This subject came up a few months ago when one of my tenants was going to be late on rent. They thought what I charged was to high. They had been tenants for about a year and a half at this point. The rent is $1,300 a month. I have a 5 day grace period before rent is considered late. After the 5th day, I charge a $75 late fee and another $20 for each day it's late after that. Is this to high? What do some of you charge?
I just charge a flat late fee, $50.00. I have seen court cases on TV where landlords have charge a daily fee amounts even less than yours, got after tenants who refused or can't pay it, and have been ruled illegal because of usury laws.
I have the 5 day grace as well with a $10 per day late fee....
$35 on the 8th, $5 per day after that, in rent of $850-$925. Basically $5 per day after 7 day grace period, back to the 2nd.
Had my lease reviewed by a local lawyer that said more than that could be a problem for some judges. However, before it even gets to that point, I feel like there needs to be incentive to pay after the initial late fee. Otherwise, why not wait to pay. Than I have to send a 7 Day notice, etc.
5 % of the rent amount
$50 * (Rent owed / Total Rent) per 10 days late.
This encourages the tenant to pay something towards "Rent owed" as soon as possible and provides an escalator for increasing lateness.
I bundle this with a "Payments are applied in the order charges are incurred" policy to prevent tenants from avoiding paying late fees. I've had tenants send me a check and say "This is just for rent." I thank them for the payment, remind them of the policy and tell them half was for rent and the other half covered the late fees. They still owe half the rent.
Some states have laws about how much you can collect in a judgement, I charge a flat $50 late fee on the 2nd day (rent is due on the first, it's late on the 2nd). This is explained at the tenant's lease signing so there are no surprises if they are late. In MI you can collect up to $35 as a late fee in a judgement.
The intent of a late fee is to be a deterrent although most landlords consider it a penalty that benefits the landlord. The idea is to stop tenants from paying late and to do that you charge the maximum legally allowed. If your tenant thinks you are charging too much then you have achieved your goal assuming they never pay late again. If they pay late again you have definatly not charged enough.
My jurisdiction allows me to impose a $190 fee the day after rent is due and that is exactly what I do. It is extremely rare that I ever get a repeat offender.
If a landlord is not charging enough all they accomplish is to train their tenants to pay late on a regular bases.