When and How to Collect Prorated Rent
Determining How Much Rent a Tenant Owes
Prorated rent is rent that is calculated based on the number of days the tenant actually resides in the rental property during the lease term. It is the actual rent amount per day that the tenant occupies the rental. For example, if the tenant only lived in the rental for 15 days of a 31-day month, then the prorated rent amount would be for the 15 days of use, not for the full monthly rent amount of the 31-day term.
Reasons a Landlord Would Prorate Rent
- Mid-Month Move-In: While a move-in on the first day of the month is ideal, tenants are not always able to do that. Based on personal circumstances, a tenant may have to move in mid-month. A landlord may be willing to prorate the tenant’s rent so the tenant only has to pay for the days they actually lived in the rental.
- Tenant Legally Breaks Lease Early: There are situations where a tenant has the legal right to break a lease early. These include victims of domestic violence or tenants with active duty military orders. The tenant would only be responsible for paying rent until the date they move out.
- Tenant Needs to Stay Longer Than Lease: There are other times when a tenant needs a slight extension on their lease, such as their new apartment is not ready for move in yet. In this case, the landlord would prorate rent for the extra number of days the tenant would stay.
- Vacation Rentals: Tenants often rent vacation properties for an odd number of days. In these cases, it is easier for the landlord to calculate a daily rate for the rental and then multiply it by the number of days the tenant will be renting out the property.
- Selling Rental Property: When a rental property is sold and there are active renters at the property, both the buyer and seller are entitled to a certain amount of rent depending on the date of sale. The landlord will have to calculate the prorated rent amount due to the buyer based on when rent is collected and when the property officially changes hands. For example, if the property is sold and changes owners on December 15, the buyer is entitled to the rent amount from December 15 to December 31.
- Renting Out Property Before Sale Becomes Final: Sometimes a buyer rents out a property before officially closing on it. The seller may need to calculate the rent for the specific number of days the buyer will be living at the property.
How to Calculate Prorated Rent
There are two main methods for calculating prorated rent. One way is based on the number of days in the month, while the other looks at the number of days in the year.
Number of Days in Month
First, know how many days are in the month. For example, January has 31 days. Next, divide the monthly rent amount by the number of days in the month. So if the rent is $1000 for the month, you’d divide that by 31 days. The daily rent would be $32.26.
Now, calculate how many days the tenant lived or will live in rental. For example, let’s say the tenant occupied the unit for 15 days between January 1 and January 15. Then, multiply the daily rent by the number of days that the tenant occupied the unit:
- $32.26 x 15 days = $483.90
The prorated rent in this example is $483.90 for the 15 days that the tenant lived in the unit in January.
Number of Days in Year
Like the first method, you’ll start out by calculating the number of days in the year. For this example, there are 365 days in the year. Next, you’ll calculate your annual rent by multiplying the monthly rent amount by the number of months in the year, or 12. So, if rent is $1000 per month, then the annual rent would be $12,000. Next, divide the annual rent by 365 days to get the daily rent amount. In this example, $12,000 divided by 365, which equals $32.88.
Now, calculate how many days the tenant lived or will live in the rental. So, if the renter occupied the unit from January 1 to January 15, it would be 15 days. Then, multiply the number of days the renter lived in the unit by the daily rent amount:
- $32.88 x 15 days = $493.20
The prorated rent in this example is $493.20 for the 15 days that the tenant lived in the unit in January.
When to Collect Prorated Rent
Prorated rent for a mid-month move-in would actually be collected during the second month of tenancy. A tenant would have already paid their first month’s rent and security deposit prior to moving into the property. Therefore, their prorated portion would be collected when their second month rent payment is due. For example, if a tenant moved in on January 15, they would pay the rent for the 17 days they lived in the unit in January on February 1.
Prorated rent that applies to a tenant’s move out would be collected at the beginning of the month or week, depending on the lease term. It would be collected as most other rent payments are—in advance of the tenant staying at the property.
If the sale of a rental property takes place mid-month, any rent due to the new owner would be paid at closing.
How to Communicate Prorated Rent to Tenant
Most communication between a landlord and a tenant should be written so that there is a paper trail if the matter were to ever go to court. The prorated rent amount should be included in the lease agreement if it is due to a mid-month move-in. In other situations, the landlord should send the tenant a written notice, which states the amount of rent due for early move out, extended stays or any other prorated rent situations. It may be smart to get the tenant’s written consent or signature agreeing to the prorated amount, too.
The Bottom Line
Prorated rent often makes sense for both a landlord and a tenant when a move-in or move-out occurs in the middle of the month, a property is being sold, a tenant legally breaks their lease early, or when it’s a vacation rental. By calculating the daily rent amount, a landlord can better understand exactly what they’re charging tenants, while tenants can better understand what they’re paying to stay or live in the unit.