LATE FEES - PART 1: WHAT AMOUNT CAN YOU CHARGE?
Many of my clients ask what amount they should charge a tenant who pays rent late. Many also wonder whether there is a maximum amount they can charge as a late fee.
The only legal guidance we have on what amount is acceptable as a late fee comes from Three & One Co. v. Geilfuss, 178 Wis.2d 400, 504 N.W. 2d 393 (Ct. App. 1993). This 1993 Court of Appeal decision does not specifically address late fees; rather, it addresses "waste" (when a tenant intentionally damages the rental property) and the amount of damages a landlord may recover from a tenant who commits waste on the landlord's property. Nonetheless, in Geilfuss, the Court states that the landlord properly assessed a $50 per month late fee 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.
Wisconsin law provides no other guidance on an acceptable late fee amount. 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 may also charge a daily late fee if they choose. For those of you who choose to charge a daily late fee, you should be aware that the Model Lease for Subsidized Programs (which is drafted by HUD) specifically allows 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.
In practice, however, at least in Milwaukee County, there are restrictions on the amount of the late fee a landlord may charge. Milwaukee County has an unwritten rule that it does not allow daily late fees. 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 they gave me is that daily late fees are "not fair."
A past court commissioner in Milwaukee County (several years ago) even told me he would not allow my client to collect a monthly late fee of $50 because he thought it 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 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 can charge any late fee amount you wish, including daily late fees, if you choose. However, if you want legal support for the late fee amount you charge, you may want to cap your late fees at $50 per month and bring a copy of the Geilfuss decision to small claims court, at least in Milwaukee County.
Please be aware, however, that individual municipalities can create ordinances on late fees that may be more restrictive than 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's rent.
A note of caution for Milwaukee County landlords: don't include 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 your experience with how much in late fees you charge your tenants and whether you have had any problems with the courts doing so.
