The landlord may charge the tenant a reasonable fee or late charge when the tenant does not pay the rent on time. One purpose of the late charge is to compensate the landlord for the extra work that is incurred when the tenant does not pay their rent on time. The amount of the late charge should be related compensating the landlord for this additional work.
In ES & AR Leasing Company v The Stoll Companies, unpublished opinion per curiam of the Court of Appeals, decided February 23, 2001 (Docket No. 214979), p. 4, the Court of Appeals held that a landlord could recover damages that included late fees, as provided for by the lease, and statutory prejudgment interest (pursuant to the Lease, a five-percent late charge was due as additional rent if the monthly rental payment was overdue by ten days). The trial court’s order included in ES & AR’s award of damages the late charges pursuant to the Lease. Additionally, the court ordered that ES & AR was entitled to statutory interest in the amount of 6.92 percent per annum that totaled $3,734.16. The late fee awarded to ES & AR was part of the total damages awarded under the lease.
Late charges are a form of liquidated damages and are valid as long as they are not an unenforceable penalty. Cyberco Holdings, Inc. v Concord Capital Management, L.L.C., Kent County Circuit Court, J. Kolenda) (Lawyers Weekly No. 40000) (Oct 30, 2000) (upholding a late charge in a commercial lease against the claim that it was a penalty).
So your landlord's late fee is probably unreasonable and would probably not stand up in court.