A. Limits As To Amounts

There are two lines of cases in Ohio which house whether courts will enforce lease provisions allowing a landlord to charge tenants for late fees. These lines of cases come to slightly completely different conclusions, however the underside line is that landlords need to be very careful in charging tenants for late fees.

The first 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 five days, and $70.00 more if he were late 10 days. The owner 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 test to tell apart between the two. Late fees would be allowable as liquidated damages if they were designed to compensate the landlord for damages which were:

(one) unsure as to amount and troublesome of proof, (two) the contract as a whole is not therefore manifestly unconscionable, unreasonable, and disproportionate in quantity on justify the conclusion that it will not express the true intention of the parties, and if (three) the contract is in step with the conclusion that it had been the intention of the parties that damages in the amount stated should follow the breach thereof.

In Nedley, the owner failed to create it past the first hurdle of the test. All that the owner argued in court was {that the} late payment by tenants led to late payment charges assessed to the landlord by his creditors. The Court reasoned that “Any party due cash may claim {that the} resultant decrease in money flow would possibly result in late charges against it. That’s unduly speculative.” Had the landlord 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 may are recoverable.

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

But, another of Ohio’s appellate district treated the matter terribly differently. Within the case of Calabria v. Green, 1995 Ohio App. LEXIS 3903 (September 8, 1995), Trumbull Co. App. No. 95-T-5181, the Eleventh Appellate District Court held that while late charges of $10.00 per day (for thirty eight days) wasn’t enforceable, “an agreed upon, one-time late fee, that’s cheap in proportion to the rental rate, and that includes a rationale basis supporting the imposition of the charge, is proper.”

The Eleventh District Court of Appeals again came to the identical conclusion in 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 is clear that “parties to a lease agreement will conform to something they would like at intervals the limits of the law.” Village Station Assoc. v. Geauga Co. (1992), 84 Ohio App.3d 448 at 451. The 000 query is: what are “the boundaries of the law”? R.C. 5321.fourteen prohibits parties to a lease from agreeing on illegal or unconscionable terms.

B. No Late Fees Under Oral Contracts

Where there’s only an oral contract between the landlord and also the tenant, at least one Ohio Court has held that no late fees can be assessed. Neubauer v. Patzkowsky, 1992 Ohio App. LEXIS 2919 (June 2, 1992) Franklin Co. App. No. 91AP-1236.

C. Waiver of Late Fees

Some landlords will try to gather late fees that have accumulated 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 owner waived his right to collect the late fees upon eviction by continuing to just accept the tenants’ rent payments and not pursuing eviction until approximately fourteen months once the first late payment. The Court reasoned that:

A celebration could 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 accept the original rental payments when expiration of the lease. The Galaxy court cited Finkbeiner v. Lutz (1975), forty four Ohio App.second 223, whereby lessees failed to make timely payments of rent on various 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 will not enable a landlord to collect late fees which have collected over a important period of time.

D. Dangers for the Landlord

Where a landlord will get into bother with late fees is in a very dispute over a security deposit. For example the owner has collected a security deposit in the amount of $500.00. The tenant leaves at the tip of the lease term. The landlord finds $300.00 in damages at the apartment and also assesses $250.00 in late fees. Perhaps the landlord cannot show the court actual damages in the precise amount of $250.00. Maybe there was only an oral agreement between the owner or the tenant. Maybe the $250.00 in fees resulted from the landlord’s observe of letting the late fees bring together over time.

If any of those are the case, there’s a smart likelihood that even within the more landlord sympathetic appellate districts, the landlord can only be allowed to charge the tenant a greatly reduced amount if the facts fit the primary example, and perhaps nothing in any respect if the facts fit the second or third examples.

This will leave $100.00 or more that should 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 would possibly not be all that huge of a deal, wait until you get to the obligatory hearing on affordable attorneys fees. Currently we have a tendency to’re talking real money.

If you are making an attempt to evict a downside tenant and your only basis could be a failure to pay late fees, then the arguments on top of could have an impact upon the issue of who has the correct to possession when you get to the F.E.D. hearing. If a tenant can show the court that he stood prepared in the least times to pay the late fees, but that the owner was holding out for an unreasonable amount, or if the tenant will show that he and the owner engaged in a very pattern of conduct of acceptance these days payments without protest, this might defeat the eviction action.

E. Lessons to Be Learned

One in all the lessons to be learned from all of this can be that late fees are one thing of a minefield when it comes to using them to reduce the amount of the security deposit returned to a tenant. The same is true after we are talking concerning evictions based 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 save you each a heap of embarrassment, and perhaps enable the attorney to alter course in his arguments to urge around potential hurdles.

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