage and do NOT call any of the other fees "late fees". Never refer to them as late fees, when speaking to, or corresponding with customers.

    Always refer to them as "processing fees", specify the exact actions that they are intended to recoup costs for, and make sure that those costs are reasonable, i.e., not punitive.
    Last edited by JAMiAM; 6th August 2010 at 01:55 PM.
    James A Mathews
    Facility Manager
    CBD Indoor Mini Storage

  8. #8
    Umbrella's Avatar
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    Default Re: Late Fees

    I do wish Oregon were as specific in their lien laws, but these issues are not addressed.

 

 
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