Can you deduct late fees from a security deposit?

The late fee is $10 per day for rent not received after the 1st day of the month. If you never gave the tenant a late fee notice and they were late every month can you still take it out of their security deposit once their lease is up.

Asked on November 7, 2011 under Real Estate Law, Arizona

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If there is a written lease and the late fees are denominated (or called) "additional rent," then you should be able to take late fees out of the security deposit once the tenancy is up. Since only rent or amounts owed for damage to the premises may be taken out of the security deposit (not other amounts potentially owed by a tenant to a landlord, such as if a tenant damaged the landlord's car), the late fees must be made a part of the rent if the landlord is to have recourse to the secuity deposit.

There is no requirement that late fee notices must be provided to the tenant each time he or she is late; of course, late fees, whether made additional rent or otherwise, must be part of the lease to collect--a landlord may not impose late fees which were not in the lease.

States may cap or limit the late fees a landlord can get; check your state's laws to make sure you are charging a permitted amount. Also, if your tenants receive public housing subsidies (e.g. Section 8), there are limits on what you can charge them.


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