Property management & leasing
Late Fee: Definition & Example
What Is a Late Fee?
A late fee is a charge added when rent or another payment is not received by the due date or the end of any grace period stated in the lease.
What does late fee mean?
Late fees give tenants a reason to pay on time and compensate the landlord for the cost of chasing late payments. The lease should state the amount, when it applies, and whether any grace period exists.
Many states regulate rental late fees. Common rules include a required grace period of several days, a cap such as 5% of monthly rent, or a requirement that the fee be reasonable compared with the landlord’s actual costs. Fees that function as penalties may be unenforceable.
Late fees are separate from returned-payment fees. When a rent payment bounces for non-sufficient funds, the landlord may charge both a returned-payment fee and a late fee if the rent ends up late.
Late fee example
Rent of $1,400 is due on the first, and the lease allows a five-day grace period with a late fee of 5% of rent. The tenant pays on the eighth, so the landlord adds a $70 late fee to the tenant’s rental ledger.
Related terms
- Rental LedgerA rental ledger is a running record of every charge and payment on a tenant’s account, including rent, fees, credits, and the resulting balance.
- NSFNSF (non-sufficient funds) means a bank account did not have enough money to cover a payment, so the bank returned the check or electronic payment unpaid, often with a fee.
- Lease AgreementA lease agreement is a contract between a landlord and tenant that sets the rent, the term, and the rules each side must follow while the tenant occupies the property.
- EvictionAn eviction is the legal process a landlord uses to remove a tenant from a rental property, usually for unpaid rent, a lease violation, or the end of a tenancy.
- Notice to QuitA notice to quit is a written notice from a landlord telling a tenant to leave the property, or to fix a lease violation or pay overdue rent, by a certain date. It is usually the first formal step toward eviction.
Late fee FAQ
- How much can a landlord charge for a late fee?
- It depends on state and local law. Some states cap late fees at a percentage of rent or a flat amount, and many require the fee to be reasonable.
