Late rental payments are among the biggest problems rental agents have to deal with. Even with PayProp’s arrears-chasing tools on your side, arrears lead to extra admin, angry clients, and delayed commission payments.
In this case, agents might be tempted to recover their additional costs (and those of their landlord) by charging the tenant a late fee on top of the rent they owe.
The national Rental Housing Act doesn’t specifically ban penalty fees. However, some provinces do have laws against them. In Gauteng, for example, lease agreements cannot impose any penalty for late payments except for interest. But even in provinces without laws against penalty fees, they can be reduced or overturned by the courts if they are deemed unfair under national regulations.
A compliant way to cover costs
Even when penalty fees are off the table, rental agents can still charge interest on missed rent as long as this is stated in the lease agreement.
With PayProp, agents can even automate interest on late payments. Users can set the date on which interest starts to accrue and the percentage to charge, after which it will automatically be added to the outstanding balance at month-end.
This interest must be given to the landlord, and cannot be retained by the agent as their own fee. Additionally, under PayProp’s End User License Agreement, the platform’s automated interest feature cannot be used for debt collection in terms of the Debt Collectors Act (114 of 1998).
While the additional time and effort taken by the agent to recover arrears isn’t compensated, the client’s cashflow – and their relationship with the agent – is protected.
