What Is a Good Percentage Fee for Late Charges on Rent?

by Shala Munroe, Demand Media
    Most rentals enforce a late fee after a grace period.

    Most rentals enforce a late fee after a grace period.

    If you're renting an apartment or a house, it's likely you have a clause in your lease that spells out a late fee if you pay your rent past the due date. Laws protect tenants from exorbitant late fees, but it's best to read the fine print of your agreement carefully to make sure there are no questionable clauses before signing it and moving in; paying for an attorney to battle the high late fees is much worse than choosing a house or apartment with a fairer late policy. If you happen to be the landlord, the same suggestions apply, although you are the one imposing the late fee.

    Purpose

    The purpose of a late fee is to compensate the landlord for any expenses incurred because you didn't pay your rent on time. For example, he may have bills that are due that he must postpone payment on if you don't pay your rent on time, incurring late fees of his own. The amount of the late fee is not designed to punish the tenant, so state laws require the late fees to be reasonable.

    Percentage

    Many landlords set a percentage for a late fee. A standard amount for a late fee is 3 to 5 percent of the monthly rental amount. If you pay $750 per month, this would be about $23 to $38. This amount is typically considered an adequate amount to cover any late fees or other charges the landlord absorbs because your rent is late. Watch for clauses that increase the percentage the longer you're late. For example, you may have a five-day grace period after your rent due date, during which no late fees are charged. Then, you might be charged 3 percent from day six to day 10, then 10 percent starting on day 11.

    Flat Fee

    Landlords may choose to charge a flat fee instead of a percentage. Calculate the percentage to make sure the flat fee is a reasonable amount. For example, if you're paying $750 per month and the late fee is $75, that's a 10 percent fee. Although that high percentage may be legal in some states, it's higher than the standard 3 to 5 percent. Try to negotiate the flat fee down to a more reasonable amount, such as $25, which is slightly more than 3 percent.

    Know the Law

    Each state has its own laws regarding how much of a late fee the landlord can charge, so check with a real estate attorney before starting your hunt for a rental home or apartment. Some cities also have rent-controlled areas, where the law governs how much rent can be charged, what late fees are acceptable and what steps must be taken before a tenant can be evicted. Be aware of the highest amount the landlord can charge for late fees before you sign the rental agreement. Keep in mind that most states allow landlords to charge a late fee plus a service fee for checks returned for insufficient funds.

    About the Author

    Based outside Atlanta, Ga., Shala Munroe has been writing and copy editing since 1995. Beginning her career at newspapers such as the "Marietta Daily Journal" and the "Atlanta Business Chronicle," she most recently worked in communications and management for several nonprofit organizations before purchasing a flower shop in 2006. She earned a BA in communications from Jacksonville State University.

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