Late Fees: What Should You Know?

Late Fees: What Should You Know?

No landlord wants to worry about late fees. In a perfect world the rent would arrive on the first of each month and everyone will be happy, but that is not the case sometimes.

There are a multitude of reasons why a renter may need a little extra time to pay. In some cases, you may be inclined to give them a little extra grace if it’s not a regular occurrence, but that sets a precedent that could be considered unfair to your other renters and may make tenants think they can continue such behavior. There should be a standard late fee process for everyone, from the grace period to how you calculate the fees. These ideas will help you come up with a late fee game plan. 

How to Calculate Late Fees

There are several ways you can decide on charging for late fees. None of these are wrong. However, some of them favor the landlord more than the tenant. 

Flat Fee

The simplest method for tenant and landlord is to charge a flat fee for late rental payments. Something like a $50 charge is straightforward and doesn’t require calculation on either end. 

Daily Fee

Another option is to charge a daily fee for each day the rent is overdue. This is fair because it prevents tenants from abusing your trust and provides an incentive to get the late payment to you as soon as possible. 


The last option is to charge a percent of the total rent, which may benefit you, especially if you own multiple properties at different prices. 5% is the average late charge for landlords who do it this way. 

Are There Legal Limitations to How Much a Landlord Can Charge?

There are legal limitations to how much you can charge. However, it varies between states. It is always best to check your state’s laws (or work with a company that already knows them), especially because they are always changing. Here are some common laws surrounding late fees. 

  • Late fees must be built into the rental contract
  • Many states have language that says the charge must meet “reasonable” standards, which is usually less than 10%
  • Most states require landlords to honor a grace period which is anywhere from 3 -5 days

What Do I Do If the Rent is Consistently Late?

Unfortunately, some tenants never seem to pay rent on time – or at all in extreme cases. At some point, you have to decide when you will no longer accept tenant payments and start making other plans. It is absolutely vital to note that you should not take a single cent from a tenant if you are planning to or have already begun the eviction process. In most states, accepting money after an eviction has begun is seen as acknowledging a new agreement between tenant and landlord, and the eviction proceedings will be voided. 

Be Easy to Work With In the Beginning

Sometimes all it takes is a conversation with your tenant to get them back on track. Be open to listening to them and try to find a payment plan or other solutions to help them get back in good standing and pay rent on time. 

Offer a Cash for Keys Solution

Evicting a tenant is a long and costly process that most landlords don’t want to undergo. You may be in a situation where a tenant bit off more than they could chew, but now they are locked in a contract. One solution is to offer your tenant cash to break their lease and move out. It will likely save you money in the long run and leave both landlord and tenant on good terms. 

Serve a Pay or Quit Notice

A pay or quit notice is a letter of intent and the first step in eviction. Your letter should be clear and concise, stating that you expect the money you are owed in full by a set date, or the tenant will be evicted. 

What LandlordStation Can Do to Help

Being a landlord without all the tools LandlordStation offers makes your life ten times more difficult. With LandlordStation it’s easy to set a due date, grace period, automated late fee, and a deadline to accept payments. In addition, LandlordStation allows tenants to pay with a credit card. This allows you to receive your payment on time and provides the tenant more time to pay.

In Conclusion

Setting and adhering to late fees will allow for a smoother property management experience. Make sure that all fees and deadlines are highlighted in the lease and always keep open communication with your tenants.