How to calculate the maximum late fee on rent: Texas, Virginia and Maine examples
A legal late fee needs three answers: when it can start, how much it can be, and what must be in the lease. Texas allows a fee only after rent is two full days late and treats 12 percent of rent as reasonable in a building of four units or fewer and 10 percent in a larger one. Virginia caps it at the lesser of 10 percent of the rent or 10 percent of the balance. Maine allows 4 percent after 15 days.
Three questions every late fee must pass
State law differs a lot, but it tends to ask the same three things. First, when does the fee begin: how many days after the due date. Second, how large can it be: a percentage of rent, a flat cap or a standard of reasonableness. Third, what must the lease say: states commonly require the fee to be written in the lease before it is charged. Check your own state's statute before you set a fee. The examples below use three states with clear statutory numbers, and are not legal advice.
Texas: Property Code section 92.019
In Texas a landlord may not collect a late fee unless notice of the fee is in a written lease, the fee is reasonable, and some part of the rent has stayed unpaid two full days after the date it was originally due. The statute treats a fee as reasonable if it is no more than 12 percent of the periodic rent for a dwelling in a structure with four units or fewer, or 10 percent for a structure with more than four units. A higher fee can still be reasonable if it does not exceed the landlord's uncertain damages from the late payment. An initial fee plus a daily fee is allowed, and together they are treated as one fee for the limit. A landlord who violates the section owes the tenant $100, three times the fee collected, and the tenant's reasonable attorney's fees (Tex. Prop. Code 92.019).
Example a made-up fourplex charges $1,000 a month. The 12 percent standard is $120. A made-up 12 unit building charges $1,200 a month, so the 10 percent standard is $120. If the 12 unit building's lease sets an initial fee of $60 plus $10 a day, the fee reaches the $120 line on the sixth day of lateness ($60 plus six days at $10 is $120), and the lease should stop the daily charge there unless the landlord can show higher damages.
Virginia: Code section 55.1-1204
In Virginia a landlord may not charge a late fee unless it is in the written rental agreement, and the fee may not exceed the lesser of 10 percent of the periodic rent or 10 percent of the remaining balance due and owed by the tenant (Va. Code 55.1-1204(E)). The balance matters. A tenant who pays most of the rent on time and is short by a small amount can only be charged a small fee.
Example a made-up Virginia unit rents for $1,500. On day six the tenant has paid $1,100 and still owes $400. Ten percent of the rent is $150, and ten percent of the balance is $40. The lesser is $40, so $40 is the most the lease can charge. If the tenant owes the full $1,500, the cap is $150.
Maine: 14 M.R.S. section 6028
In Maine rent is late only if it is not paid within 15 days of the time it is due. A landlord may not charge more than 4 percent of one month's rent, and may not charge anything unless the tenant was told in writing, when they entered into the rental agreement, that a penalty of up to 4 percent of a month's rent may be charged (14 M.R.S. 6028).
Example a made-up Maine unit rents for $900. The cap is 4 percent, or $36. The fee can start on day 16 of nonpayment, only if the written notice at the start of the tenancy said so.
Record the fee as its own charge
Whatever the fee, record it as a separate charge, not inside the rent, and keep the date it became due. A fee mixed into rent can hide the real rent balance and cause problems if you later need to prove what was owed. Apply tenant payments in the order your lease says; our post on payment application order explains the options. Late fee income is income to you when collected, and your tax preparer can say where it goes on your return.
How DoorKeeping handles it
DoorKeeping applies late fees within state caps. You set the fee in the lease, DoorKeeping checks it against the limit for the state the property is in, and the fee is charged to the tenant's ledger as its own line, separate from rent. Because DoorKeeping tracks each tenant's balance as payments arrive in your bank, the fee reflects what is actually owed. Tenants pay $0 by bank transfer or Zelle; DoorKeeping costs $2 per unit a month, every feature included, no setup and no minimum. Check your state's rules; DoorKeeping gives no legal advice.
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Questions
- How much can a landlord charge for late rent?
- It depends on the state. Texas treats 12 percent of rent as reasonable for four units or fewer and 10 percent for larger buildings, Virginia caps it at the lesser of 10 percent of rent or of the balance, and Maine at 4 percent.
- When can a late fee start?
- Also state by state. Texas requires rent to be unpaid two full days after the due date, and Maine counts rent as late after 15 days.
- Does the late fee have to be in the lease?
- In every state in this post, yes. The fee must be written in the lease or rental agreement before it can be charged.