Late fee amount must be justifiable

Question: I rent my condo to a family. Their lease says that rent is due on the first, and that a $200 late fee will apply if it is deposited in the bank after the 10th of the month. Last year they paid after the 10th on six occasions. Am I within my rights to deduct $200 from their security deposit for the six times they have been late?

Answer: You are making two mistakes. First, your lease is unnecessarily generous when it comes to a rent due date. Amend the lease (when it’s up for renewal) to give a much shorter grace period.

Second, your late-fee amount is unenforceable. A late fee must reflect the amount of money you expect you will actually lose when the rent comes in late. To measure those damages, you’d need to do a “time and motion” study, in which you add up the time you spend demanding the rent, dealing with the tenant, negotiating and adding in the interest you lose on the rent for the days it remains unpaid. There’s no way that would cost you $200.

-- Janet Portman, Inman news

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E-mail Janet Portman at janet@inman.com.