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My landlord is charging what seems like a lot for a late fee for rent payment. We pay $2,500 a month in market-rate rent, and he's charging $650 if we pay after the 10th of the month. Is this legal?
Landlords are permitted to charge fees for late rent payments, but only within certain parameters, our experts say.
For market-rate tenants like yourself, your landlord can legally charge you extra for paying your rent after it's due, but the amount he charges must be set forth in your lease.
"It has to be stated clearly in the lease," says Michael Rothschild, vice president at AJ Clarke Real Estate. "But there is a limit, and this seems to be beyond that. You can't charge whatever you want, even if the tenant agrees to it."
A $650 late charge on $2,500 rent is unreasonable, says Sam Himmelstein, a partner with the firm Himmelstein, McConnell, Gribben, Donoghue & Joseph LLP (a Brick sponsor.)
There is no set formula for what your landlord can charge, but Himmelstein explains that late fee provisions are considered liquidated damages clauses, which mean both parties have agreed to an amount for the damage that a late payment would cause the landlord, and the amount cannot be punitive.
"It has to be compensatory: How much harm does the landlord suffer if someone pays $2,500 10 days late? Not $650 worth of harm," he says. "That's nonsense and would not upheld by a court."
It's important, then, that you check your lease for late fee provisions detailing how much your landlord can charge.
Rent-stabilized tenants can be charged too, but within even stricter guidelines.
"Late fees can be charged to stabilized tenants, but they must be in the original lease, they cannot exceed five percent of the rent, and tenants cannot be evicted for failing to pay late fees," Himmelstein says.
Furthermore, landlords cannot sue rent-stabilized tenants in housing court for failing to pay late fees.
"They can sue in civil or small claims court, but I've never seen it happen," Himmelstein says.
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