My Tenant Won’t Pay Late Fees, Now What?

Written on June 14, 2017 by

People hate paying fees, whether they’re administrative fees, convenience fees, airline baggage fees—or late fees. For most people, paying fees feels unfair.

But late fees provide an incentive to pay the rent on time, and for good reason. When tenants pay rent late, not only is it inconvenient for you as a landlord, but it could disrupt your finances. You probably count on that money to pay your bills.

If you still aren’t collecting rent online, then you’re exposing yourself to additional rent collection issues. Tools like Cozy help keep tenants on track and paying on time. But you still might have to charge a late fee. When you have a valid reason for charging a late fee, your tenants might refuse to pay the extra money. What then?

Here’s what to do when your tenant won’t pay late fees.

1. Include a Late Fee Policy in Your Lease

Check the laws of your state to determine whether you’re restricted on how much of a late fee you can charge—or if you can even charge one—and how long you need to wait before you can start charging. Once you find out how to comply with your state’s laws, include the late policy in your lease. Otherwise, you can’t charge late fees at all.

You can’t just make up late fees after the fact.

While state laws vary, here are two guidelines that most states consider reasonable:

  • Wait a few days before you start charging late fees.
  • Keep the late fee at 5% (or below) the rental amount. For example, if rent is $1,500, the late fee shouldn’t be more than $75 for one month.

Here’s the late fee policy from my lease:

2. Have an ‘Allocation of Payments’ Clause in Your Lease

In addition to having a late fee clause in your lease, make it a term of the lease that any money you collect for rent for the next month will first go toward any unpaid fees from the prior month.

For example, say the rent is $1,500 a month, and your tenant paid rent late, accumulating $75 in late fees. They paid you only $1,500 instead of $1,575. Next month, your tenant pays on time, and pays $1,500. Because your lease clause states that unpaid late fees are paid first, you use the $1,500 to first pay the $75 from last month, and you apply the balance toward this month’s rent. Your tenant, therefore, would have paid you a partial rent payment of $1,425 for this month.

The reason for doing this? “It’s much easier to sue a tenant for unpaid rent than it is for an unpaid late fee,” says Lucas Hall, head of industry relations at Cozy and founder of Landlordology.

Here’s a clause Hall has in his lease:

3. Gently Remind Your Tenant

A tenant who “forgot” to pay the late fee probably falls under the same excuse category as “The dog ate my homework,” or “The check’s in the mail.” However, your tenant might really have forgotten to pay the late fee.

Whether your tenant pays you in cash, check, money order, or online, they might have been on autopilot and just paid the regular rent amount.

Assume the best. Let your tenant know that you received the rent but that they forgot to include the late fee. If it was an honest mistake, your tenant will likely let you know when you will receive the late fee payment—either now or with the next rent payment.

If your tenant did not forget, however, and tells you that they don’t intend to pay the late fee or just never pays it, you might—if this is a tenant who’s never made a late payment before—let it slide this one time. Let them know that you expect rent on time from now on and that you will enforce the late fee policy if rent is late again.

4. Withhold the Fees from the Security Deposit

If you haven’t forgiven the late fee debt, and your tenant never did pay the late fees they owe you, you have one last recourse: You can take that money from the security deposit.

Remember that whenever you withhold security deposit money, you need to give your tenant a written account of the reason. In this case, document that they didn’t pay rent on time. Tell them which month(s) and the number of days they were late to explain how you arrived at the figure you’re withholding.

Is not paying late fees ever cause for eviction?

In most cases, you don’t want to evict just because you aren’t getting your late fees. As long as you’re getting your full rent each month, it’s usually not worth the hassle of evicting. But if your tenant continually pays rent late, you might not offer to renew the lease at lease renewal time.

Bottom Line

Understand that no one likes to pay fees. So make sure you have your late fee policy clearly spelled out in your lease and that your tenant is aware that you will charge a fee for paying rent late.

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14 CommentsLeave a Comment

  • Tracey

    Landlord charges a 30 late fee after 5 pm on the first of a month. Paid rent only and he is still charging me late fees for the unpaid late fees which is NOT mentioned in the lease. This is the lease info: “A late fee of 30.00 will be assessed for any rent paid after 5 pm on the first day of the month. Further, for every 3 days after the first day the rent is not paid another 30.00 will be assessed towards the balance due for that month. Charges due will become part of the rent and be due in the next rental payment.” Is this legal to do to residents in Stark County, Ohio?

    • Laura Agadoni

      Hi Tracey,
      I cannot speak to what is legal in your county, but it sounds to me that if you pay your rent late, which in your case is after 5 pm on the 1st, you will be charged a late fee. If you don’t pay your late fee when you were late, say in January, when February comes and you pay on time, you will still owe that late fee for January. It won’t go away.

  • Jon

    I recently moved out of a home I was renting for 7 years, the last two without a signed agreement. I have been late on occasions. There was a provision written into the agreement for late rental payment charges. The landlord never sought to collect late fees during the agreement timeframe , however provided me a bill for late fees for the past 7 years. In the state of Michigan is that legal?

  • Renee Miller

    You cannot withhold it from the following months rent ,as stated in the#2 part of this article. That is completely 100% illegal. Do your homework

  • Paula

    I gave landlord award letter from social security stating I get paid 3rd Wednesday of the month. They will let me pay then but continue to charge late fees. Sometimes more than half my check. What can I do.

    • Laura Agadoni

      Hi Paula,
      Look up the laws for your state to see whether there is a cap on how much a landlord can charge in late fees. If there is, let your landlord know they can only charge that amount and no more. Other than that, you’ll need to work something out with your landlord or perhaps get a loan so that you can be ahead of the payments you get to pay rent instead of behind.

  • Cristina

    I am taking my landlord to small claims for withholding my deposit, and not providing a itemized list of deductions within the 21 days of vacating the unit. After having the landlord served, 2 months later, I have now been contacted with a list of deductions for damages and late fees. I was a tenant for five years, on a renewed lease yearly. In California, can she withhold for late fees, or even sue for past late fees for that matter?

  • Mike

    My friend pays rent of 700 a month. Under Maryland law, late fees cannot exceed 5% of the rent due. She is being charged 35 dollars on the 5th, and an extra $5 every day past that. She likes this landlord and want to cause any problems, but how can she tell the landlord that these late fees are legally too high?

    • Laura Agadoni

      Hi Mike,
      You are right that the tenant, in this case, cannot be charged more than $35 (5% of $700) in late fees each month. So your friend can simply point out this law to the landlord who might not be aware of it. But if your friend’s goal is to not cause problems, I suggest she pay her rent on time. If she likes the landlord as you say and wants to stay, she might not be invited to stay at lease renewal time if she is consistently late with rent payments. Or if she is a month-to-month tenant, she might get a 30-day notice to vacate at any time. So she might save money in late fees since the $5 daily fee past the 5th doesn’t apply here, but she might not get to stay for the long-term.

  • valerie

    I lost my job so we have been behind on rent. But i have a new job and we are catching up and the management company sold our apartment building. The new management company was automatically charging us $50 dollar late fees , when we were paying $35 before, OK fine that is OK. we are late and i get that . But now that they added another $75 dollars on top for each month and saying that , that was in our old lease, which it is not. Can they get charged 2 late fees ?

  • Erika

    So my question, I paid my landlord and sent the rent on November 2, she did not received it until the 9th, and said i had to pay the late fee. I had proof of the money order, that said the 2nd of November and she she said i have to pay the fee regardless or go to court and pay all fees nand the laywer. Now is she right can she do this, even though I did send her the money order on the 2nd ,I have no idea why she got it so late but should i still pay for something thats not in my control.

    • Laura Agadoni

      Hi Erika,
      I don’t know when your rent is due. But generally, rent is considered paid when the landlord receives it, not the date you send it. So if your landlord did not receive your rent on time, and your lease specifies that there will be late fees for rent paid late, then you owe late fees this time. In other words, it doesn’t matter when you pay. What matters is when the landlord gets it.

      • Erika Mayorga

        My rent is due the 1st of every month, and she told me the 29th that she got it the 9th when i mailed it the 2nd of this month. Every month she there is something, 1 month she lost the money order last month it was something else im worry she is trying to con me for my money.

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