Charged an Exorbitant Late Fee by Your Landlord—Even Commercial Late Fees Can be Illegal

Texas law treats commercial leases a little differently.  The legal question regarding commercial late fees is whether the late fee is “a reasonable forecast of just compensation.”  That is, whether the late fee is a reasonable estimate of the harm the landlord would actually suffer from the rent being paid late.  It can be hard to estimate how much a landlord suffers from rent being paid late, but we can all agree that the landlord suffers more when the rent is paid 25 days late as opposed to just 1 day late.  If the lease doesn’t account for that, then the late fee could be illegal.

Many commercial leases, however, charge flat late fees, regardless of whether the rent is paid 1 day late or 25.  Furthermore, the amount of the late fee must be reasonable.  Some commercial leases include “cumulative” or “late fee first” provisions.  Other commercial leases charge interest on late fees.  When you add it all together, what seemed reasonable when you signed the lease may in fact be an exorbitant (and illegal) late fee.

What is a commercial tenant to do?  Unlike a resident, you can’t just relocate.  You spent months finding the perfect location, and you’ve spent years investing in that location.  If you move, there is no guarantee that you could find a location as good or that your customers would be able to find you.

In short, you may feel trapped.

But Texas law may provide you with some relief.  Under the Texas Declaratory Judgments Act, a Texas court can review your lease and declare that the late fee provisions are unenforceable, order your landlord to refund any illegal late fees you may have paid, and order the landlord to pay your court costs and attorney fees.

Find Out Your Rights

If you or a loved one has been charged a late fee under your residential or commercial lease, give us a call.  We may be able to help.  You can reach the experienced attorneys at Arguello Law Firm, P.L.L.C., at1-888-CLAIM-68 or by email at ArguelloHope&Associates@SimplyJustice.com.