At Austin Landmark Property Services, we think it’s important to keep our rental property owners up to date on all of the new and changing laws that affect them and their rental property.
Lately, we’ve had a lot of questions about the new late fee legislation that’s come out of the Texas legislature. It’s important that you understand what’s required and what it means for your rental home in Austin or anywhere in Texas.
2019 Texas Legislation: Late Fees
The new law is SB 1414, and it covers the amount you can charge in late fees. This is a bill that actually covers two separate parts of what you can do with late fees and when you can implement them. It may require you to change some of your documents, including your lease.
This law went into effect on September 1, 2019, so this is something that you need to be doing right now.
SB 1414: Grace Periods
The first part of SB 1414 covers the grace period that you’re required to give your tenants when they’re paying rent. All landlords must provide at least a two-day grace period before you charge a late fee. So, if your rent is due on the first, you have to provide the second of the month and the third of the month as grace period days. If rent isn’t paid on the first, tenants can pay on the second or the third without penalty. You cannot charge a late fee until the fourth of the month.
This seems pretty simple, but you might have to amend your lease documents if your current lease doesn’t have a grace period written into it. Or, maybe your lease allows for a one-day grace period. This law went into effect on September 1, so any leases you sign from that point forward need to reflect the two-day grace period minimum. Any lease renewals need to reflect this new law as well.
SB 1414: Late Fee Caps
The second part of this legislation covers late fee amounts.
For single-family home landlords with four units or fewer, there’s a 12 percent safety harbor cap. This is an aggregate amount, so maybe you have an initial late fee when rent is late, and then there’s a daily fee that’s paid when rent still isn’t up to date. The total late fee cannot exceed 12 percent of your rent.
For owners who have larger properties (five or more), the cap is even more restricted. You cannot charge more than 10 percent in aggregate late fees.
There are some allowances built into this law if you want to charge more than the 12 or 10 percent. However, there’s a large burden of proof. You have to show that you have tremendous costs that make late rent payments prohibitive for you. It’s difficult to justify charging more than what the law allows in late fees.
These new requirements are in effect now. The old rules apply to anything that was signed before September 1, 2019. It’s not retroactive. But, anything signed after that date needs to reflect these requirements.
That’s what you need to know, and if we can be of any assistance, please contact us at Austin Landmark Property Services.