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Late Fees

Charging Late Fees
The LPA LEASE CLAUSE # 3, Late Fees

One of the most important elements of modern residential leases today is the Late Fee clause. In order to encourage timely rent and discourage late payments, I highly recommend you have a solid late charge clause. Having the clause in your lease is only part of protecting yourself against late rent.

The first step is to explain and warn the tenant about the late fee when going over the lease before signing it. I'll even ask the tenant not to sign the lease if they think that late payments are in their future. I also inform the tenants that I belong to a national tenant reporting bureau and have the power to adversely affect the tenant's credit, so.. "Don't mess up with your rent. It's not worth it to ruin your credit." If the tenant values his credit and plans on buying a home someday, I remind them that it is very important to prioritize the rent payment and keep their credit clean.

How much should the late fee be? I feel late charges should hurt enough; not to be so comfortable an amount that the tenant continues paying late fees every month. I don't want to make it so high that a struggling good tenant will fall even further behind, but it should be a painful enough fee that the tenant will not want to pay late again. Ever.
Keep in mind that some states have limitations on how much a late fee may be. Although Late Charges higher than the state limitation are unenforceable in court, most landlords are more interested in evicting the tenant than collecting late fees by the time they are in court.

Many tenants who incur a late fee don't really mind paying it in their own good time. That's why it is important to also charge a Daily Late Charge in addition to the initial late fee. It gives the tenant an incentive to hurry up and pay the initial late fee before it grows into an even more painful hit.

Another item we include in our Late Charge clause is a Bounced Check Penalty. I usually make the bounced check charge the same as the initial late fee. I also prepare the tenant that if the rent check bounces, it will cause the rent to be late and they will be responsible for a late charge too.

I want to stress to you that the landlord protection clauses in our lease or any other lease are there to protect you, but sometimes you will need to enforce the lease. Many landlords are afraid to lose their friendly relationship with the tenants when it comes to enforcing their lease. Remember that this is your money we are talking about. This is your property they are occupying and you deserve to have a tenant who lives up to his or her agreement with you. Send late fee notices promptly and make the tenants live up to their rental agreement. - John Nuzzolese

Late Fees (Maximum Allowed)

Usually, a late fee is assessed when the tenant doesn’t pay the rent on time. In many states, the late rent fee is not defined meaning the landlord can charge as much as described in the lease agreement. In other states, there are other defined guidelines.

State Maximum Late Fee a Landlord May Charge
Alabama No state limit but must be reasonable
Alaska No state limit but must be reasonable
Arizona No state limit but mobile homes limited to $5. per day
Arkansas No state limit but must be reasonable
California As agreed, but difficult to enforce in court
Colorado No state limit but must be reasonable
Connecticut No state limit but must provide 9 day grace period
Delaware 5% of rent max
District of Columbia 5% of rent max Mandatory 5 day grace period. Landlord may not evict over late fees. May be deducted from Security Deposit.
Florida No state limit but must be reasonable
Georgia No state limit but must be reasonable
Hawaii No state limit but must be reasonable
Idaho No state limit but must be reasonable
Illinois $20. Or 20% whichever is greater
Indiana No state limit but must be reasonable
Iowa $20. per day or $100. per mo / rent under $700., $60. mo
Kansas No state limit but must be reasonable
Kentucky No state limit but must be reasonable
Louisiana No state limit but LA consumer credit law limits to 5% or $10. Whichever is more
Maine 4% max after 15 days grace period
Maryland 5% max after 5 day grace period
Massachusetts No state limit but 30 day grace period. May evict if unpaid after 30
Michigan No state limit but must be reasonable
Minnesota 8% of the rent that is past due
Mississippi No state limit but must be reasonable
Missouri No state limit but must be reasonable
Montana No state limit but must be reasonable
Nebraska No state limit
Nevada 5% of the rent amount
New Hampshire Limited to the amount of the rent
New Jersey Seniors: 5 day grace period / Others: 1 day after rent is late
New Mexico Limited to 10% of the amount of the rent
New York Mandatory 5 day grace period limit to 5% of the rent
North Carolina 5% of the rent amount or $15. of monthly rent whichever is greater
North Dakota No state limit but must be reasonable
Ohio No state limit but must be reasonable
Oklahoma No state limit but must be reasonable and relate to incurred costs of landlord
Oregon 4 day grace period. reasonable and relate to incurred costs of landlord Daily late fees limited to 6% of any late fee charge or 5% max of the monthly rent
Pennsylvania No state limit but must be reasonable
Rhode Island No limit. Must be reasonable and relate to actual costs of landlord
South Carolina No limit. Must be reasonable and relate to actual costs of landlord
South Dakota No state limit but must be reasonable
Tennessee Mandatory 5 day grace period. Limit of 10% of the rent, but max of $30.
Texas Mandatory 1 day grace period. 12% max of the monthly rent (Structures less than 4 units) (4 or mor units: 10% max)
Utah No state limit but must be reasonable
Vermont Limited to actual costs incurred by landlord as a result of tenant paying late
Virginia No limit but must be reasonable. Mandatory 5 day grace period
Washington No state limit
West Virginia No state limit
Wisconsin Mandatory 5 day grace period. $20. Or 20% of rent whichever is greater. May charge more if landlord can prove it is reasonable.
Wyoming No statute



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