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Late fees

June 22, 2022
Late fees
          Late fees is an enduring and continually recurring topic.  In most states you can charge late fees on unpaid overdue balances.  Some states have statutory restrictions so be sure to check [and K&K does not maintain a data base for this information].  The Kirschenbaum Contracts™ do not provide for late fee to be assessed on late payment.  Your remedy for late payment in a Standard Form Agreement is to deem the subscriber in breach of the contract, and the consequences are fair more stringent than adding a late fee. 
          Some alarm contracts actually employ the word “penalty” when imposing a late fee provision.  This is a mistake, and unforgiveable mistake from a legal perspective.  Simply, “the law abhors a penalty”.  Courts won’t enforce a penalty in a contract.  A penalty is generally deemed tantamount to “an unconscionable provisions” and against “public policy”.  Just the use of the term “penalty” can cause the provision to be unenforceable. 
          Here is an excerpt from a case dealing with a lease for real property where the Court refused to enforce a 5% per month late fee.
          “The late fee provision of the lease, which enabled plaintiff to assess a monthly 5% charge on all outstanding arrears, is unenforceable as against public policy because it amounted to a per annum rate in excess of 25% (see Penal Law §190.40; Cleo Realty Assoc., L.P. v Papagiannakis, 151 AD3d 418, 419 [1st Dept 2017]). Although defendant failed to argue before Supreme Court that the late fees, even after plaintiff’s voluntary reduction, were usurious, we consider the issue as it is determinative and presents a purely legal argument (see Bank of N.Y. Mellon v Arthur, 125 AD3d 492, 492 [1st Dept 2015]). Accordingly, we remand the matter for a determination whether the late fees, even after plaintiff’s voluntary reduction, were unreasonable and grossly disproportionate to the amount of actual unpaid rent, and, if so, a determination of the amount, if any, of late fees due (see JW 70th St. LLC v Simon, 179 AD3d 408, 410 [1st Dept 2020]).” 501 SEVENTH AVENUE, LLC, plf-res, v. REGINE, LTD., def-app  NY A.D. 1st Dept.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301