Residential Lease Can Late Fees Continue to Accrue After Termination

When a renter pays rent late, most landlords will impose a late fee as a penalty to the late rent.

Late fees for rent payments are typically based on a reasonable percentage of the monthly rental rate (5-10%) or a flat fee. In most cases, a landlord can only charge a late fee if the terms are outlined in a lease agreement. If the lease does not include a late fee clause, the landlord cannot suddenly require his tenant pay a fee the next time rent is paid after the due date.

State and local laws dictate how much of a fee a landlord is allowed to charge for late rent payments. Whether you charge a percentage of the rent for the late fee or a flat fee for each day rent is late, there is usually a maximum amount a landlord can charge per month in late fees.  Most courts believe a landlord should only charge a "reasonable" amount for a late fee, which sounds subjective, but is typically less than 10% a month.

Attorney James Laughlin told ezLandlordFroms that, "Courts generally find a late fee of 5% or less (of the monthly rent) to be reasonable but this does not hold true across the board."  As a general rule of thumb, landlords should provide a grace period of at least five days before the rent is considered late, and should never charge more than 10% of the rent as a late fee (to err on the side of caution, charge 5%).

Late fee laws also say when the late fee will be implemented. For example, some states allow a landlord to charge a late fee the first-day rent is late, while other state laws require that landlords allow a grace period after the official rent payment due date, and only allow late fees to be implemented after the grace period.

Despite an approved Grace Period, it is important to remember that rent is due on or before the due date. If paid after the due date, but before the end of the grace period, a late fee may not accrue, but the payment is still considered legally delinquent.

Late Fees and Your Lease Agreement

Your lease agreement should outline all rent payment terms, including your late fee policy. A good lease agreement will include :

• How much rent is due
• What day rent is due (and what happens if the due date falls on a weekend or holiday)
• Where rent should be paid (mailed, dropped off, paid online)
• What day rent is considered late (ie is there a grace period)
• What happens if rent is paid late (how much the late fee is and how the renter will be charged)
• What happens if rent is unpaid (including details on termination of tenancy)

You should reference any state statutes that apply to your rent payment terms and late fee policies. It is also wise to have an attorney familiar with landlord-tenant laws in your state review your lease agreement before you or your tenants sign it.

I waived my renter's late fee once, and now he always pays rent late.

This type of landlord scenario is not uncommon, which is why you should always stick to your lease terms and collect late fees the first time a renter pays rent late. If your tenant gets away with paying rent after the due date and faces no consequences, it sets him up to repeat the behavior.

If you already made the mistake of waiving the late fee, stop the behavior now. Talk to your tenant and let him know that the next time rent is late you charge a late fee as outlined in your lease agreement. Send an official letter and reference the lease agreement.

Discover more tips for How to Get Your Tenants To Pay Rent On Time

Keep Communication Open

If you notice a pattern in one of your tenant's rent payments being consistently late, talk to them about it.

Some tenants' payday might fall after rent is due, so they will always be late.  In this instance, you do not have to change your lease terms to accommodate them, and should continue to collect late fees, but at least you will understand what is going on and why they make late payments.

In other cases, your tenant might not realize how their late payment affects you as a landlord, so they might make it a priority to always pay on time or even early.

As a tenant, you should always be upfront with your landlord or property management company if you expect to make a late rent payment. By communicating with your landlord, he might still charge you late fees but he could hold off on the eviction process. He could also still give you a good reference if you decide to live somewhere else, because they appreciated your honesty.

Important Note: Keep in mind that laws surrounding late fees and the eviction process has been altered during the pandemic. This can make it a tough topic to navigate for landlords and renters alike. For more information for your area, check with a legal advisor.

Discover more information related to the pandemic, and the eviction moratoriums:

• What the CDC Eviction Ban Means for Landlords and Tenants
• A Landlord's Guide to Rent Collection | Late Payments and Past Rent Debt

When are late rent fees illegal?

If there is no late fee clause in the lease agreement, a landlord cannot collect one. Most courts also only allow a reasonable amount to be charged as a late fee. For example, more than 10% of the monthly rent is typically considered unreasonable.

Nolo gives the following advice to renters for what to do if a renter has already agreed to unreasonably high late fees in a lease agreement:

If you've signed a lease or rental agreement that contains an outlandish late fee policy, you can still refuse to pay it and challenge it in court when the landlord seeks to evict you for breaking a lease provision. Why? Most courts consider the imposition of enormous late fees, like outrageous high-interest loans, to raise an important public policy issue. They will listen to your defense (though not necessarily rule in your favor) in spite of the landlord's claim that you "waived" the right to protest when you signed the lease or agreement.

It's usually better, however, that you not risk the threat of an eviction lawsuit (which always includes the possibility that you'll lose). Instead, pay the fee if possible and file your own lawsuit in small claims court, asking that the judge order the landlord to return it. That way, the only thing at stake is your time and the small filing fee, not your home. But it goes without saying that once you've sued your landlord you can expect a termination notice at the first legal opportunity, and would do well to begin checking Craigslist for a new rental.

Late Fee Laws in My State:

To make sure you following late fee rental laws correctly, you need to check your state and local landlord-tenant laws. If you own a rental property that is part of rent control, additional laws will apply to your property and how you structure your late fee policy.

This article was originally published in October 2017 and has since been updated.

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Related Reading For You:

• What to do if a Tenant Skips Rent and Disappears
• 5 Ways to Set Yourself Up for Success as A New Landlord
• The Best Way to Collect Rent Payments Online

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Source: https://www.rentecdirect.com/blog/late-rent-fees/

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