One of the most important elements of modern residential leases today is the Late Fee clause. In
order to encourage timely rent and discourage late payments, I highly recommend you have a solid late
charge clause. Having the clause in your lease is only part of protecting yourself against late rent.
The first step is to explain and warn the tenant about the late fee when going over the lease before
signing it. I'll even ask the tenant not to sign the lease if they think that late payments
are in their future. I also inform the tenants that I belong to a national tenant reporting bureau and
have the power to adversely affect the tenant's credit, so.. "Don't mess up with your rent. It's
not worth it." If the tenant values his credit and plans on buying a home someday, I remind them
that it is very important to prioritize the rent payment and keep their credit clean.
How much should the late fee be? I feel late charges should hurt. I don't want to make it so high
that a struggling good tenant will fall even further behind, but it should be a painful enough fee that
the tenant will not want to pay again. Ever.
Many tenants who incur a late fee don't really mind paying it in their own good time.
That's why it is important to also charge a Daily Late Charge in addition to the initial late
fee. It gives the tenant an incentive to hurry up and pay the initial late fee before it grows into
an even more painful hit.
Another item we include in our Late Charge clause is a Bounced Check Penalty. I usually make
the bounced check charge the same as the inital late fee. I also prepare the tenant that if the rent
check bounces, it will cause the rent to be late and they will be responsible for a late charge too.
I want to stress to you that the landlord protection clauses in our lease or any other lease are
there to protect you, but sometimes you will have to enforce the lease. Many landlords are afraid to
lose their friendly relationship with the tenants when it comes to enforcing the lease. Remember that
this is your money we are talking about. This is your property they are occupying and you deserve to
have a tenant who lives up to his or her agreement with you. Send the late fee notices and make the
tenants pay the penalties. You have your own bills and you want your rent to be on time. That's why
you rented to them.
- John Nuzzolese
John Nuzzolese is a licenced Real Estate Broker / Real Estate Investor in Nassau County, NY. where
he resides with his wife and 3 children. John has been involved with real estate sales, rentals and
investing since 1979. He owns two real estate businesses and is also President of a national
organization for landlords, The Landlord Protection Agency, Inc.
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