Late fee laws in Maine

12 Replies

So as I understand it, in the state of Maine a tenant needs to be 15 days past due on rent for it to be considered "late" before a late fee can be added to the rent. 

https://ptla.org/rights-maine-renters-paying-rent

What I'm unsure of is if this is for a Tenant at Will only, or if the tenant has signed a lease with a different arrangement, does the lease apply?

Any guidance from a Maine property manager would be appreciated. Thanks.

Hey @Brett Jones  

The way I understand it is you can only charge the max of 4% after fifteen days (meaning if rent is due on the 1st the late fee can't be assessed until the 16th) and only if the late fee is stated in writing at the time you enter into the rental agreement, meaning you couldn't charge one at all if you only had a verbal tenancy-at-will. 

Here's the statute:

§6028. Penalties for late payment of rent

A landlord may assess a penalty against a residential tenant for late payment of rent for a residential dwelling unit according to this section. [1987, c. 605, (AMD).]

1. Late payment. A payment of rent is late if it is not made within 15 days from the time the payment is due.

[ 1987, c. 215, (NEW) .]

2. Maximum penalty. A landlord may not assess a penalty for the late payment of rent which exceeds 4% of the amount due for one month.

[ 1987, c. 215, (NEW) .]

3. Notice in writing. A landlord may not assess a penalty for the late payment of rent unless the landlord gave the tenant written notice at the time they entered into the rental agreement that a penalty, up to 4% of one month's rent, may be charged for the late payment of rent.

[ 1987, c. 215, (NEW) .]

I have seen landlords do an "early payment discount" which seems to be an attempt to circumvent the late fee law but I'm not sure if that's legal or not. For example, "$1050 rent is due on the 5th of every month but if you pay by the 1st of the month it will be reduced to $1000....".  I had thought for years this was illegal but I'm curious if anyone else here has experience doing that.

Originally posted by @Ryan Murdock :

I have seen landlords do an "early payment discount" which seems to be an attempt to circumvent the late fee law but I'm not sure if that's legal or not. For example, "$1050 rent is due on the 5th of every month but if you pay by the 1st of the month it will be reduced to $1000....".  I had thought for years this was illegal but I'm curious if anyone else here has experience doing that.

 @Ryan Murdock, why would the early payment be illegal? I would assume if the lease states that rent is $1050/month but there's a discount if you pay early then there's not actual additional fee being imposed on the tenant. The key being base rent agreed to in the lease is $1,050. The landlord might know and plan on the fact that the unit really should only be worth $1,000/month, but if the tenant is willing to pay $1,050 then it's actually worth $1,050. I haven't had any experience with this and do think it's weird that you can evict someone for non-payment before you can charge them a fee for non-payment. But such is life in Vacationland.

One other thing to note. Part 2 of the statute states "2. Maximum penalty. A landlord may not assess a penalty for the late payment of rent which exceeds 4% of the amount due for one month." At one of the investor meet-ups in Portland it was mentioned by a lawyer that if the tenant is late in part of the rent then only that part can be charged the 4% fee. For example, the rent is $1,050/month and on the first the tenant pays $500, but doesn't pay any more by the 16th. Instead of charging $42 in a late fee (4% of $1,050), you can only charge $22 (4% of the outstanding balance of $550). I am not a lawyer, but there does seem to be some ambiguity in the wording of the statute as to whether this is the correct way to go or if you can charge the 4% on the full "amount due for one month". I'd suggest talking to a real estate lawyer if you're really concerned (or curious).

@Andrew Magoun I agree with your logic on the early payment discount thing but I had an attorney at one point tell me it couldn't legally be done as it was just a blatant work-around to the late fee law. With that said, I'm still not confident there's any accuracy to that. Just because a lawyer said it certainly doesn't make it true. Ask 5 lawyers you'll probably get 5 different answers. 

Likewise, I've always been under the impression the 4% could be based on the entire rent amount as there is nothing that explicitly says you can't. I'd love for someone here to clarify both points once and for all.

@Ryan Murdock , the problem with someone clarifying things like this is it'll probably cost money! Any Maine lawyers on BP want to chime in?

I know a landlord who has been doing this for over 20 years with no problems.  I tried it and found they often took the discount even when late, so I still would have to chase the fee. 

I'm not a lawyer but I don't see an issue with offering the discount as long as the contract states the base rent amount and discount date. I think you'd only run into issues if there was a history/pattern of applying/calculating the late fee based off the discount date or discounted rent amount. 

Originally posted by @Ryan Murdock :

@Andrew Magoun I agree with your logic on the early payment discount thing but I had an attorney at one point tell me it couldn't legally be done as it was just a blatant work-around to the late fee law. With that said, I'm still not confident there's any accuracy to that. Just because a lawyer said it certainly doesn't make it true. Ask 5 lawyers you'll probably get 5 different answers. 

Likewise, I've always been under the impression the 4% could be based on the entire rent amount as there is nothing that explicitly says you can't. I'd love for someone here to clarify both points once and for all.

I use Pine Tree Legals site a lot to see what they are telling renters. This page shows what they have to say about late fees. Seems pretty straightforward with the 4% and having it in writing before you rent. 

PTLA

Interesting concept with the discount rent, I may have to give that a try with my problem tenants when it is time to renew their leases!

@Ryan Murdock Thanks for the reply. The carrot vs stick idea with rent pricing is interesting. So with a tenant that is persistently late, my only option to light a fire under them seems to be a 7 day notice. How much late rent do you put up with? This person is more often than not late (very "forgetful"..), but has always paid before mid month (usually before the 10th).

@Carl Hebert I also use PTLA as a reference. It's a nice gauge to compare what I want to do as the Landlord, and what an aggressive public advocate is going to consider the minimum standard.

Originally posted by @Brett Jones :

@Ryan Murdock Thanks for the reply. The carrot vs stick idea with rent pricing is interesting. So with a tenant that is persistently late, my only option to light a fire under them seems to be a 7 day notice. How much late rent do you put up with? This person is more often than not late (very "forgetful"..), but has always paid before mid month (usually before the 10th).

Ideally you give the 7 day notice as soon as you can (on the 8th) so that by the 15th or 16th if they still haven't paid you can get a court date for an FED if you think things are really headed south. Personally, I'd rather the tenant pay after the 15th so I can get the late fee too. 

I've gotten shelled on this forum before for saying that as there are some landlords who'd prefer to evict a tenant that's a day late - I don't fault that logic either. I'd just rather collect my money a few days late than go through the expense and hassle of eviction if it can be avoided. 

For me it generally looks like this:

Rent due on the 1st, serve 7 day notice on the 8th, assess 4% late fee on the 16th, if still no rent by the 16-20th I get a court date. My goal is to either collect rent or get a Writ of possession within 30 days of the rent being due. If you start letting it slip past a month you've really dug yourself a hole. Even for tenants who consistently pay late if you at least serve the 7-day notice it lets them know you are paying attention and starts the clock ticking if you end up needing to take those additional steps. 

@Brett Jones , is the late paying tenant a good tenant otherwise? If so, it might be worth it to put up with rent coming in late. I have a tenant who consistently pays around the 10th. So they’re always late, but not late enough to trigger the late fee. While it’s definitely frustrating to have to wait that long for rent, the tenant is otherwise awesome. We almost never hear a thing from them, and when we do it’s not their fault (like there was a leak in their bathroom ceiling because the upstairs tenant left the water running and it over flowed). So all in all it’s cheaper and less hassel to keep the good tenant who pays a bit late than to evict them (or even threaten them with eviction). That said, these are awesome tenants so probably not the norm. 

I write all my leases for rent to be due on the 15th of the prior month and offer a grace period until the 1st of the next month at which point a 4% late fee occurs on the 2nd. So it feels like paying on the 1st and late is the 2nd for tenants and it makes the most sense to them. I require tenants to to setup recurring monthly autopay from their checking account to mine via cozy.com. Free for tenants and landlords. In the application phase I make it clear that this is the way tenants must pay. Never had a late payment, no misunderstandings.

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