Thursday, December 22, 2011
Monday, December 12, 2011
Check's in the mail
There are countless reasons why business owners should use brokers when entering into a lease. From market knowledge to pricing to relationships, the transaction experience and intangibles brokers bring to the table can often times save tenants valuable time and money. One day, on this blog, I'll more than likely list all those reasons. But for today, I want to talk about lease language. In particular, due to recent proposed postal changes, timely rental payments.
In most leases, there is a grace period for rent to make its way to a landlord. Typically, a tenant will have 3, 5, 7 and sometimes even 10 days after the due date (usually the first of the month) before their rent is considered late. If rent reaches the landlord after this grace period then penalties begin to acrrue. Sometimes the penalties are a flat fee (usually 10% of rent) and sometimes landlords get away with charging interest at 18% on top of the late fee as well. In addition, in most cases, once a grace period has expired, tenants are technically in default of the lease agreement which could lead to even more severe penalties if not cured in a timley manner.
Anytime I represent a tenant I try to push for a 10 day grace period, try to lessen the fees and omit any interest on top. Reasoning for this can range from corporate red tape while processing checks to glitches in the US Mail system. Which brings me to the point of this post.
With the announcement that the US Postal Service plans to close up to 252 of its 487 processing centers nation wide, the US Mail Service which serves as the primary system of delivery for rental payments will undoubtedly run slower in the coming years. So, as business owners make decisions on new leases, it will be important to remember that, with potentially 52% of the processing centers for our mail system in jeopardy, those rent checks will most certainly take a couple to several days longer to reach their destination. I will be pushing even harder for that 10 day grace period until I feel more comfortable where our delivery system is. The check's in the mail has been used as a funny excuse; now it may be the truth for a lot of us.
In most leases, there is a grace period for rent to make its way to a landlord. Typically, a tenant will have 3, 5, 7 and sometimes even 10 days after the due date (usually the first of the month) before their rent is considered late. If rent reaches the landlord after this grace period then penalties begin to acrrue. Sometimes the penalties are a flat fee (usually 10% of rent) and sometimes landlords get away with charging interest at 18% on top of the late fee as well. In addition, in most cases, once a grace period has expired, tenants are technically in default of the lease agreement which could lead to even more severe penalties if not cured in a timley manner.
Anytime I represent a tenant I try to push for a 10 day grace period, try to lessen the fees and omit any interest on top. Reasoning for this can range from corporate red tape while processing checks to glitches in the US Mail system. Which brings me to the point of this post.
With the announcement that the US Postal Service plans to close up to 252 of its 487 processing centers nation wide, the US Mail Service which serves as the primary system of delivery for rental payments will undoubtedly run slower in the coming years. So, as business owners make decisions on new leases, it will be important to remember that, with potentially 52% of the processing centers for our mail system in jeopardy, those rent checks will most certainly take a couple to several days longer to reach their destination. I will be pushing even harder for that 10 day grace period until I feel more comfortable where our delivery system is. The check's in the mail has been used as a funny excuse; now it may be the truth for a lot of us.
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