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A Late Fees for Rent Guide for Landlords [2024 Edition]

overdue bills concept with deadline calendar remind note,coins,credit card,calculator on table
by Jeff Rohde, posted in Investment Strategy

One of the biggest concerns of being a landlord is whether a tenant will pay the rent on time. Late fees are often used by landlords to motivate tenants to pay on time, to improve cash flow, and to help prevent late payments from becoming a habit.

In this article, we’ll discuss the benefits of late fees, how to determine what fee to charge, and tips to get a tenant to pay the rent on time.

Key takeaways

  • Late fees are legal in most jurisdictions and are usually governed by local and state landlord-tenant laws.
  • The amount of a late fee must be reasonable, be included in the lease agreement, and not be used by a landlord for retaliation against a tenant.
  • Landlords often offer a grace period before charging a late fee, even if they are not legally required to do so.


Is charging a late fee allowed?

Most states, and some local municipalities, have laws that govern residential rent, such as when and if a late rent fee can be charged, the maximum amount of a late fee, and whether a landlord is required to give a tenant a grace period before charging a late fee. 

The Cornell Legal Information Institute (LII) maintains a website with regulations for all 50 states, which can help landlords, property managers, and tenants understand the local laws. 

Generally speaking, a landlord is allowed to charge late fees for rent if the local and state landlord-tenant laws allow, provided:

  • The lease agreement has a provision allowing late fees to be charged.
  • Late fees are not charged by a landlord for retaliatory purposes, such as a tenant complaining about the condition of the rental unit.
  • Late fee amounts are reasonable and within a certain percentage of rent.

According to the legal resource website, a late fee may be seen as excessive under general legal principles if the late fee is greater than 5%, unless the rent is extremely late. 

For example, if the monthly rent of $1,500 is due on the first of each month and a tenant pays on the fifth, a late fee of 5% would equal $75. If the rent isn’t paid until the tenth or fifteenth of the month, a 10% late fee could be viewed as reasonable.

To learn more about customary late fee charges in a local real estate market, a landlord may wish to consult with a residential real estate attorney, a property management company, or an investor-friendly real estate agent.


Stack of coins on word fees

How to set a late fee amount

A late fee for rent is generally 5% of the monthly rent or less and may be set as a percentage of the rent due or as a flat late fee, according to

Percentage of monthly rent

If the rent is $1,500 per month and a tenant pays late, including allowing for a grace period, the late fee would be $75 and the total amount due would be $1,575.

Flat late fee 

A landlord may choose to charge a flat fee instead of a percentage of the late rent. If a landlord determines that a late fee of $50 is enough to incentivize a tenant to pay the rent on time, the total amount due if the rent is paid late would be $1,550.


Why landlords charge late fees

It’s hard to think of a creditor that doesn’t charge a late fee when a late payment is made, and landlords are no exception. There are several reasons why landlords may wish to charge late fees:

1. Late rent payments have a significant impact on cash flow.

Landlords typically use monthly rental income to pay for the mortgage and property operating expenses. If the rent is late, landlords may be charged late fees by their creditors or need to go out of pocket and contribute additional funds to pay their bills.

2. Late fees may motivate a tenant to pay the rent on time.

A tenant who is worried about being charged a late fee may be more motivated to pay the rent by the due date. Online rent payment services, such as PayYourRent and eRentPayment, also report on-time and late rent payments to the major credit bureaus, creating an extra incentive for a tenant to pay the rent on time.

3. Paying the rent late could turn into a regular practice.

If there are no negative consequences for paying the rent late, a tenant might decide to pay the rent at their convenience. Landlords who let late rent payments ‘slide’ could easily find themselves being taken advantage of.

4. A tenant who pays late may find it difficult to catch up on the rent.

A tenant who pays the rent late may fall further and further behind. Unless late rent payments are nipped in the bud, a landlord could run the risk of having to accept partial rent payments or evicting a tenant.

5. Late fees compensate landlords for extra effort.

A tenant who pays the rent late creates extra work for a landlord, and a late fee serves as compensation for the effort. A phone call has to be made to the tenant, a late rent notice needs to be sent, and payment for property operating expenses may need to be delayed until the rent is received.


How to determine when the rent is late

The short answer to when the rent is actually late is when payment is not received by the due date. 

However, there may be times when a tenant believes they paid on time but a landlord hasn’t received the rent. For example, a tenant could make an online rent payment on the first of the month, but the funds may not be available to a landlord until the second or third.

Here are some questions to consider regarding rent payments:

  • Is the rent received when payment has started, such as the postmark on the envelope when a rent check is mailed or the date payment is made online?
  • Is the rent received when funds are deposited into a landlord’s account or when a rent check is received in the mail?
  • Is the rent considered to be paid when the funds have cleared and the money is available for withdrawal by a landlord?

After considering these different benchmarks, a landlord should explain to a tenant the rules for determining a late rent payment, and include the criteria in the late payment section of the lease.


Benefits of having a grace period

A grace period provides a tenant with a few extra days to pay the rent after the due date. Some landlords choose to include a grace period in the lease, even if they are not legally required to do so. A 3-day grace period is common.

Some of the reasons to of have a grace period include:

  1. Allowing a tenant to pay the following business day if a due date falls on a weekend or holiday, without being charged a late fee
  2. Accommodating tenants who are traveling or dealing with personal emergencies and may be unable to pay the rent by the due date
  3. Accommodating tenants who live paycheck to paycheck and may not have the rent money on the first of the month
  4. Recognizing the rent payment may be in the mail or processing online and the funds may not be available for withdrawal by a landlord until after the first of the month


Tips for getting a tenant to pay on time

Although late fees for rent generate a little extra income, landlords generally prefer to receive rent payments on time. Here’s how to increase the likelihood of being paid on time:

1. Thoroughly screen tenants

Taking the extra time to thoroughly screen for the best tenant can help to reduce the risk of late rent payments, and it also helps you find a tenant who will take good care of the property. A thorough tenant screening process includes reviewing a completed rental application, running a credit report, ordering a background check and rental history report, and personally speaking to an applicant’s references.

2. Provide clear instructions for payment 

Reviewing the rent due date and amount, options for paying the rent, and late rent fees with a tenant can set the right expectations. Rent payment instructions may be reviewed as part of the tenant screening process, when the lease is signed, and a third time when the move-in checklist is completed with the tenant.

3. Provide online payment options

Rent payment services offer tenants the option of paying rent online in a variety of ways, including debit and credit card payments, and automatic payment withdrawals on the first of the month. 


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