When Is Tenant in Default?

“The chicken is ready to eat.” Which picture shows this? Both of them do. The statement is ambiguous. That’s the problem with typical lease language regarding rent.

Your tenants are not lawyers. Why are your leases written in legalese? Use plain English and say what you mean. For example, when is your tenant in rent default if rent is due on the first and there is a late charge on the sixth?

Here are the possibilities:

  • Rent is due on the 1st and tenant is in default on the 2nd. This gives you the right to send a 7-day default and notice to cure letter on the 2nd, but you won’t charge a late fee unless cure takes place after the 5th.  This is the version many lawyers believe.
  • Rent is due on the 1st and tenant is in default on the 6th. This is the version most landlords believe.
  • Rent is due on the 1st and tenant may elect to pay after the 5th if it pays a late fee, but is technically not in default until the next month’s rent comes due. This is the version many tenants believe.  Surprisingly, many judges agree with them, if your lease is not VERY clear regarding default.

The problem is a legal principal having to do with ambiguities.  If you can read a lease and say, “The language could be this….., it could be that….,” then you have an ambiguity.  Legally, whoever wrote the contract was in the best position to avoid ambiguities. As a result, courts will interpret them AGAINST the person who wrote the contract.

Avoid the problem with a simple sentence in your lease that says, “Tenant is in default if rent is unpaid by the _____ day of the month.” If that day is the 2nd, but there is not a late fee until the 6th, use a few more words to explain, “If default is cured after the 5th day of the month, then a late fee of $_____ will also be due and payable at that time.”  At the very least, explain this point in a “FAQ Sheet” you give all tenants, and which they sign.  It MIGHT help avoid future problems without getting new leases signed by everyone.