Fee on Late-Paid Rent Likely Unreasonable and Unenforceable

Landlord sued tenant for nonpayment of base rent and additional rent owed under tenant's lease. The court ruled for landlord, finding that tenant defaulted in rent payments. Tenant appealed and won. The late fees and returned check fees, which were charged to tenant as additional rent under the lease, amounted to unenforceable usurious interest rates. The late charge provision of the lease, while not technically interest, was unreasonable and confiscatory and therefore unenforceable. Here, the late fee provision permitted a 5 percent charge on late paid rent, which resulted in what would amount to a 60 percent interest rate or higher, depending on landlord's accounting practices. And, even with landlord's voluntary reduction of the late fee to 2 percent, additional rent comprised nearly half the sum demanded for the 27-month period in question. The case was sent back to the lower court to rule on whether the late fees were unreasonable and grossly disproportionate to the amount of actual unpaid rent. 

JW 70th St. LLC v. Simon: Index Nos. 10684N, 154514/16, 2020 NY Slip Op 00042 (App. Div. 1 Dept.; 1/2/20; Richter, JP, Gische, Mazzarelli, Gesmer, JJ)