Late fee 10 percent of rent ?

24 Replies

About to rent out my newly purchased house. 

Want to a dad a late fee to the lease . I’ve read some charge 10 percent of rent , plus 10 per every day late . 

Seems high . Is that typical? 

What’s your late fee policy , if any ? 

Thanks!

It's not uncommon to have an actual fee, which is a percentage of the rent, and also to charge default interest. I typically see a late fee of 5-10% after 10 days of non-payment and default interest begins to accrue at 10% after 30 days of non-payment.

973-247-9000

You need to read the laws for your state and follow those if it is stipulated.

Mine used to be $50 for late rent.  However, I had some tenants that once the rent was late and there was no ongoing late fee accrual, they felt not need to prioritize rent.  It didn't cost them any more to pay rent on the 10th than it did on the 5th.  Now I've got a $50 late fee and anything paid after the 10th of the month is a $50 late fee plus $10 a day thereafter.

I agree with Jennifer.

Another thing to consider is how the rent is paid. If the rent is paid through Cozy and the tenant does not have the cash on hand they may save money by paying the rent via credit card including the service fee of 2.75%.

If the rent was over >$1800 I would look to make the late fee >$50 to incentivize on time rent payments even if by credit card.

Frankly, it is not an issue of concern with my new tenants, but I like how it works out.

Here's the caveat with state laws.  Even if allowed, some jurisdictions consider a daily late fee to be punitive and will throw it out entirely. I know locally that judges allow up to 15%, but I keep mine at 10%. 

I saw post while back and the member did something I thought was interesting. They offered discount for paying rent by the 1st ( I guess in theory you could extend it through the grace period), then instead of a late fee they just charged the regular rent price. The thought process was to encourage on time payment vs punishing late.

So example: 1800 (50 dollar discount for on early payment), 1850 due on the 5th.

Originally posted by @Matt K. :

I saw post while back and the member did something I thought was interesting. They offered discount for paying rent by the 1st ( I guess in theory you could extend it through the grace period), then instead of a late fee they just charged the regular rent price. The thought process was to encourage on time payment vs punishing late.

So example: 1800 (50 dollar discount for on early payment), 1850 due on the 5th.

 My lease originally had a 10 day early provision in it for a modest $10 discount.  The payment had to be received by 10 days before the 1st or the discount was not allowed.  I took it out because I've rarely had late payments and most pay early anyways.

Originally posted by @Mike S. :
Originally posted by @Matt K.:

I saw post while back and the member did something I thought was interesting. They offered discount for paying rent by the 1st ( I guess in theory you could extend it through the grace period), then instead of a late fee they just charged the regular rent price. The thought process was to encourage on time payment vs punishing late.

So example: 1800 (50 dollar discount for on early payment), 1850 due on the 5th.

 My lease originally had a 10 day early provision in it for a modest $10 discount.  The payment had to be received by 10 days before the 1st or the discount was not allowed.  I took it out because I've rarely had late payments and most pay early anyways.

That seems like a terrible deal, that's a dollar a day. That would be equally terrible as a late fee... The point of the discount is that people are more motivated to pay it on time (the 1st) vs charging a late fee they don't care are less motivated because they are paying a late fee and that makes it ok to be late.  Similar to when daycares charge parents for being late, more parents were late because they could just pay the fee...

Originally posted by @Matt K. :
Originally posted by @Mike S.:
Originally posted by @Matt K.:

I saw post while back and the member did something I thought was interesting. They offered discount for paying rent by the 1st ( I guess in theory you could extend it through the grace period), then instead of a late fee they just charged the regular rent price. The thought process was to encourage on time payment vs punishing late.

So example: 1800 (50 dollar discount for on early payment), 1850 due on the 5th.

 My lease originally had a 10 day early provision in it for a modest $10 discount.  The payment had to be received by 10 days before the 1st or the discount was not allowed.  I took it out because I've rarely had late payments and most pay early anyways.

That seems like a terrible deal, that's a dollar a day. That would be equally terrible as a late fee... The point of the discount is that people are more motivated to pay it on time (the 1st) vs charging a late fee they don't care are less motivated because they are paying a late fee and that makes it ok to be late.  Similar to when daycares charge parents for being late, more parents were late because they could just pay the fee...

 I’m not sure 10% is a “terrible” late fee, but okay. The discount though, I don’t have one and don’t really think it’s a way to go. 

Originally posted by @Mike S. :
Originally posted by @Matt K.:
Originally posted by @Mike S.:
Originally posted by @Matt K.:

I saw post while back and the member did something I thought was interesting. They offered discount for paying rent by the 1st ( I guess in theory you could extend it through the grace period), then instead of a late fee they just charged the regular rent price. The thought process was to encourage on time payment vs punishing late.

So example: 1800 (50 dollar discount for on early payment), 1850 due on the 5th.

 My lease originally had a 10 day early provision in it for a modest $10 discount.  The payment had to be received by 10 days before the 1st or the discount was not allowed.  I took it out because I've rarely had late payments and most pay early anyways.

That seems like a terrible deal, that's a dollar a day. That would be equally terrible as a late fee... The point of the discount is that people are more motivated to pay it on time (the 1st) vs charging a late fee they don't care are less motivated because they are paying a late fee and that makes it ok to be late.  Similar to when daycares charge parents for being late, more parents were late because they could just pay the fee...

 I’m not sure 10% is a “terrible” late fee, but okay. The discount though, I don’t have one and don’t really think it’s a way to go. 

 I was more implying that the 10 days is long time for 10 dollars. 10% after say a 5 day grace period would make more sense.

I charge $35 late fee after the 3rd. State law here you have to wait until the last charge before you start counting for eviction papers can start. So make sure you know your state laws.

I would make sure you are charging late fees in accordance with wherever the property is located. If you can charge a flat $50 late fee for late payments. 

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570

I’m in Florida. I originally thought about charging $100/day for a late fee (I really hate unpunctuality) but my attorney said that any judge would throw it out as too harsh and that Florida law stipulates a max of 10% of the rent, so instead I revised it to “$50/day up to 10% of the monthly rent.”

(305) 902-3734

In CA it is 6%.

Courts here in Phx/Scottsdale, AZ have a 20% tolerance for what they consider to be a reasonable late charge.  Anything more than that, and the judge can throw it out.

I charge $25 per day.  I also file the pay or quit on the first business day following the 1st, so by the time we get to court, the late fee is up around the 20% threshhold.

First, check with local laws. Second, I recommend a 10% late fee. 10% is deemed a fair fee for your actual costs in tracking down rent and the headache. Third, calculate it to a dollar figure and put that on the lease.  The late fee should be big enough to make it hurt yet not considered punitive. The daily late fee is becoming more antiquated and judges don't daily fees and feel it's punitive in my market so it's often thrown out. Finally, call and interview a few property managers in your area and see how they charge late fees. 

I'm in CA and my eviction lawyer told me to set it at 10%....anything higher or daily fee get thrown out...so since he's the one that will deal with it if I face a legal issue, I went with his advice....

We go with the 10% late fee after 5 days here. One other thing that we implemented was an incentive for getting rent in on time. 1 Drawing per quarter for tenants who get their rent in on time, for Christmas one of our tenants received a $150 dollar gas card.  You can get creative with rewards. 


When we took over about 30% of our portfolio was late, implementing automatic notice to quits and the incentive has taken us down to 9% late last month.

@Marci Stein check on state and local laws. Rent is due on the 1st and I do grace period up to the 5th, then on the 6th they pay $50 late fee which goes up $5 per day after that. Not too aggressive, mainly just to make sure it is reasonable. I don't want to appear predatory.

Not sure why I didn’t get the replies notifications until I looked just now. 

Thank you all for your feedback - seems like most do a significant late fee after the 3 rd and then a daily fee - which is what I’ll do :)

GOt it Darren - thank you!

Join the Largest Real Estate Investing Community

Basic membership is free, forever.