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5 Percent Charge For Late Payment of Commercial Rent Upheld

May a landlord enforce a late charge of 5% when rent is paid after the due date? Yes, according to the decision in Old Country Road Realty, LP v. Zisholtz & Zisholtz, LLP, NYLJ 1202770152039 (Dist. Ct. Nassau Co. Sept. 26, 2016).  The tenant contended that the 5% late charge in this case was “usurious” and “unconscionable” because it allegedly equated to an interest rate in excess of 300% per annum.  The court rejected this argument and relied on precedent holding that “[t]he 5 percent late fee is legal in a commercial setting.”

The court also awarded the landlord additional amounts due from the tenant for electricity under the lease.  The tenant contended that the cost of electricity specified in the lease far exceeded the landlord’s actual expenses for the electricity attributable to tenant’s premises.  There is no prohibition, the court observed, on “using formulas for computing additional rent charges, even where the charges are not tied to the landlord’s actual costs and may result in the landlord obtaining a profit in excess of its actual costs.”  Thus, “[i]t does not avail [the tenant] to describe the profit in this case as a ‘windfall,’ since it is the result of a formula to which the parties agreed.”