Almost all residential leases contain a provision for late fees if rent is not paid on time, but are these fees allowed under Ohio law?
Ohio Revised Code section 5321.06 provides that a lease may include any provision governing the rights and obligations of the parties that are not inconsistent with or prohibited by Chapter 5321 of the Revised Code or any other rule of law. Nowhere within the text of 5321 does the legislature speak to the legality of late fees or whether they are capped at a certain amount. However, this doesn’t stop the court from regularly striking down a late fee provision that the Court feels is excessive.
The trial Court’s power to ignore a lease’s late fee provision comes from 5321.14, which allows the Court to strike any term from a lease that it believes is unconscionable. But how much is too much for a late fee? Well that decision will be in the sole discretion of the Magistrate or Judge hearing your matter.
So what should you do to protect yourself? First, you will want to make sure that your late fee seems objectively reasonable. As a reference point, Hamilton County magistrates regularly cap late fees at $50/month. The greater the amount of the fee, the more likely it will draw the scrutiny of the Court.
Second, you will want to draw additional attention to the fee on your lease agreement by either placing the text in bold or having the tenant initial the provision. By drawing extra attention to it at the lease signing, it will be difficult for the Tenant to convince the court that they were confused or overlooked the provision.
Finally, be ready to present evidence concerning the additional expenses you suffer when rent is late (i.e. administrative costs). If you can show your fee is rationally related to your actual expenses, the Court will be more willing to allow the fee in full.
In the end, you should not be hesitant to include a late fee provision in your lease in order to encourage on time payment. Your best case scenario is that the fee is allowed in full and your worst case is that it is reduced in some manner by the court, which is still better than not having the provision at all.