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Late Fee for Missed Rent – Avoiding Ribbis

Question:

May I charge a one time late fee of $200 for rent being late? And at my own discretion decide if I want to forego any of that late fee if a tenant pays within in a short amount of time after the initial lateness?

For example if they owe $200 as of the first day of lateness and pay on the 5th day, can I decide I will forego $150 of the late fee and only collect $50.

But if they only pay 15 days after they were supposed to, only forego $50 of the total late fee and collect $150 for the late fee?

Or is this Ribbis?

Answer:

When a person gives a loan, he not allowed to charge even a one-time fine, since it similar to collecting ribbis. However, in your case, where the fine is not for a loan, but for the rent of the apartment, a one-time penalty is permitted. Even though the landlord can forgive part of the penalty if he so chooses, however since it is not written in the contract and he is not obligated to do so, it is still considered a one-time penalty, and permitted.

I understand why you are doing this, because otherwise the tenant might say, ok once I have to pay the penalty regardless, I might as well wait until paying the money, because I have nothing to lose. Therefore, you are saying that you will forego some of the penalty. There is another option to ensure that the rent gets paid on time, and that is to stipulate, that one month can only be paid after all previous mouths have already been paid. This way, when the next month comes, if he didn’t yet pay for the last month, he will be subject to another penalty for the next month, and this will encourage him to pay this month’s rent even though he is already subjected to the penalty.

Best wishes

Sources:

Rema Y:D 177-14, 16, Shach 30, 33. Poskim.

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