If they took you to court over it you may very well lose. Alot of times judges throw out late fees in court. They should be paid when they pay the rent. I have in my lease now that any late fees are paid first with any money they give me towards the rent. For ex. if they owe $1,000 rent and $100 late fee if they only give me the rent money they still are behind on their rent by $100 as I apply the late fee first. This means you can give them a P&Q notice for the missing rent.
that makes sense. thats what i meant i would invoice them every month for left overs of the total rent. now the question is if they fail to pay that unpaid rent [since the fee gets added to the rent] after the tenancy expires, can i deduct from the deposit then?
He's asking if, in a hypothetical scenario, he can deduct a last month late fee from the security deposit. I don't know the answer, but I know that he can't accumulate fees and do it at the end for the reasons given previously. By letting them live there, he's essentially forgiving the debt.