Grace Period for Renters is Good
Business for Landlords
Robert S. Griswold | Steven R. Kellman | Ted Smith
This column on issues confronting renters and
landlords is written by Counselor of Real Estate and
Certified Property Manager Robert Griswold, host of Real
Estate Today! with Robert Griswold (10 a.m.
Saturdays on AM1130 - KSDO radio, or on the Internet
and by attorneys Steven R. Kellman, director of the
Tenants' Legal Center, and Ted Smith, principal in a law
firm representing landlords.
QUESTION: Recently, my landlord sent a notice to tenants saying
that the rent is due on the first of each month without a grace
period. He used to give us five days to pay, but after several years
he changed it to three days. I thought that was reasonable especially
if the first falls on a weekend and tenants may be gone for the
weekend. Is it common for a landlord not to provide a grace period?
ANSWER: Griswold: It is fairly common for rental property
owners to offer a grace period. Typically, a three-day or five-day
grace period is offered. As you correctly note, it is perfectly legal
for a rental property owner to require the rent payment in full on or
before the first of the month and not offer any sort of grace period.
Even with a grace period, the rental property owner legally has the
right to serve legal notices regarding nonpayment of rent. I have seen
many examples of rental property owners tightening their policies and
rules, including a reduction or elimination of grace periods.
I think a three-day grace period is a good business practice and
one that does not impose an unreasonable burden on the rental property
owner. It also can avoid claims of discrimination because a rental
property owner that does not apply a late charge policy consistently
could be accused of treating tenants differently or discriminating.
With such a harsh rent-collection policy, a rental property owner
should enforce the policy with all renters equally, which would
clearly create tension with some of the best renters who are
inevitably going to be late with their rent payment occasionally.
Your landlord is being too aggressive in my opinion and should
seriously consider retaining the current policy, as the rental market
may not always be so strong. I believe that the rent is a very
important tenant obligation, but rental property owners need to be
fair and reasonable.
Your landlord most likely has a grace period for the payment of
bills, including mortgage. I recommend a three-day grace period that
expires on the third of the month even if it falls on a weekend or
holiday. I believe that the extra three days is reasonable and avoids
problems with good tenants that just miss paying on time.
I just received a letter from the company I rent from which says,
"Prior to signing your new agreement, you will need to provide
proof of renter's insurance. Your renter's insurance policy must
contain personal liability insurance in an amount not less than
$100,000 and be maintained for the duration of the lease." Must I
do this? There was nothing about it in my original lease.
Griswold: Yes. When signing a new lease or after proper
legal notice for a month-to-month rental agreement your landlord can
change the terms of the agreement to require you to have renter's
insurance. Remember that each time a lease is renewed or every month
on a month- to-month rental agreement is an entirely new contract in
which both parties must agree on all terms or either party can
terminate the relationship.
I strongly recommend all tenants have renter's insurance to protect
them from loss or damage to their personal property as well as
liability claims. The landlord's insurance does not cover your losses
unless you can specifically show that the landlord was negligent.
Of course, prudent landlords also benefit by requiring tenants to
have a renter's insurance policy since typically there are fewer
claims made against their insurance policy if the tenant has proper
coverage. For many years, it was extremely difficult to find good and
affordable renter's insurance coverage, but the market has improved
While renter's insurance may not be something that you anticipated
in your budget, it makes sense for both tenants and landlords and is
just as important as having insurance on your car!
I have a single-family house renting for $1,300 a month under a
one-year lease. I found out that the rent is far below market. I
intend to raise the rent to at least $1500 a month after the lease is
But the contract says "that occupying the house after the
lease period the rent will be $1,400 month to month." What should
I do? Can I force them to sign another lease at a higher rent?
Griswold: The clause in your lease that increases the rent
upon lease expiration from $1,300 to $1,400 per month is referred to
as a holdover clause. A holdover clause is designed to encourage the
tenant to renew the lease.
The holdover rent is typically set at a much higher, but
reasonable, rent level that would exceed the current market rental
value for the property. However, in your case, the holdover rent is
below the market rent. Thus, your tenant may prefer to stay on a
month-to-month and will gladly pay the holdover rent of $1,400 per
I would suggest that you send the tenant a written notice legally
terminating the lease upon expiration. You can also include an offer
of a new lease at the current market rent of $1,500 per month. Most
tenants will accept the new lease terms.
Of course, if your tenant does not sign the new lease and attempts
to tender payment at the $1,400-per-month rate, then you should return
the rent payment and immediately serve the tenant with an unlawful
detainer. So while you cannot force them to sign the new lease, you
essentially give them a choice of paying the current market rent or
vacating the property.
YOU'RE A TENANT OR LANDLORD, the authors stand ready to
answer your questions in this column, although letters
cannot be answered individually. Write them at: Rental
Roundtable, Homes Section, San Diego Union-Tribune, P.O.
Box 120191, San Diego, CA, 92112-0191. Or you may e-mail
them at firstname.lastname@example.org
2001 Rental Roundtable
Robert Griswold and the Real Estate
Today! radio show strongly support the intent and the letter of all federal and
state fair housing laws. As a reminder to all owners and managers of real
estate, note that all real estate advertised is subject to the Federal Fair
Housing Act, which makes it illegal to advertise "any preference,
limitation, discrimination because of race, color, national origin or ancestry, religion, sex,
physical disability, or familial status, or intention to make any such
preference, limitation or discrimination." Additional state and/or local
fair housing laws may also apply. Be sure to inform all persons that all
dwellings offered or advertised are on an equal opportunity basis.
Revised and Updated -
Wednesday, April 26, 2006
Robert S. Griswold, CRE, CPM, CCIM,
PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
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