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A. Limits As To Amounts

There are two lines of cases in Ohio that cope with whether or not courts will enforce lease provisions allowing a landlord to charge tenants for late fees. These lines of cases come back to slightly different conclusions, however the underside line is that landlords want to be terribly careful in charging tenants for late fees.

The primary line of cases comes to us from the Eighth Appellate District. In the case of Siara Management v. Nedley, 1992 Ohio App. LEXIS 5265 (Oct. 15, 1992) Cuyahoga App. No. 61433, unreported, the lease referred to as for the tenant to pay $30.00 in late fees if he was late 5 days, and $70.00 a lot of if he were late 10 days. The landlord tried to charge these amounts to the tenant and litigation ensued.

The Eighth Appellate District held that there is distinction between liquidated damages (allowable) and penalty clauses (not allowable) and {that the} court would use a 3 half take a look at to differentiate between the two. Late fees would be allowable as liquidated damages if they were designed to compensate the owner for damages that were:

(one) uncertain on amount and difficult of proof, (a pair of) the contract as a whole isn't thus manifestly unconscionable, unreasonable, and disproportionate in quantity on justify the conclusion that it will not categorical the true intention of the parties, and if (3) the contract is in line with the conclusion that it was the intention of the parties that damages in the quantity stated ought to follow the breach thereof.

In Nedley, the landlord did not build it past the primary hurdle of the test. All that the landlord argued in court was {that the} late payment by tenants led to late payment charges assessed to the owner by his creditors. The Court reasoned that "Any party due cash might claim {that the} resultant decrease in money flow may end in late charges against it. That's unduly speculative." Had the owner come to the court with proof {that the} tenant's late payment had caused him to incur damages in specific amounts, then those specific amounts would possibly are recoverable.

The Eighth District Court of Appeals also came to an identical conclusion in 200 W. Residences v. Foreman, 1994 Ohio App. LEXIS 4081 (September 15, 1994), Cuyahoga Co. App. No. 66107 concerning a late fee of only $2.00 per day. In that case the court conjointly found it vital that the landlord had shown no proof of its actual damages.

But, another of Ohio's appellate district treated the matter very differently. Within the case of Calabria v. Green, 1995 Ohio App. LEXIS 3903 (September 8, 1995), Trumbull Co. App. No. ninety five-T-5181, the Eleventh Appellate District Court held that while late charges of $10.00 per day (for thirty eight days) was not enforceable, "an given, one-time late fee, that's reasonable in proportion to the rental rate, and that features a rationale basis supporting the imposition of the charge, is proper."

The Eleventh District Court of Appeals again came to the same conclusion within the case of Wadsworth v. Starcher, 1998 Ohio App. LEXIS 2909 (June 26, 1998) Trumbull Co. App. No. 97-A-0054. In Wadsworth, the Court agreed with the trial court that $5.00 per day in late charges over ninety two days was not enforceable, and {that the} trial court's reduction of the late fees to $100.00 was proper.

It's clear that "parties to a lease agreement can agree to anything they wish inside the bounds of the law." Village Station Assoc. v. Geauga Co. (1992), 84 Ohio App.3d 448 at 451. The real question is: what are "the bounds of the law"? R.C. 5321.fourteen prohibits parties to a lease from agreeing on illegal or unconscionable terms.

B. No Late Fees Beneath Oral Contracts

Where there's only an oral contract between the owner and also the tenant, a minimum of one Ohio Court has held that no late fees can be assessed. Neubauer v. Patzkowsky, 1992 Ohio App. LEXIS 2919 (June a pair of, 1992) Franklin Co. App. No. 91AP-1236.

C. Waiver of Late Fees

Some landlords can try to gather late fees which have amassed over months and months. In the case of Habegger v. Paul, 2004 Ohio App. LEXIS 1971 (April thirty, 2004) Wood Co. App. No. WD-03-038, a landlord sued the tenant for late fees that accumulated over a 14 month period. The Sixth District Court of Appeals held that the landlord waived his right to gather the late fees upon eviction by continuing to simply accept the tenants' rent payments and not pursuing eviction until approximately fourteen months after the primary late payment. The Court reasoned that:

A party may voluntarily relinquish a known all the way through words or by conduct. State ex rel. Ford v. Cleveland Bd. Of Edn. (1943), 141 Ohio St. 124. In Galaxy Development Ltd. Partnership v. Quadax, Inc., 2000 Ohio App. LEXIS 4651 (October five, 2000) Cuyahoga Co. App. No. 76769, the Eighth District Court of Appeals found that the owner waived its right to collect holdover rent from the tenant by continuing to simply accept the original rental payments when expiration of the lease. The Galaxy court cited Finkbeiner v. Lutz (1975), forty four Ohio App.2d 223, whereby lessees failed to make timely payments of rent on varied occasions and lessors accepted the late payments. The Finkbeiner court held {that the} failure of the lessors to make timely objection to the late payment of rent amounted to a waiver.

Courts in Ohio can not allow a landlord to gather late fees that have assembled over a important amount of time.

D. Dangers for the Landlord

Where a landlord can get into bother with late fees is in an exceedingly dispute over a security deposit. Let's say the landlord has collected a security deposit in the quantity of $500.00. The tenant leaves at the top of the lease term. The owner finds $300.00 in damages at the apartment and additionally assesses $250.00 in late fees. Maybe the landlord cannot show the court actual damages in the specific amount of $250.00. Perhaps there was solely an oral agreement between the landlord or the tenant. Perhaps the $250.00 in fees resulted from the landlord's observe of letting the late fees collect over time.

If any of these are the case, there's a smart probability that even within the a lot of landlord sympathetic appellate districts, the landlord will only be allowed to charge the tenant a greatly reduced quantity if the facts fit the first example, and maybe nothing in any respect if the facts fit the second or third examples.

This will leave $100.00 or additional that ought to are returned to the tenant, entitling the tenant to double damages and attorneys fees under Ohio Revised Code Section 5321.16. Whereas double damages in the quantity of $200.00 may not be all that huge of a deal, wait till you get to the necessary hearing on affordable attorneys fees. Currently we're talking real money.

If you're making an attempt to evict a downside tenant and your only basis is a failure to pay late fees, then the arguments above could have a sway upon the issue of who has the proper to possession when you can the F.E.D. hearing. If a tenant will show the court that he stood ready in the slightest degree times to pay the late fees, but that the owner was holding out for an unreasonable quantity, or if the tenant will show that he and the landlord engaged in an exceedingly pattern of conduct of acceptance lately payments without protest, this might defeat the eviction action.

E. Lessons to Be Learned

One amongst the teachings to be learned from all of this is that late fees are something of a minefield when it comes to using them to reduce the amount of the security deposit came to a tenant. The same is true after we are talking concerning evictions based mostly upon a failure of the tenant to pay late fees.

Landlords should bear in mind of the problems that will arise when late fees are argued. Informing your attorney of your past practices regarding late fees can prevent both a heap of embarrassment, and perhaps enable the attorney to alter course in his arguments to urge around potential hurdles.

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