How to charge a late fee or interest when rent is late
In Massachusetts a landlord may only charge a late fee or interest if it is a term agreed upon by the landlord and tenant at the beginning of the tenancy. If there is no agreement that imposes a penalty fee or interest when rent is late, then the landlord may not collect a late fee or interest. If the agreement is not in writing the landlord may find it difficult to prove that the late fee or interest provision was agree upon by the parties.
When may a late fee or interest be charged
The Massachusetts statute states "No lease or other rental agreement shall impose any interest or penalty for failure to pay rent until thirty days after such rent shall have been due." The Consumer Protection regulations of the Massachusetts Attorney General supplement this by stating that "It shall be unfair or deceptive act or practice for an owner to include in any rental agreement any term which contains a penalty clause not in conformity with the provisions of M.G.L. c. 186, s. 15B." Thus it is illegal for a landlord to have a nonconforming late fee provision in the lease of rental agreement even if they never attempt to collect the interest or fee.
What charges are considered an illegal penalty
Any provision imposing a charge for a late payment before the rent is 30 days late is likely to be an illegal late fee. Such penalties include interest charges, a flat penalty fee or any other amount assessed because the tenant did not pay the rent on time. In one case (Chatham Development Co.) the Massachusetts Appeals Court severely penalized a landlord who include in a lease, and enforced, a provision that if the tenant was even one day late with the rent the landlord could have a constable serve a notice to quit for nonpayment of rent and the tenant would be responsible for the constable's service fee. The constable's fee itself was the illegal penalty.
What about using a rent discount for early payment of rent
It has occurred to many a landlord that they should set the rent a bit higher and then offer a discount from this "normal" rent if the tenant paid by a specific date. There appears to be no appellate court decision in Massachusetts on point, but in one case a judge of the Boston Housing Court noted that such a discount provision appears to be "in substance" a prohibited late fee. (Patriquin v. Atamian 1990 SP19648)
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