Late Rental Payment Laws

By , Attorney

Many landlords impose late fees as a way to compensate them for the consequences of receiving late rent. To be legal and enforceable, the fee must be explained in the lease or rental agreement, and must be reasonable—it must closely approximate the landlord's true damages. (True damages include the interest you lose when the rent isn't paid, plus the value of your time in going after that late rent.) Fees that are excessive are likely to be viewed by a judge as punitive, and won't be enforced.

State Limits on Late Fees

About one-quarter of the states have gone further than simply requiring late fees to be reasonably close to the landlord's actual damages—these states impose specific limits. As shown on the "Late Fees" chart below, the limits may be expressed as dollar amounts or percentages of the rent.

Grace Periods

Unless state law or their own leases say otherwise, landlords who have included a late fees policy in their leases or rental agreements may impose them as soon as the rent is late. Some states, however, require grace periods, as shown in the "Late Fees" chart below.

How to Write a Good Late Fee Clause

Follow these tips to design a fair and legally enforceable late fees clause.

Use a grace period. Even if your state does not require it, waiting two or three days before imposing the fee is a good idea. A stiff fee that kicks in on the first day the rent is late might not be upheld in court if your tenant challenges it. If you are constantly annoyed with one-to two-day late rental payments, it may be time to consider terminating for nonpayment.

Be mindful of the total late charge. If your state does not set a specific limit, don't let the charge exceed 4% to 6% of the total rent. A higher total might not hold up in court.

Fees that increase each day the rent is late should have an outer limit. Late charges that increase each day the rent is late could be considered interest charged at a usurious rate. For example, ten dollars per day for a rent of $1,000 is 3,650% annual interest. Instead, charge $10 for the first day, $5 for each subsequent day, but cap it at 5% of the total rent.

Don't disguise late fee charges by giving "discounts" for early payment. For example, some landlords discount the rent if it's paid on time, but charge "full" rent if it's a day late. Judges aren't fooled by this scheme, and will not enforce it if the discount either violates state limits or (in states that do not impose specific limits) bears no reasonable resemblance to the landlord's true damages.

Learn more about Leases and Rental Agreements.

Late Fees

Many states have set limits on late fees, and have imposed grace periods. In states that have no legislated rule, landlords should follow the advice above. This chart is excerpted from Every Landlord's Legal Guide, by Marcia Stewart and Attorneys Ralph Warner and Janet Portman (Nolo).

State

Grace Periods and Limits

Statutes and cases, grace periods

Statutes and cases, late fee limits

Alabama

Alaska

Arizona

Late fees must be set forth in a written rental agreement and be reasonable.

Ariz. Rev. Stat. Ann. § 33-1368(B)

Arkansas

Ark. Code Ann. § § 18-17-401, 18-17-701, 18-17-901

California

Late fees will be enforced only if specified language is included in a written lease or rental agreement.

Orozco v. Casimiro, 121 Cal. App. 4th Supp. 7 (2004)

Colorado

Connecticut

Landlords may not charge a late fee until 9 days after rent is due.

Conn. Gen. Stat. Ann. § 47a-15a

Conn. Gen. Stat. Ann. § § 47a-4(a)(8), 47a-15a 1

Delaware

To charge a late fee, landlord must maintain an office in the county where the rental unit is located, where tenants can pay rent. If a landlord doesn't have a local office for this purpose, tenant has 3 extra days (beyond the rent due date) to pay rent before the landlord can charge a late fee. Late fee cannot exceed 5% of rent and cannot be imposed until the rent is more than 5 days late.

Del. Code Ann. tit. 25, § 5501(d)

Del. Code Ann. tit. 25, § 5501(d) 2

District of Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Late fees cannot exceed $10 per day or $40 per month.

Iowa Code Ann. § 535.2(7) 3

Kansas

Kentucky

Louisiana

Maine

Late fees cannot exceed 4% of the amount due for 30 days. Landlord must notify tenants, in writing, of any late fee at the start of the tenancy, and cannot impose it until rent is 15 days late.

Me. Rev. Stat. Ann. tit. 14, § 6028

Me. Rev. Stat. Ann. tit. 14, § 6028 4

Maryland

Late fees cannot exceed 5% of the rent due.

Md. Code Ann. [Real Prop.] § 8-208(d)(3) 5

Massachusetts

Late fees, including interest on late rent, may not be imposed until the rent is 30 days late.

Mass. Gen. Laws Ann. ch. 186, § 15B(1)(c); ch. 239, § 8A

Mass. Gen. Laws Ann. ch. 186, § 15B(1)(c)

Michigan

Minnesota

Late fee policy must be agreed to in writing, and may not exceed 8% of the overdue rent payment

Mississippi

Missouri

Montana

Nebraska

Nevada

A court will presume that there is no late fee provision unless it is included in a written rental agreement, but the landlord can offer evidence to overcome that presumption.

Nev. Rev. Stat. Ann. § 118A.200(3)(g), (4)(c)

New Hampshire

New Jersey

Landlord must wait 5 days before charging a late fee, but only when the premises are rented or leased by senior citizens receiving Social Security Old Age Pensions, Railroad Retirement Pensions, or other governmental pensions in lieu of Social Security Old Age Pensions; or when rented by recipients of Social Security Disability Benefits, Supplemental Security Income, or benefits under Work First New Jersey.

N.J. Stat. Ann. § 2A:42-6.1

N.J. Stat. Ann. § 2A:42-6.1 7

New Mexico

Late fee policy must be in the lease or rental agreement and may not exceed 10% of the rent specified per rental period. Landlord must notify the tenant of the landlord's intent to impose the charge no later than the last day of the next rental period immediately following the period in which the default occurred.

N.M. Stat. Ann § 47-8-15(D) 8

New York

North Carolina

Late fee cannot be higher than $15 or 5% of the rental payment, whichever is greater; and may not be imposed until the rent is 5 days late. A late fee may be imposed only one time for each late rental payment. A late fee for a specific late rental payment may not be deducted from a subsequent rental payment so as to cause the subsequent rental payment to be in default.

N.C. Gen Stat. § 42-46

N.C. Gen. Stat. § 42-46

North Dakota

Ohio

Oklahoma

Preset late fees are invalid.

Okla. Stat. Ann. tit. 41, § 132(B)

Sun Ridge Investors, Ltd. v. Parker, 956 P.2d 876 (1998) 10

Oregon

Landlord must wait 4 days after the rent due date before imposing a late fee, and must disclose the late fee policy in the rental agreement. A flat fee must be "reasonable." A daily late fee may not be more than 6% of a reasonable flat fee, and cannot add up to more than 5% of the monthly rent.

Or. Rev. Stat. § 90.260

Or. Rev. Stat. § 90.260 11

Pennsylvania

Rhode Island

R.I. Gen. Laws § 34-18-35

South Carolina

South Dakota

Tennessee

Landlord can't charge a late fee until the rent is 5 days late. If day five is a Saturday, Sunday, or legal holiday, landlord cannot impose a fee if the rent is paid on the next business day. Fee can't exceed 10% of the amount past due.

Tenn. Code Ann. § 66-28-201(d)

Tenn. Code Ann. § 66-28-201(d) 12

Texas

Late fee provision must be included in a written lease and cannot be imposed until the rent remains unpaid one full day after the date it is due. The fee is valid only if it is a reasonable estimate of uncertain damages to the landlord that are incapable of precise calculation. Landlord may charge an initial fee and a daily fee for each day the rent is late.

Tex. Prop. Code Ann. § 92.019

Tex. Prop. Code Ann. § 92.019

United States

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming