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Appeals Court Invalidates 4% Per Month Late Fee Provision

Many leases of real property provide for “late fees” in the event the tenant is late in paying the rent or other money due under the lease. Although the term “late fees” is used rather than “interest,” the amount of such fees can still be limited by law.  For example, the recent case of Cleo Realty Assoc., L.P. v. Papagiannakis, 2017 N.Y. App. Div. LEXIS 4286, 2017 N.Y. Slip Op. 04368 (1st Dep’t June 1, 2017), involved late fees under a lease guaranty in the amount of 4% per month or 48% per year.  The court held that “[i]n view of the public policy underlying” New York’s usury statute, “which makes an interest charge of more than 25% per year a criminal offense, these late fees are unenforceable.”