When to stop charging a late fee

15 Replies

So my question is, when do I stop charging my tenant a daily late fee charge if he has already paid most of rent but maybe still owes $100 for that month?  

I have a renter who usually is about a week or two late with rent.  So I charge him a daily late fee penalty.  He can usually get me the rent within that week or two but not the full amount.  It is a mess I admit.  Should I keep charging him the daily late fee penalty until the full amount has been paid or should I stop the charge when he has paid most of it.  New landlord here!   

The late fee stops when the rent is paid in full. I have a chronically late paying tenant as well...pays around the 10th of every month. I am trying to put together a strategy to get rid of her. I think you should find a new tenant, as well.

Thanks for the advice Chuy!

You'd stop whenever the legal maximum late fee has been reached.

Maybe to make it easier for future leases, you could just do a simple late fee that hits once it's late. My rents are due the 1st and late after the 3rd. Any rents not received at midnight on the 4th get $40 late fees. This is also easier to keep up with on the books.

And remember, their payments go towards fees first. Then any money left over after paying off the fees goes towards rent. Confirm this with your local rental laws, but that's typically how it goes.

Originally posted by @Kyle Grimm :

So my question is, when do I stop charging my tenant a daily late fee charge if he has already paid most of rent but maybe still owes $100 for that month?  

I have a renter who usually is about a week or two late with rent.  So I charge him a daily late fee penalty.  He can usually get me the rent within that week or two but not the full amount.  It is a mess I admit.  Should I keep charging him the daily late fee penalty until the full amount has been paid or should I stop the charge when he has paid most of it.  New landlord here!   

 You might want to consider only accepting full payment instead of partial payments.

Unless the rental law requires you to accept full payments, I'd rather at least get partial payments and still be able to file for eviction if needed. At least some of the money would be recovered. Just my opinion, of course, but I do this in Maryland because I can still evict even if I accept partial payment. So again, check your rental laws.

Often, there is a maximum in late fees you can charge legally. A friend of mine lost a daily late fee in court--the judge said it was too extreme. But whatever you are legally entitled to do, and is what you stated on the lease, is what you should continue doing. If you stop late fees, you could set a precedent. But truly check into your late fee status with a lawyer.

Thanks everyone for the valuable information! I am putting together a plan to fix the problem! 

@Kyle Grimm

My lease states a $100 late fee after the 5th.  It keeps it simple and avoids math wars. 

Keep in mind that I deal in low income tenants and in a state where $75 is the legal max per month, but here is my late fee verbiage if it is helpful:

Any rent due not paid by the 4th day of the monthly rental period is subject to a $30.00 late fee charge with an additional $5.00 for each additional day that the rent remains unpaid. The total late charge for any one month will not exceed $75.00. All late fees in a month will be cut in half if tenant makes arrangements to pay late in advance [declares and follows through with a payment date]. Accrued late fees in a month will be credited up to $10.00 if half of rent due is paid by the 15th. Accrued late fees in a month will be again credited up to $10.00 if an additional 25% of rent due is paid by the 25th. Landlord does not waive the right to insist on payment of the rent in full on the date it is due.   

My leases state that a late fee of 5% is charged if the rent is failed to be paid by the first of the month (unless when the first falls on a weekend or legal holiday in which case it would be due on the next business day) and $5 for each additional day the rent remains unpaid. However the maximum late fee cannot exceed 10%.

@Michele Fischer I would be interested to know where you got your late fee limit of only $75?  Here is the RCW 19:150:150 that defines Washington's Late Fee law...

Any late fee charged by the owner shall be provided for in the rental agreement. No late fee shall be collected unless it is written in the rental agreement or as an addendum to such agreement. An owner may impose a reasonable late fee for each month an occupant does not pay rent when due. A late fee of twenty dollars or twenty percent of the monthly rental amount, whichever is greater, for each late rental payment shall be deemed reasonable, and shall not constitute a penalty.

The way I read it, $75 is only 20% of a $375 rent.  You can charge up to 20%. many of my rentals are well over $1,000/mo.  I have written in my contract that I charge $50 + $5/day (30 days late = $200). I have yet to be questioned by tenant or judge on the validity of it.

Enforce your lease agreement and charge the maximum allowed by your local laws. Do not set a precedent for being lax or you will have a hard time going forward. Be a professional business owner and adopt that mindset.

I don't stop my late fees until the rent is paid in full. I had a tenant for 5 years that paid late every month. She always paid when she said she would but with a daily late fee it added up to be a good chunk of extra money. I would say that as long as your tenant is paying you every month, keep them. 

A couple of thoughts. Is there any way to cure the continual late payments such as adjusting the due date? I don't have a per day fee but rather charge a flat fee after the 5th of the month. My leases also state that the postal date stamp is the date paid. So, they could mail it on the 5th and I don't receive it till the 7th: not late. I had one tenant that was late often. I offered to change the rent due date to compensate...and to try to put an end to late payments. After they paid 3 or 4 late fees ($75) they finally understood and paid on time rather than give away $75. In your case, have you considered breaking the rental into two payments? You could get 1/2 on the 1st and the other half on the 15th? If I was to do an arrangement like that I would do two things: first-amend the lease with both parties written consent. Second: i would change the rental amount to a slightly higher amount to compensate for additional work. However, if you MUST have your money on or around the 1st to pay a mortgage and don't have reserve funds, amending the lease for two payments may not fit into your situation. Either way: I would work to find some solution because ongoing problems take all the fun out of rental properties:) BTW-whatever your choice make sure you are within your state statutes.

@Curtis Bidwell , thanks for the heads up, I'll have to look into that more.  I've been operating under that understanding so long that I don't remember where it came from.  And this reinforces that I need to read the tenant landlord law more often!

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