Is $1,000 late-fee charge illegal?

Rent it Right

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Apr. 30, 2010

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Rent it Right

Janet Portman
Inman News

Q: Last September, I was unable to pay my rent ($1,000 per month), and incurred a late fee of $100. I paid all of October's rent, and every month's rent from that time onward, but I wasn't able to pay September's rent until now. I've just paid it, by paying double this month, and my landlord tells me that I owe him $1,000 in late fees -- $100 for each of the 10 months that September's rent remained unpaid. Is this legal? --Amy P.

A: Your landlord's way of doing business is quite strange. Most landlords would never allow a tenant to remain on the property for months after failing to pay an entire month's rent, let alone the late fee. They would send a notice to pay or quit, and if the tenant remained, they'd evict and use the deposit to cover both the unpaid rent and the late fee.

Assuming the late-fee policy was part of the lease or rental agreement, and the late fee was described as "additional rent" or the lease otherwise made it clear that the deposit could be used to satisfy sums owed pursuant to the lease, the landlord would have no trouble using the deposit to cover the unpaid rent and the fee.

Your landlord, instead, allowed an entire month's rent plus its late fee to be carried as a debt. When you paid October's rent, the landlord applied that money towards September's unpaid rent and unpaid late fee, but because October's check included only the rent, not the fee, you still owed the September late fee.

And because the October check went to cover September's rent, October's rent was now late, triggering another fee (and October's rent wasn't covered until you paid in November). The same scenario repeated itself month after month, with late fees stacking up.

Your landlord is likely to argue that there's nothing illegal in all of this, and that the alternative (evicting you for nonpayment) would have been harsher for you. Perhaps, but let's remember that the purpose of a late fee -- and its only legal justification -- is to compensate the landlord for his actual losses when the rent is tardy. These losses include the time and trouble it takes to remind tenants to pay, and the interest lost on the unpaid rent.

Measured by this standard, your landlord lost 10 months' interest on $1,000, and the value of the time he spent dealing with your tardiness. It's preposterous to suggest that a $1,000 debt resulted in $1,000 worth of lost interest and costs.

And incidentally, a late fee that's 10 percent of the rent may be illegal itself; many states limit the maximum fee allowed, and only a couple allow the fee to go that high.

Before refusing to pay the fee and risking an eviction lawsuit, consider taking your question to a local lawyer. The precise wording of your late-fee clause, and your state's law on the subject of late fees, may add something to this analysis.

Q: One of my tenants claims that he twisted his ankle on a front doorstep that he says was loose. I don't think it was loose at all; I think he hurt himself somewhere else (if he's even hurt), and wants to pin it on me. This guy has been a pain in the neck for some time, and this was the last straw -- I served him with a 30-day notice. He says he's not moving, that he'll sue me for his injury, and that I can't retaliate like this against him. What do you think? --Peter P.

A: Most states have adopted some variation of the Uniform Residential Landlord and Tenant Act, which prohibits a landlord from retaliating against a tenant -- by increasing rent, decreasing services or evicting (or threatening to evict) -- after a tenant has sought to "enforce a right or remedy granted by the state's landlord-tenant laws."

From the sounds of things, your tenant is planning on suing you for negligence, and you have responded, at least in part, by giving him the boot. So there are two issues going on here: whether you were negligent, and whether you can successfully terminate the tenancy in response to the forthcoming lawsuit.

Whether your tenant can successfully sue you for his injury will depend on whether he can prove to a judge that you knew of a dangerous condition on the front step and unreasonably failed to correct it; that this condition caused the injury; and that he is in fact injured.

He'll have to show, for example, that the step was loose and that you knew about it or should have known, in the exercise of normal landlord maintenance; that you had (or would have had) an opportunity to fix it (or at least warn users to avoid it); and that you failed to do so. You wouldn't be responsible if the step unexpectedly came loose just before the tenant slipped; nor should you be responsible if the tenant's slip didn't in fact cause the injury.

Let's assume for the moment that your tenant successfully convinces a judge (or insurance adjuster) that you're to blame for his woes. Can you terminate his tenancy without fear of breaking the law? Look back to that description of the anti-retaliation law -- it protects tenants after they've "sought to enforce rights and remedies" granted under the landlord-tenant act.

This means that landlords can't, for example, terminate when tenants use the landlord-tenant act's "repair and deduct" statute, or when tenants insist on proper notice before the landlord enters.

Similarly, tenants would be protected against retaliation if they complained to a housing inspector about substandard, unfit conditions. But does the landlord-tenant law compensate tenants for injuries that result from the landlord's negligence, or is a personal-injury lawsuit too removed from the landlord-tenant act to be part of the tenant's protections?

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