Late Fees: How Much is Too Much?

Late Fees: How Much is Too Much?

"The average renter, and many landlords, do not realize there are laws regarding late fees."

Rental agreements are filled with a lot of legal terms that the average renter, and landlord, is not interested in reading.  However, there are a few parts of the rental agreement that both parties should be aware of.  Next to the amount of rent due, the late payment fee is one of the most important parts of a lease.  The renter should know how much they are required to pay if their monthly rent is paid late, and the landlord should know if they are charging a late fee that is too high.

What are Late Fees

The late fee is the amount of money a landlord can charge a tenant who has failed to pay their rent in the time frame indicated on the lease.  Most lease agreements offer a grace period before requiring a late fee.  The late fees are charged to offset the cost of sending notices through an attorney, or processing late payments.

Late Fee Laws

Each state has laws regarding excessive late fees.  A landlord cannot arbitrarily decide to charge their renter $20.00 per day in addition to rent if they are late paying.  Landlords should only charge a late fee that is reasonable and that is clearly defined within the lease.

What is Too Much?

The average renter, and many landlords, do not realize there are laws regarding late fees.  Usually, late fees that exceed $1.00 per day are thought to be excessive.  Unless a landlord can prove that there is a specific reason that justifies a high late fee (legal fees, eviction proceedings, etc.) they usually cannot require a renter to agree to pay an excessive late fee.  The best way to find out how much a late fee should be is to consult your states landlord and tenant laws. 

Finding out if your late fee is in violation of state tenant laws is something that every landlord should do prior to making a rental agreement.  Even if the tenant agrees to the late fee, it can be difficult to collect these fees if a court decides they are excessive.