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Admin Fee For NSF Cheques On Rental Agreements?

ClintL

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For most rental agreements I've seen, there is a clause regarding an admin fee that tenants agree to pay in the event of a NSF cheque. Have any of you ever had this fee challenged by a tenant and if so, what was the outcome?
 

Sherilynn

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Depends on the province. In Alberta, you can charge NSF fees and/or late fees that reflect your actual costs. You may not charge a fee as penalty.



So if the NSF fee is high and is challenged in court, it will be denied.



An alternative here is to charge higher rent but to have an automatic discount for tenants who pay on time and do not bounce cheques. If the market rent is $1000, then the rent on our lease is $1100 and the "prompt-pay discount" is $100. If the tenant bounces a cheque or pays late, he loses the discount for that month. If he does it again, he loses his discount permanently.



As an added bonus, banks use the full lease amount for mortgage qualification, plus the courts use the full lease amount when determining judgements.



I believe you may find a "prompt-pay" form in the Critical forms section as I got the idea from Don R. Campbell (Thanks again, Don!)
 

housingrental

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In Ontario it is $20 plus actual banking costs you are charged (ie no cost to you = $20, $7.50 charge to you = $27.50, etc.)

It should be written into the tenancy agreement

In the past at LTB I've been told if it's reasonable (such as $50) they do not challenge the amount / require proof - and they have never - but I've not tried to make a claim including high NSF fee's in a long time







[quote user=ClintL] For most rental agreements I've seen, there is a clause regarding an admin fee that tenants agree to pay in the event of a NSF cheque. Have any of you ever had this fee challenged by a tenant and if so, what was the outcome?
 

housingrental

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Of note on Sherrilynn's post that mentions prompt payment discount

In Ontario you can do this for 2% (ie rent owing divided by 0.98) if not received on the first

This should be written in your tenancy agreement
 

invst4profit

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As a added disincentive in Ontario landlords have the option of filing a L9. This is particularly effective in the case of a second occurrence of a NSF. The L9 is filed immediately upon receiving the NSF notice from the bank and requires no notification to the tenant. It is guaranteed the board will order the tenant to not only pay the rent, NSF fees and $20 administrative fee but also the landlords $170 filing fee for the L9. Usually explaining the consequences of a second NSF is all that will be necessary to prevent it from happening again but if it should occur this is a very clear indication of the type of tenant you will be dealing with in the future. A N4 will likely be necessary in their future so begin to prepare your case by having L9s on file.



If your tenant did not understand after the first NSF that it is not tolerable then receiving a L9 notice from the board will definitely drive the message home.
 

ClintL

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Great comments everyone - thanks! I may have to amend my lease agreements since I have a $25 admin charge for NSFs and bring it down to $20 - but make it clear that this does not include the actual bank charge levied.



One tenant thought that L&T board allows rent to be paid reasonably late up to the 5th day of each month if the 1st is the due date. I couldn't find anything that suggests this to be true. All I can find for the Ontario L&T is that midnight of the due day is the deadline.
 

invst4profit

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No the landlord tenant board does not have a payment grace period. Although they do not penalise a tenant for paying late.

Any grace period or penalty is in the hands of the landlord based on LTB policies.

When a tenant does not pay by midnight on the first of the month a landlord has options.



1) Wemble,stall do nothing for whatever period of time without penalty to the tenant.

2) Issue a N4 which is allowing the tenant 14 days to pay but does not actually cost the tenant any additional money regardless of when they pay or are ordered to pay following a board hearing.

3) File a L9 with the board on the 2nd of the month which allows the tenant to pay anytime up to the date stated in the board order but immediately imposes a $170 cost on the tenant as of the date of filing the L9.



The board does not care when tenants pay but do expect them to pay at some point in time however no penalties are levied by the board.



The L9 filed promptly on the 2nd of the month is always my first choice.
 

EdRenkema

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Here is an option although it is not advisable, I have done it.

I write in the lease in big bold letters:

There will be a $150 charge for any NSF cheques.

That is something very noticeable, I do not follow through on this if they cover the payment in a weeks time.

If they read that on the lease and immediately protest - then guess what? I now know I have a tenant that has previously done this & I certainly do not want that type of tenant, it is like a screening process.



Yes I can hear the protests now by all the letter of the law landlords and they are correct.

But it is logical is it not that any tenant that has no intention of writing NSF cheques will have no problem with that clause, I know I certainly wouldn't...



Yes this will be challenged and certainly disallowed but as I explained I wouldn't follow through on it.

Your choice (relax Adam) :)



 

invst4profit

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You can definitely do it Ed and it is a good tool to eliminate the undesirable "I know my rights" tenants.



Personally I have no problem stretching the law or intimidating applicants/tenants when necessary. The Ontario RTA/LTB is so heavily weighted in favour of tenants that I see no reason not to stretch the rules just shy of breaking.



The fact is in Ontario you can put anything you want in your lease. You are not breaking the rules of the RTA unless you try to enforce them. Basically what the RTA states is that any language in a lease that violates or contradicts the RTA is null and void.
 

EdRenkema

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[quote user=invst4profit]The fact is in Ontario you can put anything you want in your lease. You are not breaking the rules of the RTA unless you try to enforce them. Basically what the RTA states is that any language in a lease that violates or contradicts the RTA is null and void
Good point!
 

iskra

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I charge $35 for NSF. The amount is clearly stated in my agreement. I collected the NSF charge in the past with no problem so far. I am in Ontario.
 

kfort

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[quote user=Sherilynn]

If the market rent is $1000, then the rent on our lease is $1100 and the "prompt-pay discount" is $100.



As an added bonus, banks use the full lease amount for mortgage qualification, plus the courts use the full lease amount when determining judgements.



I do this PLUS a $70/NSF admin fee PLUS a $40/day late fee begining on the 2cnd of the month. Yes, it is unreasonable. Yes I would lose if challenged at a hearing. Yes, I am ok with that. And Yes, I have collected several times. I had one tenant bounce 3 cheques in a year.... Effective rent for that unit went up ~$100/month as a result of the fees charged.
 
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