What it is
A late fees clause defines what happens if rent isn't paid on time: the grace period (usually 3–5 days), the fee amount (typically 5% of monthly rent or a flat $25–$75), and any compounding daily charges.
Why it matters
Many states cap late fees as a percentage of rent and prohibit daily compounding. Aggressive clauses can turn a single missed paycheck into hundreds of extra dollars and an eviction filing.
Sample clause language
"If rent is not received by the 1st of the month, Tenant shall pay a late fee of $100 plus $25 per day until paid in full. Repeated late payment shall constitute a material breach."
What it really means: No grace period and a daily compounding fee — likely illegal in many states. A fair clause allows 3–5 days grace and caps the late fee at ~5% of monthly rent.
Red flags
- No grace period
- Daily compounding fees
- Late fee exceeds 5–10% of monthly rent
- First late payment triggers eviction notice
- Late fees applied before due date posted
Fair / acceptable
- 3–5 day grace period
- Flat fee or capped percentage
- Single charge, not daily
- Notice required before eviction
How to negotiate
- Ask for a 5-day grace period
- Cap the fee at $50 or 5% of rent — whichever is lower
- Strike daily compounding language
Frequently asked questions
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Not legal advice. For informational purposes only.