Commercial Lease Late Fee: Everything You Need to Know

When a commercial lease late fee has to be charged, it means a renter has failed to pay on time.3 min read

When a commercial lease late fee has to be charged, it means a renter has failed to pay on time. As the landlord in a situation like this, you may charge a late fee or penalty. The late payment penalty on a commercial lease is usually calculated as a five to 10 percent of the rental amount. It can also be a flat fee.

Usually, a late fee can only be charged if the original lease agreement provides for it. If your lease has no late fee clause, you can't suddenly expect your tenant to pay a fee next time he or she is late in paying the rent.

The Maximum Amount to Charge

The issue of how much you can charge as a late rent penalty depends on local and state legislation. Whether you choose to charge a flat fee for every day that the rent is late, or whether you charge a set percentage of the rental amount, there is a maximum amount that you are allowed to charge every month. According to most courts, this amount needs to be kept reasonable, which means less than 10 percent per month.

Generally speaking, as a landlord, you will need to give your tenant about five days' grace before considering the rent payment late. While the courts will stipulate that you charge no more than 10 percent per month, the general advice is to use caution and charge only five percent.

The laws about payment of late fees also stipulate when you can implement these fees. In some states, a landlord may charge this fee on the first day after rent was due. In other states, a grace period is necessary, and such fees can only be charged at the end of this grace period.