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6 Reasons Why You Should Charge Late Rent Fees

Many landlords don’t find it easy to charge late fees because they want to show understanding during challenging times. It becomes even more difficult when you have a good relationship with your tenants. And as a landlord you don’t want to lose that good reputation.

When you are dealing with your tenants yourself, you are being blamed for charging tenants late fees unlike the utility companies where companies are being blamed. Therefore, you being a nice landlord, let your tenants pay late and don’t charge late fees so that you don’t become that bad landlord who is interested in earning a quick profit instead of being a good landlord.

If you are not sure if you want to or you should charge late fees or not, here are some solid reasons you should charge late fees.

1. Your Finances are Important & You Should Take Care of it.

No matter how nice you are, the truth here is that the rent your tenants pay is your income. And for some of you, it may be your only income source. In that case, you would need to receive rent payments before a certain date because you have bills to pay just like everyone else out there. And not paying those bills on time not only costs you late fees, it also negatively impacts your credit score. These are the two major hits you received directly because of your tenants paying you late.

2. Motivation

Nobody wants to pay extra or pay unnecessarily. And according to tenants, late fees are literally money down the drain for no reason. And that is exactly how late fees motivate tenants to pay rent on time so that they don’t have to waste money on late fees.

3. Bad Habits

Assume you opt not to charge late fees. The tenants have zero risk if they pay late. They don’t face any consequences for delaying the payment. And when there are consequences of no losses, there is no risk. And with no risk there is no fear. So it is more likely that your tenant may pay late. The problem starts with the first delayed payment. The tenants delay it a day or two in the beginning and then three or for days and then a week and so on. Accepting delayed payment the very first time puts you in a risky position and it becomes hard for you to stop late payments at later stages.

4. Helps Avoid Embarrassment

When tenants delay their rent, they start avoiding you to avoid the embarrassment. And you feel awkward too when you are tracking down your tenant and asking for rent again and again. Therefore, tenants being aware of late fees, will pay on time and save you both from the awkwardness and embarrassment.

5. Words Spreads like Wildfire

Don’t just consider that if you let one tenant pay late once and no one will find out. Tenants do talk to each other and it is highly likely that they will share the story with each other. Consider a scenario, one tenant is upset because the rent might get delayed this month and the other tenant tries to make him/her feel good and say something like this, “the last time I delayed the rent, the landlord did not charge me late fees, so don’t worry. You will be fine”. And you receive rent late without them feeling bad for you as a landlord. And then the next thing you know, every other tenant is paying late.

6. Help Your Tenants

Some tenants don’t pay enough attention to the budget. Let’s say your tenants live from paycheck to paycheck. They slip into serious financial problems once they mess up one payment. This way, they are one rent away from getting into trouble. Once they fall behind on rent and other bills, it becomes really hard for them to catch up. It will be really hard for them to pay bills and rent on time and will be even more difficult to make ends meet. If you make them aware of late fees, they will be motivated to pay their rent on time and as a result they will pay more attention to their budget.

How Much You Should Charge for Late Rent Fees?

Now as you have enough reasons to charge late fees, how much should you charge?

The law states that you can charge only up to 5% of the rent and according to the average rent in the US you can charge $70 in the late rent fees. You can also opt to set a lower rate.

You can choose a flat late fee or daily late fee. Most landlords consider it much more effective to charge daily late fees as it adds up everyday and it motivates the tenant to pay the rent faster. For example $5 per day can add up to $30 in 6 days. This way the tenants tend to pay rent faster to avoid additional late fees as the time passes.

Remember, before you set your late fees, do check your local and state laws and make sure you are following the law to avoid legal consequences. Make sure you have mentioned late fees in your lease agreement because without that you can’t charge your tenants late fees.

Grace Period

Once again, please make sure you check the laws as some laws require you to give your tenants a grace period of five days. Other states leave the decision to the landlords. Do include your grace period in the lease agreement to give it a legal status.

Why is it good to set a grace period?

There are several good reasons to set a grace period.

  • Several transactions take time to complete. That means your transaction could be on the way and may not clear on the same day it was sent on.

  • Tenants that have paid on time for years may not be really happy with late fees.

  • Receiving income is not in control of the tenants. So delayed income is not really their fault.

  • Several of your tenants may not be paid on the very first of the month.

  • It shows that you are considerate and understand that the delay may happen and you are not taking advantage of that.

I would mention this once again, do include your grace period in the lease agreement.

How can you help tenants?

We already have discussed the benefits of using digital rental apps. For example you can automate many processes with digital rental apps. You can keep track of everything in one place. You can communicate with your tenants and keep the conversation recorded.

Digital rental apps automatically calculate the late fees and send reminders to tenants automatically. It benefits the tenants at the same time by reminding them about the rent payment and helping them avoid paying late fees.

Rental apps help avoid the direct confrontation of tenants. Landlords don’t have to go after tenants and ask for payment. It automatically charges late fees and lets the landlord and tenant have that good relationship.


Bottom line is, late fees don't make landlords rich and is certainly not a source of income for them. It is a tool to help tenants pay on time. Make sure the late fee is reasonable and resonates with the property class. A combination of grace period and the use of digital rental apps not only helps you get paid on time, it also helps the tenants avoid paying extra in the form of late fees.

Learning is a life-long process. We continue to learn from our experience and from the experience of the people in the same field. That is why we tend to network with like-minded people in different events and online. Join our exlusive membership and become part of the conversation.

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Justin Brennan

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