Tip #53

Charge a Hefty, but Legal, Late Fee

Written on June 18, 2015 by

Late Fees By StateI believe that late fees provide the only real motivation for tenants to pay rent on time.

While some landlords mess around with early payment rewards to entice tenants to pay on time, I believe nothing works as well as a hefty (but legal) late fee.

Be Reasonable

My state doesn’t have a statute on late fees, therefore I’m only responsible for ensuring they are “reasonable” – which is completely subjective.

As such, I charge different one-time late fees, depending on the rent amount:

  • 10% if the rent amount is less than a $1,000,
  • 7.5% if the rent is between $1,000-$2500, and
  • 5% if the rent is over $2,500.

Some lawyers will tell you that anything over 5% will get thrown out in court, but I would argue that a $30 late fee on $600 in rent, does not motivate even the poorest of tenants. They will still pay you whenever they feel like it.

Related: Daily Late Fees Provide Motivation to Pay Rent Quickly

You Won’t Get Rich

My goal is not to actually collect late fees – but rather to motivate my tenants to pay on time.

The cost of receiving rent late is far greater than the few hundred dollars you’ll make by trying to collect small late fees.

Whatever amount you choose, make sure that it’s written and agreed to in the lease.

You can’t assign a late fee, no matter how small, if it’s not in the lease.

Late Fees & Grace Periods by State

State regulations vary greatly on this topic, so it’s imperative that you learn and abide by your state laws.

According to my research (though I’m not a lawyer), only 15 states regulate grace periods and/or late fees. Please click on the links to the actual statutes, to ensure accuracy of the data.

StateGrace PeriodLate FeesReference
Arkansas5 Days-A.C.A. § 18-17-701(b)
California-Must be in a written lease and be reasonable.CA Landlord/Tenant Handbook
Connecticut9 Days-CT Gen Stat § 47a-15a (2013)
Iowa-Agreements less than $700/mo, a max $12 per day or $60 per month. For agreements more than $700/mo, a max $20 per day or $100 per month.Iowa Code Ann. 562A.9(4)
Maine15 DaysMaximum 4% of rentMe. Rev. Stat. Ann. tit. 14 §6028
Maryland-Maximum 5% of rentMd. REAL PROPERTY Code Ann. § 8-208 (2014)
Massachusetts30 Days-MGL c.186 § 15B(1)(c))
Nevada-Must be in a written leaseNRS 118A.200
New Jersey5 Days for protected classes-N.J.S.A. 2A:42-6.1
New Mexico-Maximum 10% of rent and be in a written leaseN.M. Stat. Ann. § 47-8-15(D)
North Carolina5 DaysMaximum $15 or 5%, whichever is greaterNCGS § 42-46(a)(1)
Oregon4 DaysMust be in a written lease and be reasonable, and may be a flat fee, a daily fee of no more than 6% of the flat fee, or no more than 5% of the total rent for each succeeding 5-day period or portion thereof of the rental period, until rent is paid in full.Or. Rev. Stat. § 90.260(1)(2)
Tennessee5 DaysMaximum 10% of the past due amountTenn. Code Ann. § 66-28-201(d)
Texas1 DayMust be in a written lease and be reasonableTex. Prop. Code Ann. §§ 92.019
All Other States--No Statutes
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16 CommentsLeave a Comment

  • Ron

    What do you think about a fixed late fee when the rent is one day late, and then an additional fee for each day the rent payment is late? This assumes that the total late fee stays within the legal limits. Without the adjustable part, a tenant will not be in a hurry to pay rent after they have incurred the fixed late fee.

    • Lucas Hall

      Hi Ron

      That’s exactly what I do – for the exact reason that you mention. Without daily fees, the tenant has no motivation to pay if they are already considered late. Daily late fees ensure that a tenant chooses to pay on the 3rd, rather than the 30th.

      I have a one-time fixed late fee on the first day that rent is officially late (the 2nd of the month). Then, I have a $20 daily late fee every day thereafter.

      I wrote a tip on daily fees: https://www.landlordology.com/daily-late-fees/

      The tricky part is staying within the legal limits (if any) and keeping it reasonable.

      Cheers!

      • Ron

        Wow. $20 per day is a strong incentive. Mine is not that high, but the concept is a good one.

        • Lucas Hall

          You’re right, but most of my rents are above $3K/mo. If the rent is less than $1,000, a $5-$10 daily late fee would be more appropriate.

          Plus, if I ever had to go to court over unpaid rent, I would just drop the daily late fees, to show the Judge that I’m not out for blood, but rather, I just want my rent money.

      • sherrod brown

        So youy have a nutso late fee? the people who are willing to rent at all, are already likely people working for less money, and also working for companies that are not exactly “secure”. And youre trying to charge a crazy fee like 20 bucks? ok brainiac…lets say the car needs something like a fuel pump./ Not cheep, not expensive…but you have to get it fixed. So that rent check CANT be given to you, for you see…ifi i have just one car, I HAVE to get it fixed for WORK. so EVERYONE can be paid…and here you want to charge 20 bucks a fuckin day? so lets multiply. If I get paid onnce a week…thats 200 or more bucks depending on how I get paid!!! SO…youre planning on screwing your chances the NEXT check as well? someone should whip your

        • Naomi Brown

          whoa buddy, sounds like you are a renter who habitually pays rent late and resents the fees you have to pay because of it. I routinely waive late fees, even for habitually late renters, so long as they call me and let me know what is going on and then follow through with what we agree upon. We pay the insurance, lawn care, taxes and repair bills on time. Charging late fees is a way we have to enforce getting our rent on time to pay those bills with. I charge $50 if not paid by the 5th, giving my tenants an extra day beyond what the law in my state says. Then $10 a day after that until rent is paid with a cap of $150 per month. My family owns 3 rentals that I manage and rents are between 885-1200. I’ve written it into every lease for the past ten yrs but have yet to collect more than a handful of $50 fees and have never enforced a single day fee. I had one renter who only paid the rent on time once in 3 years and I think he paid me 2 or 3 $50 late fees even with rent routinely being 3 weeks late. I definitely should have tightened up on him and perhaps he would have started paying on time. about the time I decided to crack down on him, he put in his notice because he bought a home…

          • Renter in spokane, Wa

            I have had to pay $50 late fee because I switched jobs due to them not paying paychecks on time…As soon as this company couldn’t pay me on time I left and found a new job because it affected my payment with landlord. With this new job my paycheck isn’t received by the due date of my rent therefore landlord is getting an extra $50 per month on a $650 a month agreement. I stay in communication with the landlord and haven’t discussed the problem with him but he refuses to give me leeway. Is $50 late fee too high for this amount of rent?

  • Terri

    If you have a month to month agreement that does not include a late fee clause and the tenant is late, would you have to give a 30 day notice for future late fees to go into effect? Would he have to sign it?

  • Joe

    Hi All,

    I now charge a $50 one time late fee. I’ll tell you why below…

    I used to charge a $10 per day late fee, it was enough to collect the rent on time.

    Here’s the problem,
    Renters that do not intend to pay, know it will go to Court, the Judge will dismiss the late fee;
    this was in Michigan, with my high cost Attorney at my side.

    A while back, I had a $25 discount for rents paid on time.
    I never allow a grace period in any case – 1 day is late.
    The problem with that was, $25 was okay for the renter wanting a week or two to be late…

    … Of course I advised about the 7-day notice to evict, so it never went past that,
    except for the professional rent scammers – I screen much closer now.

    So, Why now a $50 late fee?

    I now accept payments on-line. They can pay by check or credit card.
    With credit cards there is a 2.9% convenience fee.
    $1,000 rent @ 2.9% is $29 charged to their credit card.

    That’s cheaper than a $50 late fee, then they can have about 30-days to pay their card

    • Lucas Hall

      Hi Joe,

      Thanks for sharing!

      Another tool I use is automatic rent payments. I mandate in the lease that my tenants setup automatic online rent payments. That way, they can’t ever “forget” to pay the rent.

  • Brandi

    I rent and my landlord wants to charge $20 a day for being late even when I tell him what’s going on and why I’m late. As for the 5 day Grace period do they count the 1st? Logic tells me if due on 1st with a five day Grace then it would start on the 6th with the late fees.

  • Michelle Jiong

    I had late charges of 150 dollars at 50 dollars a month flat fee. I had gotten behind 2 months(payed but not full rent of 635/month. This was after 18 months of no late payments that I had financial challenges. Long story short with paying a month behind with @150 in late fees I was taken to court and with lawyer fees I owed @$5660 dollars. I agreed to pay my regular rent and my late fee on time until paid off. After 2 1/2 years of never being late again as well as paying my fees my landlord kept charging me $50 dollars a month AFTER our court date and agreement. Now my balance is @2300 just for paying on my original balance. I am in Missouri. Is this legal?

  • Foalabama

    I stay in Alabama, i have been in this house since 2009 i have signed one lease since i have been here havnt gotten any reciepts for payment (55O) now 600 LONG STORY SHORT this landlord charges me five dollars a day when im late after the 10th of each month…i had to have surgery which required me to be off so i end up being more late…got my income tax paid him 2600 to play catch up well i thought i caught up mind u this is all hear say from the L.L now he tells me that i am 5,104 in late fees!! And i am 2mths behind in my rent!!!! Tld me i had 175 on the books and he didnt no wat to do wit it..that was 2 go the the late fee &he jus let it sit thr and accumulate i say to that amt 5104.. thr were NO RECIEPTS EXCHANGED…CAN HE DO THIS..

  • Vince

    I am a tenant in Florida, living in the same place for 2 years now. One of my rent checks was bounced last month, and I was charged $50 for the NSF, $60 for the initial late fee, and $10 thereafter. My landlord did not tell me the check bounced and I had no idea that the late fees were adding up, equaling to over $200 in fees. Do I have any case against these tenants? The agreement states “Daily late charges will not exceed 15 days for any single month’s rent.” After a month and a half, I was finally sent an email saying I had a balance of $800, and they claimed because they are changing management they did not hire a property manager during that time so there was noone to tell me of any late fees.

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