Having the rent paid on time every month is every landlord’s dream. With careful tenant screening landlords can significantly increase the probability that being paid on time is not only a dream, but the norm. Massachusetts has a several interesting details surrounding rent collection that are worthy of a review.
Base rent + property tax increase
When it comes to paying rent tenants will have a due date and a grace period, typically written into the lease. In Massachusetts, the grace period is 30 days, after which time a late fee may be charged. Yes, this is a really long time to wait to charge a late fee, but there is no statute for the amount of the late fee. Bounced check fees are another story. For payments under $1500, the amount of the penalty is $30 or the amount of the payment, whichever is less; for payments $1500 and greater, the amount of the penalty is equal to 2% of the payment. There is also a flat $30 maximum fee for any payment made using electronic funds transfer.
Landlords charge what is considered “base rent”, which is the monthly rent amount. However, landlords are also allowed to pass along a pro rata portion of any increase in property taxes to the tenant. Specifically from M.G.L.A. 186 § 15C, if the real estate taxes of the property increase during the agreement term or any renewal, the landlord may require tenant to pay the increased taxes. The tenant can only be required to pay the proportion of a tax increase that can be attributed to the premises. And if the landlord obtains an abatement of the real estate tax levied then a proportionate share of the abatement must be refunded to the tenant.
Last month's rent
Massachusetts landlords are allowed to collect the last month’s rent at the beginning of the lease term, however, this is only allowed if a separate written last month’s rent agreement or addendum has been executed. A written receipt must be provided to the tenant if the last month’s rent is collected.
The addendum must include the amount collected, information about the required receipt, and a disclosure about how interest must be paid on the last month’s rent.
A receipt for the last month’s rent is required to be provided by the landlord, and must include the following information:
- the amount of such last month’s rent;
- the date on which it was received;
- its intended application as rent for the last month of the tenancy;
- the name of the person receiving it and, in the case of an agent, the name of the lessor for whom the rent is received;
- a description of the premises;
- a statement indicating that the tenant is entitled to interest on the last month’s rent at the rate of five per cent per year or other such lesser amount of interest as has been received from the bank where the last month’s rent has been held; and
- a statement indicating that the tenant should provide landlord with a forwarding address at the termination of the tenancy indicating where such interest may be sent.
The landlord is required to pay interest on the last month’s rent to the tenant on an annual basis. In the event the tenancy is terminated before the end of the stated agreement term then the landlord must provide accrued interest to the tenant, no later than 30 days after the termination. Interest does not accrue for the last month for which rent was paid in advance, because the last month’s rent is being used for that final month.
At the end of each year of the tenancy the landlord must provide to tenant a written statement indicating the amount of interest due. The landlord must also give tenant the interest which is due or shall notify tenant that they may deduct the interest from their next rent payment. If, after 30 days from the end of each year of the tenancy, the tenant has not received the interest due or the notice to deduct the interest from the next rent payment, the tenant may deduct the interest due from the next rent payment.