Late Fee policies

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Late Fee policies

Brandon JaPro Member
Investor · TX · Member since 2024 · 18 posts · 8 votes

Good morning everyone.  New to rentals and it’s been 20 years since I have rented a place myself.  Looking for ideas on how to structure my late fees and what you charge.  Do most people charge a set amount or is it better to go with a percentage of the rent?  Do the fees add up daily or do you use a different rate?  Any adivice would be appreciated.  Thanks in advance.

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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
3mo
Quote from @Brandon Ja:

Good morning everyone.  New to rentals and it’s been 20 years since I have rented a place myself.  Looking for ideas on how to structure my late fees and what you charge.  Do most people charge a set amount or is it better to go with a percentage of the rent?  Do the fees add up daily or do you use a different rate?  Any adivice would be appreciated.  Thanks in advance.


Check your local regulations, but recommend making the Late Fee a percentage of the rent - like mortgage lenders make their Late Fees.

Also, if allowed, have a Daily Late Fee that kicks in after another X days.

Once had a tenant "teach us a lesson" when the got even with us for not waiving another late fee for them. They started paying at the end of the month as there was no additional penalty and they've pay before we could get an eviction court date. 

You could also offer a Rent Credit if they pay before due date. Or offer both Rent Credit and then Late Fee.

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  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    2y

    There will likely be local regulations that will dictate the maximum late fee that can be charged. Even if I have late fees in my leases, I rarely apply them. All of my properties are A/B locations with responsible tenants who make their payments through an online payment system. Never have to chase tenants for rent. Never have rent collections that drag more than a few weeks. In fact it’s not even necessary to send reminders. Rent collection is an auto pilot part of my business. Even if I were to collect the late fees it doest’t materially alter my properties performance and my tenants appreciate the flexibility in the very rare circumstances where they are late. In return my tenants treat me and my properties very well, stay longer and refer friends. 

     It’s usually the C/D property investors who are sensitive to late fees because they are often times running  business rather than investing in real estate where they have to nickel and dime the tenants to generate revenues. Perhaps my take is the unpopular take but that’s my personal feeling. 

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  • Brandon JaPro Member
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    Investor · TX · Member since 2024 · 18 posts · 8 votes
    2y

    Stuart, thanks for the input.  I don’t think that would be an unpopular opinion.  I beleive there is always a way to improve relationships and often times that involves some give and take.  It seems like a small price to pay for the relationship you are explaining between you and your tenants.  I will definitely factor that into my planning as I move forward.

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  • Kevin Sobilo
    Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
    2y

    @Brandon Ja, I am somewhat along the lines of @Stuart Udis with how I approach things. I have B and C rentals.

    These are the things I consider with how I approach late fees.

    1. When I think about how much to charge, I look at mortgage payments. They typically charge 10% as a late fee. I consider that the upper bound of reasonableness. I stay well below that mark. For rents under $1k, I charge $50 and for rents over $1k I'm at $75.

    2. I charge flat fee for simplicity. If you charge a per day rate it gets more complicated and you run the risk of potentially breaking laws in some places about late fees.

    By simplicity I mean, it becomes important to determine WHEN a payment is made.

    For example, if a tenant is mailing you a money order is the payment made when its mailed? When its post marked? Or when its received by you? If you say when its received by you, how does the tenant pay the late fee because they don't know if that will take 3 days or 3 weeks!

    3. Why late fees at all? I might be like Stuart and not charge late fees at all for high class units. I'm not sure they would serve a purpose for me then, but for working class people who do more often have financial stresses it is an incentive for sure and also it compensates you for the lateness.

    I am NOT operating to where a late tenant payment affects my ability to manage my rentals and pay my expenses. So, a small flat late fee compensates me fairly for the inconvenience of the lateness.

    4. How I apply it. I discuss from the lease signing how I value "communication and cooperative" over trivial things like collecting a late fee. If the tenant has an OCCASIONAL and very TEMPORARY situation that causes them to be late on rent I will almost always waive the fee. 

    There are many other situations where I waive the fee as well. For example currently I have a tenant who has a delinquent balance because of employment difficulties. I told them if they pay a $100 per month towards the balance, I would waive that month's $50 late fee. Over the months it will take them to catch up this will save them several hundred in fees but I am also collecting that balance. If they were to move out with that balance I would be unlikely to ever collect it, but with this approach I have a decent chance of collecting it.

    5. Does being late make someone a "bad tenant"? In my opinion no. I have had tenants with good paying jobs who don't manage things well.

    I had a state corrections officer as a tenant who paid 2-3 weeks late virtually every month for over 3 years. So, I would collect several hundred per year in late fees simply because they didn't manage their personal finances well.

    Once a tenant pays the rent and late fee, I consider them to be in "good standing" once again.

    6. When is rent late. My state doesn't require a grace period, but I still have a 5 day grace period in my leases because I want my leases to be fair for everyone in that same spirit of communication and cooperation that I espouse to tenants.

    7. When is rent late? This has to do with how you determine when a payment is made. I prefer tenants pay using electronic ACH transfers through apartments.com and in those cases payment is considered made when they initiate the transfer even though I don't receive the money for days afterwards. For something like a mailed money order, I use the post mark because its a bright line and within the tenants control if they take it to the post office themselves. 

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  • Gregory SchwartzBusiness Member
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    2y

    - Due on the first.

    - Late on the 4th with a $50 fee

    - Each day after the 4th is an additional $10

    - Post notice on the 15th

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    2y

    I believe the maximum you can charge in Texas is 12% of the monthly rent, but check your state laws to verify.

    - Rent is due on the first

    - If rent is not in my hands by midnight on the 4th, I charge a late fee of 5% of the rent. Late fees are not waived, even if Aunt Gertrude dies.

    - If rent and other charges are not paid in full by midnight on the 10th, I start the eviction process on the 11th (or the first business day after the 10th).

    - Eviction process does not stop until everything is paid in full.

    Even if a tenant calls and tells me they will be paying rent in full on the 11th, I'm still following my process with late fees and the eviction process. Every. Single. Time.

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  • Gino BarbaroPro Member
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    2y

    @Brandon Ja

    I would contact a local realtor or property management company to see what is the nor for the market. You may be even able to go on apartments.com to see what the competition is doing.

    After 5 days, rent is late. I charge a 5% late fee, ( you could charge a flat fee, based on the rent)cthat is added to their rent. Every state is different with days to post notices, and when you can start your eviction proceedings.

    The key is to charge it, enforce it, and make sure you follow the rules for everyone.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    2y

    @Brandon Ja lots of good ideas here!

    Michigan has no laws about late fees, by you need to check your state & local statutes.

    Conceptually, if you don't have a solid Late Fee policy, you will eventually get taken advantage of.

    What we do as a PMC, much of it automated:

    1) Rent Due Date: first of month
    - Don't ever modify this as too complicated to track!

    2) Grace Period: 5 days
    - Many judges in our area frown upon no grace period
    - Ours is voidable if tenant is late more than 3 times in a 12-month period

    3) Late Fee 5% on the 6th
    - Our software auto-charges
    - We will waive for a GREAT tenant, 1 maybe 2 times annually, just like a lender may waive the occassional late fee

    4) Daily Late Fee: 10% per diem
    - Our software auto-charges
    - We added this years ago when a smart aleck tenant, upset that we wouldn't waive their late fee, told us they would pay the last day of the month.
    - Judges often throw these out:(

    5) Eviction Notice for Nonpayment of Rent: sent ASAP
    - In Michigan, it's a 7-Day Notice
    - Our staff bulk sends on the 6th of each month, no exceptions
    - Even our best tenants get them and we just tell them it's automated and they can ignore if they pay

    Recommend you have a detailed Eviction Procedure and follow it!
    You can build in SOME flexibility, but don't become a pushover or you will get screwed.
    ALWAYS maintain the "upper hand".
    - We often go to court and get an Eviction Judgment, then negotiate a Payment Plan with tenant. If tenant doesn't follow, we order a Writ.

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    We want to motivate our tenants to pay their rents ASAP so we charge daily late fees. We just increased ours to a $50 late fee after 3 days and $10/day after that.

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  • Rachid AbadliBusiness Member
    Investor · Sacramento, CA · Member since 2024 · 129 posts · 37 votes
    4mo

    I use a flat fee after a 3-day grace period, not a percentage. Here's why: percentage-based fees sound fair, but they create an inconsistency problem across units at different rent levels. A flat fee is easier to explain, easier to enforce, and easier to defend if it ever comes up in court.

    The bigger lesson I learned is that the late fee itself almost never changes tenant behavior. What changes behavior is the system. If rent is due on the 1st and tenants can pay online with autopay, most just set it and forget it. The ones who consistently pay late usually have a cash flow timing issue — their paycheck hits on the 5th, not the 1st. I've had better results adjusting the due date in the lease to match their pay cycle than adding bigger penalties.

    One thing to watch in Texas: there's no statutory cap on late fees, but courts can still throw out fees they consider "unconscionable." I keep mine at $50–75 depending on the rent level, and I've never had pushback.

    Also, whatever you pick, make sure it's automated. If you're manually tracking who paid and who didn't across multiple units, you'll miss something. Your software should auto-apply the fee on day 4 and send the notice. Take yourself out of the equation — it also removes the temptation to waive it for the tenant who always has a good excuse.

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    4mo

    We charge late fee on day 4 and then daily late fees after that to motivate the tenant to pay. There are normally state and local laws that will guide you on the do's and do not's.

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  • Amit PatelBusiness Member
    Property Manager · Bartlett, IL · Member since 2025 · 177 posts · 68 votes
    3mo

    Hey Brandon,

    Most landlords I work with keep late fees simple and consistent. A flat fee after a short grace period is the most common approach because it is easy for tenants to understand and easy to enforce. Something in the range of fifty to one hundred dollars after three to five days is typical, depending on the rent amount and your local market.

    Some people use a percentage of the monthly rent instead, often around five to ten percent. A few combine both, starting with a flat fee and then adding a smaller daily amount if the rent stays unpaid, though many prefer to avoid daily fees because they can get messy.

    The most important step is to check your local Texas regulations first so you stay compliant on maximum amounts, grace periods, and how the fee must be written in the lease. Clear communication and consistent enforcement usually get better results than aggressive fees.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    3mo
    Quote from @Brandon Ja:

    Good morning everyone.  New to rentals and it’s been 20 years since I have rented a place myself.  Looking for ideas on how to structure my late fees and what you charge.  Do most people charge a set amount or is it better to go with a percentage of the rent?  Do the fees add up daily or do you use a different rate?  Any adivice would be appreciated.  Thanks in advance.


    Check your local regulations, but recommend making the Late Fee a percentage of the rent - like mortgage lenders make their Late Fees.

    Also, if allowed, have a Daily Late Fee that kicks in after another X days.

    Once had a tenant "teach us a lesson" when the got even with us for not waiving another late fee for them. They started paying at the end of the month as there was no additional penalty and they've pay before we could get an eviction court date. 

    You could also offer a Rent Credit if they pay before due date. Or offer both Rent Credit and then Late Fee.

    [email protected]248-209-6824
    Logical Property Management4.9462 Reviews
    WebsiteView Page
    3Reply
    • Kevin Sobilo
      Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
      3mo
      Quote from @Drew Sygit:
      Quote from @Brandon Ja:

      Good morning everyone.  New to rentals and it’s been 20 years since I have rented a place myself.  Looking for ideas on how to structure my late fees and what you charge.  Do most people charge a set amount or is it better to go with a percentage of the rent?  Do the fees add up daily or do you use a different rate?  Any adivice would be appreciated.  Thanks in advance.


      Check your local regulations, but recommend making the Late Fee a percentage of the rent - like mortgage lenders make their Late Fees.

      Also, if allowed, have a Daily Late Fee that kicks in after another X days.

      Once had a tenant "teach us a lesson" when the got even with us for not waiving another late fee for them. They started paying at the end of the month as there was no additional penalty and they've pay before we could get an eviction court date. 

      You could also offer a Rent Credit if they pay before due date. Or offer both Rent Credit and then Late Fee.


      The strategy your tenant used would not work everywhere. I'm sure laws vary widely, so other jurisdictions certainly may not work the same. 

      If a tenant tried that with me 3 things could happen that would negatively affect them:

      1. An eviction filing alone creates a public record and future landlords will see it and many till treat it similarly to an eviction even though the case was dropped. 

      2. Filing with the court caused "damage". Damage isn't only physical damage, it is any additional cost caused by the tenant not meeting their obligation under the lease. So, if a tenant paid AFTER I filed to get a court date, the tenant would be billed back for that filing fee which would be 2-3x the late fee!

      This same concept works for other issues. For example, if a tenant is issued a code violation. I once had a tenant get issued a code violation ticket for having a mattress they were disposing of against the side of the house. I had txted the tenant about it, but the next day the code enforcement caught it and issued a ticket. If unpaid they send to the property owned because unpaid it can become a lien on the property. So, I paid it and billed the tenant back for it. 

      3. In my state, I would not have to accept even a FULL payment after the 10 day period of my pay or quit notice. However at court the magistrate might grant the tenant the opportunity to pay in fill to stay. To do that they would need to both show up to court, pay in full including late fees and court costs. So, once again, it comes at a real cost to the tenant. 

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  • Mendy J.
    Investor · NY · Member since 2026 · 121 posts · 42 votes
    3mo

    we charge $50 late fee after the fifth of the month for all class rentals and from the sixth we consider starting eviction.

    in my opinion, I believe charging less than $50 in today's environment is too little for the tenant to change his behavior.

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  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 3k+ votes
    2mo

    Our management practice:  Rent due on 1st, if not recd by close of business on 5th, assess $(set late fee).  

    Just keep in mind that the L/T court judge can strike down any/all late fees on the filing at their own discretion, if it goes to court.  

    Of course you may appeal to the next apelet court, and you'll spend time and fees to do so.  You decide if that's worth it.

    To me, there's a kind of 'gotcha' feel to the late fee itself, however, that's the world we are living in.  Some folks train with treats, some with penalties--that's your call.  

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