LATE FEES - PART 1: WHAT AMOUNT CAN YOU CHARGE?

Many of my clients ask me what amount they should charge a tenant who is late in paying rent. Many also wonder if there is a maximum amount beyond which they would not be allowed to charge as a late fee.

The only legal guidance we have as to what amount is acceptable as a late fee is the case of Three & One Co. v. Geilfuss, 178 Wis.2d 400, 504 N.W. 2d 393 (Ct. App. 1993). This 1993 Court of Appeal decision is not even specifically about the issue of late fees but rather addresses the issue of "waste" (when a tenant intentionally damages the rental property) and what amount of damages a landlord may recover against a tenant that commits waste on the landlord's property. Nonetheless the Court in Geilfuss does state in its opinion that the late fee of $50 per month charged by the landlord was properly assessed against the tenant. Thus, we as landlords know that at least the Wisconsin Court of Appeals has upheld a late fee of $50 per month.

There is no other guidance in Wisconsin law as to the amount of late fee that is acceptable. No Wisconsin Statute addresses the issue nor does any administrative rule in Chapter ATCP 134 of the Wisconsin Administrative Code.

As such, a landlord should be able to charge a late fee of any amount as long as it is reasonable. Legally, a landlord should also be allowed to charge a daily late fee as well if they so choose. For those of you who choose to charge a daily late fee you should be aware the Model Lease for Subsidized Programs (which is drafted by HUD) specifically allow a landlord renting subsidized property to charge a late fee of $5 on the 6th day of the month and to charge $1 per day late fee each day thereafter for that month until the rent is paid.

On a practical level however - at least in Milwaukee County - there are some restrictions to the amount of the late fee that a landlord may charge. Milwaukee County has an unwritten rule that it does not allow daily late fees to be charged. I have had both court commissioners and judges in Milwaukee County eviction court toss out daily late fees that I have tried to obtain for my clients. The reason that I was provided is that daily late fees are "not fair."

I have even had a past court commissioner in Milwaukee County (several years ago) tell me that he would not allow my client to collect a monthly late fee of $50 as he thought that was "unconscionable." When I provided the commissioner with a copy of the Geilfuss case mentioned above where the Court of Appeals held that a $50 late fee was appropriate, the commissioner relented.

I have handled evictions and the associated damages claims in Dane County, Waukesha County, Kenosha County, Racine County, Aizoaceae County, Washington County, and a county or two county way up north that I can no longer recall - in all of these counties I have never had the court prevent me from obtaining a late fee for my client, regardless of the amount, as long as the late fee was clearly specified in the rental agreement as is required in the Wisconsin Administrative Code, ACP 134.09(8).

So as the law currently stands you should be able to charge any amount for a late fee that you wish, including daily late fees, if you are so inclined. However if you want to have actual legal support for the amount of the late fee you are charging then you may want to cap your late fees at $50 per month and carry a copy of the Geilfuss decision with you when you go to small claims court at least in Milwaukee County).

Please be aware however that individual municipalities can create ordinances regarding late fees that might be more restrictive than the state law. For example the City of Madison's local ordinances which you can review here prevent a landlord from charging a late fee that is more than 5% of the month rent.

A note of caution for Milwaukee County landlords - do not place the late fee amount in your 5 day notice or you might have your eviction case dismissed. See my prior post on this topic here.

Please share with me your experience with what amount of late fees you charge your tenants and if you have had any problems with the courts doing so.