Monetary, Interpersonal Laws and Din Torah (11)
Payment of Rent: Timely Payment. A tenant has an obligation to pay his rent on time. In classical Torah law, the Gemara (1) learns from a posuk that payment for workers and rentals is due at the end of the work or rental period. However, the custom has become that a tenant pays at the beginning of the month, and this understanding between them obligates the tenant to pay at the beginning of each month. The Chofetz Chaim in sefer Ahavas Chesed (2) proves that according to some Poskim a tenant who can pay on time and does not, transgresses a Torah prohibition of Bal Talin (delaying wages).
Penalty for Late Payment. Some agreements include a penalty for paying late. Even though the tenant ends up paying more for paying late, this is not a violation of Ribbis (interest) for a one time penalty, since it is not an accumulative obligation, but rather an obligation that becomes valid the instant one violates the deadline. [By a real loan this is prohibited Rabbinically]. This is only permitted by a one-time penalty for each new month of unpaid rent. However, if the penalty for the first month increases for the same month’s rent if he doesn’t pay for that first month a second time, it is assur, as explained in Shulchan Aruch (3).
Important Detail About Late Payment Penalties. Even though a one-time penalty is permitted on rentals, it cannot be done if the penalty entitles him to pay even later than the original time. The reason for this is because it is like saying, had you paid now, the lower price kicks in and if you pay later with the penalty added, you can hold the money for longer. This is an issue of Ribbis as you made him pay more for holding your money.
Discounts for Early Payments. If a landlord tells a tenant that the annual rent is $12,000, but if he pays up front, one month is free, and he owes only $11,000, it is prohibited to take the early pay option, if no kinyan is being made at the time of payment. Since he doesn’t have irrevocable rights, his prepayment is thus similar to a loan which is gaining him cheaper rent, and is included in the issue of Ribbis. This is based on the Shulchan Aruch and Nekudas Hakesef (4). All these rules regarding penalties are relevant for long time dental services which offer these discounts and also have penalty clauses. (To be continued)
(1) בבא מציעא סה. (2) אהבת חסד ט:ה (3) יו"ד קעז:טז (4) שם קעו:ו