Lease Agreement Late Fees Laws

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Can a Landlord Charge a Late Fee If My Rent is Late?

A landlord generally has the ability to charge a late fee if rent is not paid on the due date. However, the landlord must have included a late fee provision in the written lease agreement stating how much the late fee is and when the late fee is due. A landlord also has the ability to start the unlawful detainer process if a tenant's rent is late.

How Much Can the Landlord Charge for a Late Fee?

The landlord can charge any reasonable amount that reflects the landlord's actual losses because of the late rent payment. Late fees should not be designed to penalize the tenant; unreasonably high late fees are usually not enforceable. 

What Are Liquated Damages?

It is often very difficult to determine the actual loss the landlord suffers due to late payment of rent.  Both parties may agree in advance, usually in the lease, that a specified amount is due instead of calculating the actual loss after it is suffered. This type of clause in a lease is called a liquated damages clause. The courts have generally upheld liquated damages clauses in residential leases.

What If the Late Fee Is Excessive?

If the late fee is excessive and unreasonable, a court may declare the clause in the lease containing the late fee provision void. A tenant may also be awarded money to penalize the landlord if the late fee violates a city or state law.

What Is Considered an Excessive Late Fee?

Courts in some jurisdictions have held late fees that are $1 a day to be excessive. Courts in other jurisdictions have held that charging $40 for being one day late is not excessive. What a court considers to be an unreasonable and excessive late fee depends on the jurisdiction the property is located. 

Can the Landlord Charge a Late Fee If the Security Deposit Is Late?

This would depend on the clause regarding late fees. If the late fee clause includes security deposits, then the fee is most likely enforceable. Likewise, if part of the rental payment goes towards paying the security deposit, there might also be late fees attached. However, the relation of security deposits to late fees must be clearly spelled out in the lease.

Most late fee clauses, however, only charge a late fee if the rent is late. Security deposits are a payment separate with a separate purpose from that of rent. The purpose of rent is payment for the tenant’s right to possess the property; security deposits are advanced payment for damage to the property while it is in the tenant’s possession.

Can Late Fees Be Deducted From a Tenant's Security Deposit?

The answer will depend on the state you are in. Some states, such as California, allow landlords to deduct from security deposits as a form of back rent payment in the event that the tenant breaches the lease. Other states, like Florida, allow landlords to deduct from security deposits for late rent only after the tenant has moved out or been evicted.

However, late fees can only be collected if the lease specifically states that such fees can be demanded. If the lease does not have such a fee provision, than the landlord cannot use the security deposit to cover late fees because late fees would not be permissible, no matter what form it takes. 

Why Is the Landlord Demanding More Rent Than What I Owe In Monthly Rent and Late Fees?

Many contracts, including leases, have a contract provision known as an acceleration clause. An acceleration clause in a contract allows the landlord to collect all the rent due if there is a breach of the lease, such as late rent payment. In other words, this provision “speeds” up when the rest of the rent is due because a monthly rent was late.

Acceleration clauses are more common for commercial tenants than residential tenants because commercial tenants are often in a stronger bargaining position with their landlords than residential tenants.

Do You Need a Lawyer for My Late Fee Problem?

Landlord tenant law is very complex, varies by city, and is constantly undergoing changes. An experienced landlord-tenant lawyer can advise you of the exact rules your city has regarding late fees and can protect your rights, whether you are an owner trying to utilize a late fee clause or a tenant fighting an excessive and unreasonable late fee.

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Last Modified: 10-25-2013 03:19 PM PDT

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