Tip #44

Daily Late Fees Provide Motivation to Pay Rent Quickly

Written on August 21, 2014 by , updated on December 17, 2014

Daily Late FeesLate fees provide the proverbial muscle to motivate tenants to pay their rent on time.

One-time fees are great, but daily late fees are better.

I don’t enjoy charging late fees, and have never had a late rent payment since I started using Cozy. However, I still include late fees in my lease, just in case a tenant decides to be rebellious.

Laws Exist, but Differ

Because some cowboy landlords have gotten a little carried away with late fees, many states have put limits on the fees a landlord can charge for late rent. Further, many cities and localities have additional rent control ordinances to regulate late fees.

For example:

  • Oregon specifically allows a landlord to charge daily late fees starting the 5th of the month.
  • California and Texas simply state “a reasonable amount” is allowed.
  • New Mexico takes it a step further by allowing late fees, but not more than 10 percent of the rent amount, and the landlord must give notice of the late fee charged no later than the last day of the following month after the default occurred.

The Perfect Late Fee Combination

One-Time Fees

My state doesn’t have a statute on late fees, but that doesn’t mean I can charge whatever I want!

Any fee that is not “reasonable” will likely get thrown out of court. Unfortunately, the term “reasonable” is not very helpful because everyone has a different opinion of what that means.

Define “Reasonable”

Generally speaking, a one-time late fee of 3-5 percent will be considered “reasonable” by most people.

To double-check, ask your friends and family what they think. If they cringe when you tell them your late fee, you’ll know it’s too high.

With that said, I have seen large, nationwide apartment companies charge as much as 10 percent and get away with it. I suppose they think it’s better to ask forgiveness than permission.

One-Time Fees Aren’t Enough

The problem with one-time late fees is that once the tenant has incurred the late fee, there’s no incentive to pay rent quickly, and often the tenant will wait until the end of the month to pay up.

Since the rent is already late, why should the renter scramble for money to pay rent on the 6th, when it could wait until the 30th at no additional cost?

Daily Late Fees

The beauty of charging a daily late fee in addition to a one-time fee is that once the tenant incurs the initial fee, there is still financial motivation to deliver the money as soon as possible.

Personally, I charge a $20 daily fee, starting on the 2nd late day and every day thereafter, until rent is paid in full. This ensures that the tenant will continue to attempt to pay rent quickly, even if it is officially late.

When you use a one-time fee and a daily late fee together, it really provides incentive for the tenant to pay rent on time.

Keep in mind, all this can be avoided if you force your tenants to pay automatically through a property management system like Cozy.

Sample Lease Clause

Before using this clause, you should check for compliance with your state laws, and have a local attorney look at it.

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What Late Fees Do You Charge?

What type of late fee structure works for you? Share it in the comments below.

photo credit: Antoine Millet via cc
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63 CommentsLeave a Comment

  • Nick

    We use cozy and incorporated a $75 one-time late fee in our lease which works out to ~6%. But we will definitely be considering moving to a recurring daily late fee for our second property which should be rental-ready oct 1. We’re big believers of incentives, so this makes a lot of sense thanks!

    • Lucas Hall

      Hey Nick,

      Cool man, give it a try. Just to clarify, I only recommend using a daily late fee WITH a one-time fee on the day that rent is officially late – then daily fees every day thereafter. There has to be that initial fee, otherwise tenants will always be late a few days and would only be forced to pay a few daily fees.

      Again, its good to have in the lease, but since you and I both are using Cozy, it will rarely ever need to be enforced. BTW, there are some really great changes coming to Cozy that I think you (and everyone else) are going to love. Stay tuned.

      • Jennifer

        Money hungry much??! You people dont seem to want to take into consideration that most people are late paying rent because we’re struggling financially. Not everybody has extra money at the end of the month and are living check to check. When you look for any reason to take advantage of all the fees you THINK you can charge, youre causing an incredible hardship on people who are already struggling! Not everyone who pays rent late is looking to screw their landlord over. Sometimes we get paid different schedules than when you want your rent paid. You seem like youre just trying to make extra money off of people who are already struggling. Its a disgusting thing you are promoting! Theres alot of single parents who need just a little leniency!

        • Lucas Hall

          Hi Jennifer,

          If one of my good tenants – who always pays on time – is late, then I always forgive the fee – especially if they let me know ahead of time.

          Here’s another article I wrote: https://www.landlordology.com/forgive-a-late-fee-once-but-only-once/

          The daily late fee is there to prevent tenants from taking advantage of the situation. Most landlords, like myself, are not money-hungry, but it is a business not a charity.

          Good luck to you.

          • Jennifer

            Sorry but I think you landlords moat definitely take advantage of the tenants looking for any way possible to get extra money. A good example of that is this ridiculous pet rent. Just a way to charge more rent. Most households now consist of a single parent working their rear off to make ends meet and we come across uncompassionate landlords like you promoting the rubbish you are. Times are hard. Most people dont have 2 incomes. And all youre doing is taking even more money that needs to be used to buy food. You have no idea the hardships you impose by being a landlord like you.

            • hoerschel

              Jennifer, your whining is unbecoming as an adult. Go back and read what you wrote. And grow up. There’s no free lunch. Most of the landlords I know are compassionate, caring people. They’re willing to work with folks who find themselves in circumstances beyond their control. Too often, though, the binds people get into are due to poor judgments and bad decisions. For you to whine and foist your personal problems on others is symptomatic of what the liberal mindset has done to our society: Blame others for your inability to manage your affairs. If you’re truly desperate, help is available. Don’t blame the landlord who took the risk of renting to you in the first place.

              • Jennifer

                My landlord wants to charge $100 late fee… Wheres the compassion in that?! How is that anything other than some greedy jerk trying to get extra money???
                Excuse me while I go grow up now.

              • Lucas Hall

                Jennifer,

                How much do you pay for rent? A 5-10% late is a common practice in the industry. While $100 is still a lot of money, it might be considered “reasonable” according to your state’s landlord-tenant laws.

                We’ve written a summary of the state laws here: https://www.landlordology.com/state-laws

            • Cesar

              Jennifer, If you are having trouble making ends meet, the first thing you should do is give away your pet. A pet is a LUXURY, there is food cost, veterinary costs and the time it takes to take good care of a pet. If you are having financial trouble you are probably working extra hours and you most likely don’t have time to make your pet happy. Find a new home for your pet and you’ll cut your budget in at least $100 a month plus the pet rental fee.
              Pets have accidents in common areas often and dedicated carpet cleaning is required, pets make noise (barking) – a nuisance for tenants without pets who complain and take time away from property manager. Pets can infest a property with pests (fleas, etc). The extra fee has a reason to be

              • Avery Glendenning

                For people with Axiety issues and Depression it’s not a “Luxury” . Also, they are part of my family, especially since I live alone and have no one else.

              • Larry Coleman

                I have a question I’m with a landlord that I’ve been with for almost 4 years and we always pay on time this month I was late but I rent is late until the 6th of the month and the first day you get charged $50 and then $10 after that until you pay the full rent.
                So here’s my question I wasn’t able to pay the rent until I think it was the 12th and so she said on the 12th it’ll be regular rent plus plus $80 which I’m fine with but I didn’t have the $80 extra to pay so I made sure I paid the extra rent and I would have the remainder “$80” 2 Days Later can she still charge me a daily fee after I’ve given her the regular rent?

              • Michelle

                My landlord was advised in advance that we might be late with our rent because we were waiting for a reimbursement that could come after the 1st of the month. Today is the 9th and they have the full rent. We have until the 3rd to pay and have it not be late. We still owe them $2,000 of the security deposit, which we are paying when my husband’s disbursement finally shows up.

                They are trying to charge us $125 PER DAY in California. Is that not against the law?

              • Danielle

                My rent is 700. They charge 20 after first three day late. Then charge 5 a day after that. Thing is after I’ve paid full rent by third week they still charge late fees on the late fees. They say oh well your paying late fees first then whatever is left is paid off the rent. So by the time my rent is paid in full I have paid 20 plus 5 a day time 30 or 31 days. I get paid week to week. 300. I also have to pay my electric because the lease requires electric to never be turned off. Reason. The wiring in each apartment is connected to other apartments as well. So I’m not only paying for mine alone as far as electric. How I figured this out. For a month or so my electric went down after tenent on left side moved out and no one was living there.

            • Cynthya Green

              I don’t know what state you’re in, but here in Mississippi the law protects renters. As a landlord myself I think it only fair to inform you of what may also apply in your state. According to Miss. Code 75-17-27 defines “late charge” as $5 or 4% of the amount of delinquency, though this is a UCC statue, it has been applied to mortgage note payments and homeowners’ assessments (Rea v. Breakers Ass’n, Inc., 674 So.2d 496 (Miss. 1996)).
              Miss. Code Ann. 75-17-25 defines “finance charge” if late charge exceeds the statutory late charge, then the interest and finance charge is forfeited. IF THE LATE CHARGE EXCEEDS MAX AMOUNT ALLOWED BY LAW BY MORE THAN 100%, THE RENT FOR THAT MONTH WOULD BE FORFEITED BY THE LANDLORD.

              • Danielle

                At the end of this month I will be able to pay a few months ahead. And save my paychecks. I had to give up my car and other income just to keep a roof over my son’s and my heads. No pets. Just dealing with everyday struggles as a single mom. No food because all extra income is going to late fees. It’s a snowball effect when imposing daily late fees for those that do work paycheck to paycheck. No end in sight until tax season comes along.

            • Jared

              Jennifer, all landlords aren’t rich. We’re investors. If I take equity out of my current home to by an investment property there’s risks involved. If renter’s like yourself don’t pay then my investment is not paying off. I have rented to people in the past and there are people out there who have no motivation to pay rent. They just move from place to place and get over on anyone they can.

              • Jacob Gambler

                Yes that maybe true that it invokes risk but landlord can abuse there power over late fees that’s why we have a federal government. I have paid my rent on time for 3 years now and I still they say I owe late fees.

          • Anthony

            Hi Lucas,

            When you charge the daily late fee to add in addition to the 5%. That certainly looks like what you are saying here. Doesn’t that go past what is considered reasonable than?

          • GRACIE

            what if after paying rent n some of late fee but landlord continues to run 25 late fees current on the late fee charge seriously bogus

        • Anne

          If renters would just let me know their payday or best date for them
          To pay I would work with them and I have allowed renters to be a few days late on regular basis even with that clause. The problem is I have bills to pay too. I have to pay my insurance , taxes and mortgage payments so rent always being late needs to have some consequence. My current renters have had excuses and are now month and half behind. I should just let it go since they are struggling???

        • Janet Curtis

          charging late fees is not unusual. As the landlord IM not given a break for MY crisis/caused y renters own problems? Landlords rent as they need the money ON time! So saying we should have compassion for trnters when they have none for the struggling landlord is an absurd comment. my renters cause me late fees galore and it ruins MY credit I wait all day to hear sorry we can pay now. WELL neither can I. I have had to take payday loans and will be in debt for months making their rent payments pay for what they made me borrow to cover tHE<? are u kidding trying to sell my furniture to no avail. why should I suffer because they are having a hard time and I have to pay all their rent if i get it to these loan companies they forced me to get?

        • Abel

          Then down grade to what you can afford. You choosing a place to live that stretches your budget isn’t the landlords fault. Pay on time or pay extra.

        • Tonya Briggs

          Completely agree!!!! We are being charged 50% of our monthly rent for a late payment when we are current on our rent now AND she thinks that late fees are accumulating on the late payments. Slumlords we like to refer to this as…

        • Barry

          I’m a landlord with a mortgage that needs to be paid on time. I have a family. In principle, what you’re saying is that it’s OK for tenants to pass their hardships onto their landlords. Shame on you.

          The late fees are designed to keep tenants disciplined, that’s all. (It works BTW) Landlords aren’t going on vacation with your 5% late fee.

        • megan jones

          Don’t you understand that landlords have to pay their mortgages as well? That is why they need rent and that is why it’s totally acceptable to charge late fees. Also it’s in your lease. Everytime we have gotten screwed over is because the tenants who live in our rental couldn’t afford it and should never have moved their in the first place and actually PLAN on screwing you over. If you cant afford it and are living check to check, you need to figure out a new living situation and not plan on screwing over landlords.

      • Denise

        This is just so awesome! Thank you for this advice! I will implement this ASAP!,,

    • Tiffini parker

      My lamd lord charhe fifthy dollars thre time one after the 5 fifthy after the 7th fifthy after the tenth. Thats 150.00 thats to muuch the rent allready four fifthy for a two bedroom one bath

  • Roger

    Late on 2nd (no grace period) $25 and additional $25 after 15th. In LA California it is nearly impossible to legal enforce. THe fee must be reasonable, not punitive and represent actual added cost to landlord. Even at that the courts often will not enforce – especially as cause for eviction. We add the following to lease:

    Renter acknowledges that Landlord will incur certain administrative costs in connection with a late payments and/ or bad checks, and that the amount of such administrative costs would be extremely difficult or impractical to ascertain. Therefore, Parties agree that if such administrative charges are as stated in Terms Section (G) & (H) above. All charges owed under this lease shall
    be deemed rent or additional rent including late and bad check fees.

    We have had success in deduction late fees from security deposits on move out.

    Amazingly the rent control agency charges LANDLORD 100% late penalty for failure to register on time.

    • Lucas Hall

      Hi Roger,

      Thanks for sharing that! I had never thought of converting a late fee into rent owed. I would have just assumed the judged would see right through it. I’m glad to hear it works in your area!

      100% ??? My jaw is on the ground! I surely hope the registration fee is not anything more than $100.

      Take care Roger.

  • Daniel

    My leases have no late fees. For an apartment that rents for $750, I’ll charge $800 rent and give the tenant a $50 reduction for on-time payment. That way when I have to evict someone, the $800 is all rent and there is no confusion. When I’m signing a lease I merely tell the tenant that if they pay on time, the rent will be $750. If they balk at it, that means before they move in they are already planning to pay you late – probably not the tenant you want in your property.

  • Jilly

    Sometimes our judges aren’t willing to grant late fees in court. So we offer a combination of “discount rent” and late fees. If rent is $500/month, the lease states rent is $ 525/month but you get a $25 discount for paying “on-time”. After the 10th day of the month, we charge $5/day late fee (by then we may have already filed an eviction suit, depending on the situation. By stating the rent is $ 525/month, the Judge will definitely grant that amount vs. never knowing if he/she will grant late fees.

  • Robert C Sonderegger

    All my current leases stipulate a 3-day grace period plus a $30 late fee on day 4. I would like to change it to a daily $10 fee starting on day 2.

    My question is — can I unilaterally change the lease with an official notice?
    The building is in Los Angeles and is under LA rent control.
    Most leases started as 1-year leases then lapsed into month-to-month.

    Thanks

    Robert

  • Renter

    So basically this forum is a how to nickle and dime and hurt good tenants who might have something come up because there are bad tenants.

    • Lucas Hall

      Hi Renter,

      I always recommend that a landlord forgive a late fee once. No ones perfect, and even the best tenants fall on hard times. But it’s better to have the rules on late fees in the lease (even daily late fees) to prevent a good tenant from turning into a bad tenant.

      https://www.landlordology.com/forgive-a-late-fee-once-but-only-once/

      If you were a landlord, how would you structure late fees?

    • Renter2

      Exactly! I have always paid my rent on time. Recently I broke my wrist and was out of work.My landlord refused to waive the late fee for one month. I will NOT be renewing my lease next year. I also am now considering taking my landlord to small clams court for not making timely repairs. I would not have considered this if they had waived the late fee. Works both ways!

      • Lucas Hall

        Hi again,

        Good luck! Keep in mind, unless you have some sort of receipts or actual damages due to the repairs not being done in a timely way, I’m not sure if small claims would be the best place for you. It’s not a system for emotional or subjective damages – you need proof of a dollar amount. Make sense?

        • Ish

          Hey i was wondering i always pay my rent yes i have to pay late but it is always paid by the 10th in full with a fee .is that something a landlord will evict me for im the only one working so its tough but atleast they always get there moey by the 10th. If that something a landlord couuld be ok with? WhaTs your take on the situation

  • patrice

    Can my landlord say rent is always due on the 1st by 5p.m if not paid by 5p.m im responsible for $165 that day in texas and on the 3rd $5 each additional day?? This seems shady being that in texas a grace period much be atleast a day after the due day. He also said if a holiday falls on rent day, the rent must be paid before the first? Is this legal???

    • Lucas Hall

      Hi Patrice,

      Here is our guide to Texas landlord-tenant laws: https://www.landlordology.com/texas-landlord-tenant-laws/

      As far as I can tell, there’s no requirement for a grace period in texas.

      Generally speaking, weekends or holidays to push rent due days back – simply because the tenant has all month to pay rent. There’s nothing saying a tenant can’t pay early and there’s multiple ways to give rent. Some counties have their own rules on holidays, and do force it to be pushed back, but most don’t.

      I hope that helps. Please know that I’m not a lawyer, nor is this legal advice.

  • Renter

    In Texas, we signed a lease in Feb 2014, our lease has expired and we rent month to month. Can the landlord enforce late fees since we have no written lease? Also can the landlord evict if we challenge them with what the law? Also we use the same bank as our landlord and we are to make our rent pmts by depositing into the landlords account. There are times when we make our payment by transfering the rent from our account to theirs. This process takes a few days. Our landlord starts charging late fees on the 4th and a daily fee. Last month the landlord said they did not get the rent untill the 8th even though I did the trasaction on 4th. Can LL enforce all the late charges after 4th after transaction took place?

  • Liz

    I was curious if you might be able to give us some helpful wording to explain to our tenant that we are not trying to be uncompassionate or mean when we are charging a late fee. We have written in our leases that we have a five day grace period and on the sixth day of the month they will start incurring a $5 per day fee. We do not even charge an initial late fee. One or two times he let us know that he would not be able to pay to the 9th or the 11th and we did not charge him a late fee, since he was typically on time. He lost his job and was not able to pay a months rent and therefore incurred 25 days of late fees which ended up being $125. If I do not pay my taxes on the property, I immediately incur a 10% late fee which is $290. Thx

  • nicole

    we pay 450 for rent on our house.our landlord charges 5$ a day your late.. we have no lease or rental agreement. we filled out a rental application but never signed a lease .. that was 2 years ago. we call her when we need maintenance in our home and rarely get a call back. our ac went out and we tried calling her every day for 4 days.. with it being 90 degrees in my home with 6 kids and she never called back. we finally fixed it on day 5.. and she never returned our call. we have a leaking roof in our laundry room which is starting to mold. and she had a contractor take out a door that was dry rotted when we moved in and they didn’t build it correctly and now there’s a huge breeze coming in where they built it. we live in Indiana any help.

  • Long Minero

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  • Mary Carter

    Great information. Thank you all.

  • Kevin

    New to this whole landlord thing. What are the benefits/drawbacks of Section 8?

  • Concerned Renter

    Here’s my situation. I couldn’t cover my rent check when he deposited it on the 7th.I called him and said I would send another rent check. $465 in NSF, late, and per day charges. He received the replacement on the 13th. The bank redeposited the 1st check on the 10th. He deposited my replacement check on the 17th, causing me to be overdrawn, and NSF charges in my own account, and had to borrow money to cover my expenses. He will take no responsibility for my incurred fees because of his depositing of a check that wasn’t his to cash since he was already paid, he’ll send me a check to reimburse me for the check amount, but I need to pay his fee bill. My landlord stole from me, cost me money in bank fees, and I have no recourse. Hostile? Yes.

    • A Landlord:

      Concerned Renter: While I understand your position and feel for you, keep in mind that it was YOUR check that bounced and YOUR responsibility to provide a replacement check. Your landlord has no control over his bank. Unfortunately, this is a situation created by you and your bounced check. It was not his responsibility to stay on top of what the bank does. I’m sorry that you experienced this, but please take responsibility rather than placing it on your landlord.

      Incidentally– I carried a tenant for 6 mos (May-Oct) because she had every excuse in the book and I was trying to help them. Now we are having to evict them and she is abusive & slandering me all over town. Great way to say Thanks. Never again- some renters ruin it for others

  • Rob

    Nice Post and Great Comments!

    I institue a 7 day Grace period specifically to allow for Good tenants living check to check. Their bi-weekly checks do not arrive on my schedule so it is beneficial to me to allow room for this in the lease.

    I impose a 100$ (one-time) late fee on the 7th day. I always for give with communication AND if the rent is paid by months end.

    Anyone know if you can charge interest on any outstanding balance? I ask because I ended up carrying a balance of over $2000 (high rental area) for a tenant for 8 months while waiting for court . I am not a bank …

  • RonF

    (This is what I have seen: For rent past due by 30 days or more… Pursuant to State of Texas, Finance Code, Title 4, Chapter 302 Section 302.001(b) and such interest will be charged and compounded monthly during the 2016 calendar year.

  • Home

    I use your late fee advice. Tenant agree. He have to wait for court settlement before he can pay me. He pay once every 6 months. Every month have extra $3,000, 6 months is $18,000. He sign and agree on the rental lease, will I get in trouble for charge big late fee?

    Also, I don’t know how to calculate late fee. eg. if
    Jan late, $50 + $10 per day
    Feb late do I have to charge additional $50 and additional $10 per day, and total become $20 a day?
    Or simply charge $10 a day on both Jan and Feb, no matter how many months late, still $10 a day and no matter how many month late, still one time $50 late charge?

  • Patricia Alvares

    Question: when we say: ” A late charge not to exceed $25.00 or 5% of the rent it means :
    We can only charge up to 5% or we have the choice to charge $25.00 even when is more than 5% of the amount?
    Thank you!

  • Jacob Gambler

    Yes that maybe true that it invokes risk being landlor. They can abuse there power over late fees that’s why we have a federal government. I have paid my rent on time for 3 years now and I still they say I owe late fees.

  • mykene

    so your telling me that $10.00 late fee is legal on top pof another late fee of 150.00 WOW wtf

  • A Landlord:

    Concerned Renter: While I understand your position and feel for you, keep in mind that it was YOUR check that bounced and YOUR responsibility to provide a replacement check. Your landlord has no control over his bank. Unfortunately, this is a situation created by you and your bounced check. It was not his responsibility to stay on top of what the bank does. I’m sorry that you experienced this, but please take responsibility rather than placing it on your landlord.

    Incidentally– I carried a tenant for 6 mos (May-Oct) because she had every excuse in the book and I was trying to help them. Now we are having to evict them and she is abusive & slandering me all over town. Great way to say Thanks. Never again- some renters ruin it for others

  • myra rennie

    I own a lot in a private rv park and the annual assessment is $600 per year payable in two payments. Payments of $300 due on Jan 31 and March 31. I f payment is not received by 5pm on due date a late fee of $100 is added. Is this legal?

  • New Landlord

    I am new to being a Landlord and my current tenant is someone I am taking a chance on because his financial history was not great but we wanted to give him an opportunity to get out of a bad spot. Unfortunately he has already gone through 2 different jobs in 5 months, had to buy another truck for work b/c his other one died, and was late on rent last month (although he told me ahead of time and was compliant with the late fee). But now he is late again and hasn’t returned my text or phone call to even inform me of why he is late. He occupies a studio apartment above our garage so I know when he is home. Should I go ahead and write up an official late rent notice or just try to talk to him?

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  • Daphne Floyd

    Firm In Securing Loan
    {Lendingcrowdfinance@yahoo.com}

    Hello everyone I am Daphne Floyd from Savanna Georgia 31482.USA.I was in debt to pay my rent and my two kids have been sent from school due to my low income and was threatened that my kids would be taken to the foster care so I had no choice than to seek loan from banks but was not offered I was in confusion,on leaving the bank so frustrated a lady that works in the bank came to me telling me about a company she secured a loan from but I angrily left her due to my uncertainty with loan lender.I had thought of it that night and had no other option than to give it a try so I went to know more from the banker Janet.So she told of Lending Crowd finance loan company how they assisted her in

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