Charging late fees is customary in most leases.  However, as of August 1, 2010, in Minnesota, you should know that there are 2 new laws relating to how and when you can charge late fees.

#1 – For leases starting after January 1, 2011, the landlord cannot charge more than 8% of the monthly rent amount as a late fee UNLESS there is a federal law to the contrary (i.e. HUD or RD housing).  For example, if you charge a tenant $500/month for rent, you CANNOT charge that tenant more than $40 in late fees for a given month ($500 x 8% = $40).

#2 – If it is not written into the lease that you can charge late fees, you are prohibited from charging late fees.  As a landlord, you need to state in the lease that you have the right to charge late fees if rent is late by a certain number of days and also how much that late fee is.

For more information about these new laws, please go to this link or contact my office.

Be Sociable, Share!
Tagged with:
 

19 Responses to “Charging Late Fees: 2 New Landlord Tenant Laws”

  1. Deb says:

    If there are 4 tenants paying $400 each amonth($1600 total) and only 1 tenant is late in paying, does he pay the 8% on his share-$32 or on the total rent-$128?
    Thanks,
    Deb

  2. robert jansen says:

    if the rent is 550.00 and the tenant pays only 500.00 do we charge a late fee of 8% against the five fifty or the 50.00 still owed?

    550.00 x 8%
    or 50.00 x 8%

  3. Luke Enno says:

    Hi Robert, as a general rule of thumb, I recommend charging the late fee of 8% against the $50. However, I don’t believe it is unwarranted to charge a late fee against the entire amount. I have a number of rentals and the way that I approach it is as such: I expect to receive the entire amount of rent due when it is due. If I receive a portion of it, that doesn’t solve my problem. The late fee is intended to operate as a deterrent hopefully so that the tenant doesn’t continue to cause an issue. In the strictest sense, it does not seem entirely unreasonable to charge a late fee of a flat amount and say you have to pay all of the rent on time or else even if I receive a part of the rent, you still owe the entire late fee. “Savvy” tenants may push the boundaries like paying a portion of the rent timely and then being late on the remainder. One final note: Housing court and courts in general are somewhat disinclined to award late fees even if properly due per the lease. Also, some judges go out of their way to be partial to tenants. Your safe bet is to do $50.00 x 8% but if you do $550.00 x 8%, you can argue that it is justified under the circumstances. It is not an unconscionable amount to charge $550.00 x 8% and the tenant is in material breach of the lease whether they fail to pay $50 timely or $550 timely. The court doesn’t distinguish between the two.

  4. Luke Enno says:

    Hi Deb. Thank you for your question. I have received this type of question numerous times. My general argument is this: if all tenants are responsible for the entire amount, then the one tenant is responsible for $128. In other words, ask yourself this question: if one tenant moves out and there are three tenants left, do the three tenants that are left now pay for 1/3 each of $1600? If the answer is yes, then the one tenant is responsible for $128 in late fees. However, to go a step further, you could argue that in fact all 4 tenants are responsible for the $128 and all 4 tenants are responsible for the $400 not paid. I don’t mean that each must pay $128 but if they are under a joint lease situation, technically you could request that the four of them together come up with the $128 and the four of them together come up with the $400. If they are under a joint lease situation and one tenant had to be evicted, to be precise, you would probably have to bring all of them into the eviction action.
    If they are under 4 separate leases, then only the one tenant is responsible for the $400 and the late fee is just $32. I don’t see that scenario too often.
    If it is a verbal lease, then I would try and argue that they are collectively under 1 lease. They may argue that they are under separate leases if you are treating them individually.

  5. Zachary Schaeffer says:

    How far back can a landlord charge for late rent? My landlord charged me for the entire year all at once and is trying to take it out of my damage deposit. Is this legal?

  6. Luke Enno says:

    Good afternoon Zachary,

    When it comes to late fees, the landlord can go back to the beginning of the lease to charge late fees for untimely payment of rent AS LONG AS the landlord has spelled out the specific terms in the lease regarding how much late fees will be charged and when they will be imposed – see the statute below. However, the landlord cannot charge in excess of the allowable amount for late fees which is no more than 8% of the amount of rent which was late. For example, if your monthly rent was $1,000 and you were late 3 different times, the landlord could charge as much as $80×3= $240.

    Can the landlord remove the late fees from your security deposit? Yes, if it is rightfully owed under the terms of the lease. If the late fee terms are clearly spelled out in the lease, then by law you have contractually agreed to them. I highlighted the area below that demonstrates this fact.

    Do most landlords charge for late fees months after they were due? No. Why not? Because most landlords waive the collection of late fees by their actions. Your argument could be that the landlord waived his/her right to collect late fees by not otherwise collecting them immediately at the time they were due. However, most leases have some type of language that spells out

    You might think you are receiving a bit of a raw deal. If so, conciliation court is an option to deal with this dispute. Perhaps there are unclear terms in the lease. Perhaps there are issues with how the landlord has handled calculating late fees or timely notice as it relates to the security deposit. If any of those issues exist, Chapter 504B is designed to help you. Let me know if you have any other questions.

    504B.177 LATE FEES.

    (a) A landlord of a residential building may not charge a late fee if the rent is paid after the due date, unless the tenant and landlord have agreed in writing that a late fee may be imposed. The agreement must specify when the late fee will be imposed. In no case may the late fee exceed eight percent of the overdue rent payment. Any late fee charged or collected is not considered to be either interest or liquidated damages. For purposes of this paragraph, the “due date” does not include a date, earlier than the date contained in the written or oral lease by which, if the rent is paid, the tenant earns a discount.

    (b) If a federal statute, regulation, or handbook providing for late fees for a tenancy subsidized under a federal program conflicts with paragraph (a), then the landlord may continue to publish and implement a late payment fee schedule that complies with the federal statute, regulation, or handbook.

    504B.178 INTEREST ON SECURITY DEPOSITS; WITHHOLDING SECURITY DEPOSITS; DAMAGES; LIMIT ON WITHHOLDING LAST MONTH’S RENT.

    Subdivision 1.Applicability.

    Any deposit of money, the function of which is to secure the performance of a residential rental agreement or any part of such an agreement, other than a deposit which is exclusively an advance payment of rent, shall be governed by the provisions of this section.

    Subd. 2.Interest.

    Any deposit of money shall not be considered received in a fiduciary capacity within the meaning of section 82.55, subdivision 26, but shall be held by the landlord for the tenant who is party to the agreement and shall bear simple noncompounded interest at the rate of three percent per annum until August 1, 2003, and one percent per annum thereafter, computed from the first day of the next month following the full payment of the deposit to the last day of the month in which the landlord, in good faith, complies with the requirements of subdivision 3 or to the date upon which judgment is entered in any civil action involving the landlord’s liability for the deposit, whichever date is earlier. Any interest amount less than $1 shall be excluded from the provisions of this section.

    Subd. 3.Return of security deposit.

    (a) Every landlord shall:

    (1) within three weeks after termination of the tenancy; or

    (2) within five days of the date when the tenant leaves the building or dwelling due to the legal condemnation of the building or dwelling in which the tenant lives for reasons not due to willful, malicious, or irresponsible conduct of the tenant,

    and after receipt of the tenant’s mailing address or delivery instructions, return the deposit to the tenant, with interest thereon as provided in subdivision 2, or furnish to the tenant a written statement showing the specific reason for the withholding of the deposit or any portion thereof.

    (b) It shall be sufficient compliance with the time requirement of this subdivision if the deposit or written statement required by this subdivision is placed in the United States mail as first class mail, postage prepaid, in an envelope with a proper return address, correctly addressed according to the mailing address or delivery instructions furnished by the tenant, within the time required by this subdivision. The landlord may withhold from the deposit only amounts reasonably necessary:

    (1) to remedy tenant defaults in the payment of rent or of other funds due to the landlord pursuant to an agreement; or

    (2) to restore the premises to their condition at the commencement of the tenancy, ordinary wear and tear excepted.

    (c) In any action concerning the deposit, the burden of proving, by a fair preponderance of the evidence, the reason for withholding all or any portion of the deposit shall be on the landlord.

  7. Julio says:

    as a landlord and my tenant left but still owes me back rent and he is paying little by little can i still charge him late fees after he has left or does that stop after he left???i know its a dumb question but i was just curious…thank you…sorry for the repeat i put wrong email

  8. Luke Enno says:

    Late fees tend to be disfavored to some extent by law. Can you charge him the late fees? Yes. If he disputed the charge of late fees after the fact and said that he had left already, a judge might agree with him. However, the real point is this: if he is delinquent in paying, the late fees in a way operate as interest on a “loan” which he is repaying over time. Technically, late fees apply to late payment of rent for a tenant who is occupying a unit. Again though, this would be a gray area in my view. If you can satisfactorily demonstrate if called upon to show your reason/logic for what you are doing, it is possible that if this case were in a courtroom, a judge might agree with you.

  9. Kate says:

    Our community has a number of slumlords charging excessive late fees along with some additional questionable practices. If a tenant owes a late fee or accumulated late fees from months they were delinquent on their rent, the landlord will take their timely payment of their current monthly rent and take out the amount owed for the past late fees and claim they are behind on their current rent and then charge them another late fee. What is the remedy for this situation- is there a statute I can point them too? The tenants cannot move out because they have bad credit.

  10. Luke Enno says:

    Late fees are the devil’s triangle and much of it depends on which state you are in as to the law regarding late fees. Some states are very clearly defined in terms of how late fees are to be assessed and whether they are permissible. In Minnesota, my strong recommendation is to contact HomeLine (612) 728-5767. Homeline is an outstanding tenant advocacy service available to Minnesota tenants.

    Let me try to answer your question as best as I can: Excessive late fees are not permissible in MN or many other states for that matter. MN only allows a charge of up to 8% of the rent amount as a late fee. For example, if the monthly rent is $500, then the landlord has the right to charge up to $40/month as a late fee. Anything above that amount is unlawful.

    Other questionable practices you allude to should be dealt with through either the state attorney general’s office or conciliation court or if the county happens to have a dedicated housing court, through housing court.

    It appears as though the landlord is shystering the tenants in the scenario you describe to an extent. On one hand, the landlord can argue that he/she has the right to take out a portion of what he/she is receiving to off-set against past-due amounts. However, it enters a gray area as to whether an additional late fee should then be charged for the current month. I’ve dealt with dozens of landlord-tenant law cases and late fees is the murkiest area under the law. The tenant strongly needs to speak with a free tenant advocacy service in the state in which he/she is located. Minnesota has Homeline. Other states have different programs. Tenant advocacy services have a valuable function because in certain instances they can expose slumlords for what they are. Obviously, this landlord doesn’t deem this tenant to be so bad as to have him/her evicted. Accordingly, the landlord needs to reach a means by which the past-due late fees can be resolved separately from the month to month rent the tenant is timely paying. Merging those issues screams of slumlording.

    I hope this information helps. I know it isn’t a crystal clear answer. Late fees law varies and is very much case-by-case.

  11. Luke Enno says:

    This post has been very popular largely because it deals with an issue that varies widely from state to state and even from case to case and county to county or judge to judge. When it comes to late fees, there are very few hard and fast rules as to what is reasonable or unreasonable beyond what I stated in this article.

    As a landlord, if you can demonstrate that the late fees charged are reasonable, a judge may award a judgment for that amount. But a reasonableness standards is so case-by-case that one can only speculate as to how a judge might rule.

    I would say that the Golden Rule to an extent applies. It is appropriate to charge a late fee in accordance with your time and effort and given how much is late, how late the payment is received and how often the problem has arisen. A certain amount of grace should be exercised but not too much.

  12. brandy says:

    so lets say that someone i.e me had a late fee of 700.00 in total with my landlord. I struggle every month in the past couple years and they have been accepting my monthly rent amount and saying nothing about the late fee accumulation on their books of $700.00 this was in July that I owed 700.00 in ONLY late fees to them.

    now as of todays date. They are not doing 8% late fee on the RENT amount but adding the rent amount (i will say 700.00 in rent) to the 700.00 adding that together.

    700.00 Rent
    700.00 late fees on books OLD
    =1400.00 they show as owed now then they add the 8% new late fee
    =1512.00 they are claiming is due now
    Rent paid 700.0
    leaving them with now 800.00 owed in more late fees

    Can they add the late fee to the late fee on the books? Can they add this all together and say that I owe them an extra 800.00 in just late fees? Are they allowed to basically charge me 16% late fee?

    To me they are charging me 1,2,3 time the late fees as they are charging me late fees for the late fees not being paid every single month.

  13. Luke Enno says:

    If you are in a county and/or in a state where there is a late fee cap, I would argue that the landlord is operating outside the bounds of the law. At the very least, they are playing in the gray areas of the law.

    The challenge for you of course is if you want to take corrective action, you likely have to address it in conciliation / small claims court. Many landlords are saavy to the fact that if they time out when they notify a tenant of late fee charges, there is little the tenant can do about it especially if the tenant is in a position where they intend to move in the not-too-distant future.

    If you are planning on staying awhile longer, my first recommendation is to talk with a free tenant advocacy service about what can be done here. In Minnesota, there is HomeLine. (612) 728-5767. Free tenant advocacy services run down the options for tenants. I’m guessing that they likely will recommend spinning the case over to conciliation court.

    Now with that said, the landlord may have a viable defense to what late fees it wishes to collect. If indeed you have been late each of these months, they may have something in the lease that allows them to collect the late fees even months or years later. One defense that you have for why the late fees are unjust is that they are serving as a penalty DESPITE THE FACT that each month the landlord ACCEPTED your late payment of rent without stating any issue. There are a lot of gray areas here and frankly, it is a flip of the coin how a judge would rule. It truly is and I can state that based on experience observing many many landlord-tenant cases like this. Good luck!

  14. Steven C. says:

    Hello,

    My landlord applies late fees if the full rent is not paid by midnight of the first day of the month. Convention experience has been that late fees are usually applied when late five days. I didn’t see anything about a “grace” period in the laws pertaining to late fees other than the number of days late be stipulated in the lease. That being said, is there a grace period allowed by law that I have missed?

    Thanks,

    SCP

  15. Luke Enno says:

    Steven,

    You are on the right track. Unless the lease itself allows for a grace period, late fees would apply if full rent is not received by the landlord as provided in the lease. The statutes in most if not all states do not have provisions for grace periods and instead follow basic contract law. A lease is a type of contract and if the lease says that a renter must pay by DATE X, then the renter must pay by DATE X.

  16. Miranda T. says:

    So say somone has a late fee of $40 for one month but pays on time the next month in full but still has the late fee of $40, do you charge the 8% on that $40 the next month? Is it an 8% on the remaining balance of the account?

  17. Luke Enno says:

    The 8% fee is primarily if not exclusively intended to be on the actual monthly rent amount, not the late fee itself. However, I don’t believe a judge or a court would have an issue if a landlord charged 8% on the $40 late fee if it has not been paid. It is only 27 cents per month ($40 x .08 x 1/12). But again technically, the 8% fee is intended to be on the monthly rent amount. Intent of the law is important when trying interpret what to do.

  18. Jason says:

    I am a landlord having trouble with a tenant paying on time. The rent is $760 so I have been charging $60 late fees because he is late almost every month. I haven’t evicted him because it seems he is trying to pay and he is taking really good care of my property.

    I’m trying to apply additional motivation for him to get current on his rent. So, my question is can I only charge the late fee on the rent that is due for this month, or can I charge it each month for the entire delinquent balance? For example, $760 is due on September 1st, but he is currently $1,000 delinquent. If he does not pay on time can I charge him 8% on $1,760 or just the $760?

    Or to state it another way, on the second of each month can I levy an 8% fee on the entire outstanding delinquent balance?

  19. Luke Enno says:

    Jason,

    I apologize. This message didn’t come through right away.

    It is somewhat tricky as far as what you can do here with respect to the late fee. However, I would conclude that in general, the late fee amount charged needs to correspond with the amount not paid – i.e. just the $760. I believe if you were in court on this matter, you would have a harder time demonstrating to a judge that charging 8% of $1,760 even though $1,000 was paid timely is how the late fee should have been calculated. The judge in that instance would be more of the mindset to conclude that you should simply evict the tenant if the tenant is having difficulty paying 100% of the rent on the first of the month.

    I understand where you are coming from here. You want the tenant to take the matter more seriously and pay on time in the coming months. However, I suspect that even charging more of a late fee (i.e. based on $1,760) is not going to motivate this particular tenant to change his actions. He isn’t a bad faith individual. He just isn’t responsible.

Leave a Reply