Tip of the Month - September, 2022

Late Charges

Source: Every Landlord’s Legal Guide
By: Marcia Stewart/Attorney Janet Portman
       Ann O’Connell (Nolo-15th addition)

If you are faced with a tenant that has not paid rent on the due date, you probably do not want to immediately hand out a formal notice telling the tenant to pay the rent or leave.  After all, it is not going to do any thing positive for your relationship with the tenant, who might have just forgotten to drop the check in a mailbox.  But how else can you motivate tenants to pay rent on time?

A fairly common & sensible practice is to charge a reasonable late fee and highlight your late fee policy in your lease or rental agreement and move-in letter to new tenants.  You are still bound by general legal principles that prohibit unreasonable high fees.  Courts in some states have ruled that contracts that provide for unreasonable high late charges are not enforceable.

Unless your state regulates late fees, you should be on safe ground if you adhere to these principles.

1-The late fee should not apply until @ least three or five days after the due date.

2-The total late charge should not exceed four percent or five percent (4%/5%) of the per monthly rent.

3-If late fee increases each day the rent is late, it should be moderate and have an upper limit.

4-Do not try to disguise excessive late charges by giving a “discount” for early payment.

If you are concerned about tenants paying on time-and who isn't’?-put your energy into choosing responsible tenants!!

This web page was updated 8/30/2022.