Fittest loser
Article posted: 6/10/2012 5:19 AM

When do late-payment fees become 'excessive'?

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By Robert Griswold

Q. My husband and I rent a townhouse that is privately owned. Per the lease we signed, the rent is due on the first of the month and there is a five-day grace period. The landlord charges us $35 for the first day if we pay on the sixth of the month and $25 each additional day that we are late in paying the rent. Our monthly rental is $810.

I will admit that we have paid our rent late several times due to delays with our payroll. We do pay the late fees. But there have been times that we have paid $1,500 in rent and late charges in a single month. This is killing us, and my question is, could this be deemed excessive?

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A. Late fees are very controversial, and many state courts have ruled that excessive late fees are not enforceable. So I caution that the answer to your question could depend on the opinion of courts, but I do feel that the fees being charged by your landlord are excessive.

Of course, charging tenants late fees when they don't pay their rent on time is one of the most effective ways to encourage on-time payments. And I am a strong advocate for timely payments, as most landlords aren't so financially well-off that they don't have a mortgage and expenses to pay for the ownership of the property they rent to you.

So your failure to pay your rent most often creates a real hardship for a landlord. But the late fees should be reasonable and in line with the actual harm caused by the late payment.

If you are late in your rent, then the landlord does have to continue to make his payments without the benefit of your rent money, and he also has to call you or send you legal notices to prompt you to pay. This is a real out-of-pocket cost to your landlord.

The five-day grace period is generous, and the $35 late fee for the first day is not out of line. But the unlimited $25 per each additional day you are late can add up to some serious money very quickly, especially when you consider that your $810 per month rent equates to a daily rental rate of $27 per day or just $2 per day more than the late charge!

Of course, the simplest solution is to just pay your rent on time, but I know that may not always be possible. So when your lease comes up again for renewal, I would suggest you talk to your landlord and negotiate a more reasonable late charge.

Q. I have been a tenant for many years. I recently moved out of my old apartment and I have just spoken to the managers in regards to my deposit of $1,750, as it has been almost a month without any word from them.

They finally got back to me and said the cleaning fees and such would total $1,700.

I had hired professionals to deep-clean the carpet and spent hours cleaning myself. I have never been charged so much. I know I can go to small claims court, but that would take me away from work. I am hoping you can suggest some other options. Can you advise me on how to best handle this matter?

A. You certainly are due an explanation of the charges, as a written full accounting along with a check for the small remaining balance of your security deposit should have already been sent to you. At this point, I would start documenting your concerns in writing and send a demand letter seeking a full accounting with copies of receipts and photos or any supporting evidence that the landlord has to justify the $1,700 in deductions from your security deposit.

Remember that the charges should be only for items that are broken or damaged and not for components that would need replacement because of ordinary or expected reasonable wear and tear based on the length of your tenancy.

If all else fails, you can contact your local Better Business Bureau or tenants' rights agency or even local media, as they will sometimes have a consumer reporter. There are also local mediation and alternative dispute resolution (ADR) services in many communities that offer low-cost or even free services.

You will want to present your evidence of the condition of the unit when you moved in versus when you moved out, and the length of your tenancy plus the receipts for the cleaning. If that fails, I still think small claims court would be appropriate based on the amount of the deductions -- unless they can justify the majority of them to the point that it is just not worth your time.

• Property manager Robert Griswold is author of "Property Management for Dummies." Email rgriswold.inman@retodayradio.com.

2012, Inman News Service

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