Definition
Late fees are charges imposed for late rent payments, specified in lease agreements and subject to legal limits. They encourage on-time payment.
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Late fee amounts and enforcement vary by state. Many states cap late fees at 5-10% of rent or prohibit excessive fees. Late fees must be specified in leases and applied consistently. Late fee policies encourage on-time payment and compensate for administrative costs and delay. Excessive fees may be unenforceable.
Pro Tip
Check state laws on late fee caps before setting policies.
Example
A lease specifies $50 late fee or 5% of rent, whichever is greater, if rent is not received by the 5th