« Rochester Blog

Late Fees

How to Always Collect Your Late Rent Fees

September 15, 2010 by
Comments (0)

gavelIf you’re like most owners of rental property, you own a handful of units and work hard to keep the bills paid.  When a tenant starts slipping behind on their rent you take comfort in knowing that you can apply late rent fees to offset the deferred income.   Being the nice person that you are, you start letting the late payments slide as your tenant continues to struggle to pay rent.  You may think, “Well, at least they are managing to cover the base rent.  I guess it saves me going through an eviction… for now.”

As those late fees pile up unpaid, the joke is on you.  If it ever goes to court… as is often the case, the landlord is out of luck and those fees are generally waived.

The Secret:
Late fees are only enforceable if they are classified as ‘added rent’, which legally entitles you to collecting ‘late fees’ in the same way you are entitle to collect unpaid rent.  Smart landlords always account for this in their leases.

Unenforceable late fee lease clause:

If Tenant fails to pay the rent in full before the end of the 5th day after rent is due, Tenant will pay Landlord a late fee of $25. This fee is due with that month’s rent payment in full.

Enforceable late fee lease clause:

If Tenant fails to pay the rent in full before the end of the 5th day after rent is due, Tenant will pay Landlord, as additional rent, a late fee of $25. This additional rent is payable as rent, together with the next monthly rent due. Late charges, attorney’s fees and any expenses related to the enforcement of this lease shall be classified as “additional rent”.

Now you have the option of letting your enforceable late fees accrue, buying your renter some breathing room. You also have the option of taking past due charges out of the latest rent payment. If you go this route, you should inform the tenant of exactly how the rent was applied and what the balance now due is. As always, be sure to communicate this to your tenant in writing.

Regrettably necessary disclaimer: Newdigs is not in the business of giving legal advice, please consult your attorney for the real thing. We’re just here to get you thinking like a pro!