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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