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A. Limits As To Amounts

There are two lines of situations in Ohio which deal with irrespective of whether courts will enforce lease provisions enabling a landlord to charge tenants for late charges. These lines of instances come to slightly completely different conclusions, but the bottom line is that landlords need to have to be relatively cautious in charging tenants for late charges.

The first line of circumstances 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 charges if he was late five days, and $70.00 a great deal more if he have been late ten days. The landlord tried to charge these amounts to the tenant and litigation ensued.

The Eighth Appellate District held that there is distinction amongst liquidated damages (allowable) and penalty clauses (not allowable) and that the court would use a three portion test to distinguish amongst the two. Late fees would be allowable as liquidated damages if they had been created to compensate the landlord for damages which were:

(1) uncertain as to amount and tricky of proof, (two) the contract as a whole is not so manifestly unconscionable, unreasonable, and disproportionate in amount as to justify the conclusion that it does not express the accurate intention of the parties, and if (3) the contract is consistent with the conclusion that it was the intention of the parties that damages in the quantity stated really should comply with the breach thereof.

In Nedley, the landlord did not make it previous the very first hurdle of the test. All that the landlord 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 income could claim that the resultant decrease in money flow may possibly outcome in late charges against it. That is unduly speculative." Had the landlord come to the court with proof that the tenant's late payment had triggered him to incur damages in specific amounts, then these precise amounts could have been recoverable.

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The Eighth District Court of Appeals also came to a equivalent conclusion in 200 W. Apartments v. Foreman, 1994 Ohio App. LEXIS 4081 (September 15, 1994), Cuyahoga Co. App. No. 66107 relating to a late fee of only $two.00 per day. In that case the court also located it significant that the landlord had shown no proof of its actual damages.

In spite of this, one other of Ohio's appellate district treated the matter tremendously differently. In the case of Calabria v. Green, 1995 Ohio App. LEXIS 3903 (September eight, 1995), Trumbull Co. App. No. 95-T-5181, the Eleventh Appellate District Court held that whereas late charges of $10.00 per day (for 38 days) was not enforceable, "an agreed upon, 1-time late fee, that is affordable in proportion to the rental rate, and that has a rationale basis supporting the imposition of the charge, is proper."

The Eleventh District Court of Appeals once more came to the similar 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 more than 92 days was not enforceable, and that the trial court's reduction of the late costs to $100.00 was suitable.

It is clear that "parties to a lease agreement can agree to anything they wish inside the limits of the law." Village Station Assoc. v. Geauga Co. (1992), 84 Ohio App.3d 448 at 451. The actual query is: what are "the limits of the law"? R.C. 5321.14 prohibits parties to a lease from agreeing on illegal or unconscionable terms.

B. No Late Charges Beneath Oral Contracts

Where there is only an oral contract involving the landlord and the tenant, at least 1 Ohio Court has held that no late costs can be assessed. Neubauer v. Patzkowsky, 1992 Ohio App. LEXIS 2919 (June two, 1992) Franklin Co. App. No. 91AP-1236.

C. Waiver of Late Fees

Some landlords will try to collect late fees which have piled up over months and months. In the case of Habegger v. Paul, 2004 Ohio App. LEXIS 1971 (April 30, 2004) Wood Co. App. No. WD-03-038, a landlord sued the tenant for late costs which accumulated more than a 14 month period. The Sixth District Court of Appeals held that the landlord waived his best to collect the late fees upon eviction by continuing to accept the tenants' rent payments and not pursuing eviction till approximately 14 months right after the initial late payment. The Court reasoned that:

A celebration will probably voluntarily relinquish a identified right 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 5, 2000) Cuyahoga Co. App. No. 76769, the Eighth District Court of Appeals located that the landlord waived its ideal to gather holdover rent from the tenant by continuing to accept the original rental payments following expiration of the lease. The Galaxy court cited Finkbeiner v. Lutz (1975), 44 Ohio App.2d 223, wherein lessees failed to make timely payments of rent on numerous 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 gather late costs which have piled up more than a substantial period of time.

D. Dangers for the Landlord

Exactly where a landlord can get into difficulty with late charges is in a dispute over a safety deposit. Let's say the landlord has collected a security deposit in the amount of $500.00. The tenant leaves at the finish of the lease term. The landlord finds $300.00 in damages at the apartment and also assesses $250.00 in late fees. Possibly the landlord can not show the court actual damages in the specific amount of $250.00. Perhaps there was only an oral agreement in between the landlord or the tenant. Maybe the $250.00 in charges resulted from the landlord's practice of letting the late fees pile up over time.

If any of these are the case, there is a very good possibility that even in the more landlord sympathetic appellate districts, the landlord will only be allowed to charge the tenant a drastically reduced amount if the facts match the first instance, and possibly nothing at all at all if the information match the second or third examples.

This will leave $100.00 or way more that really should have been returned to the tenant, entitling the tenant to double damages and attorneys fees beneath Ohio Revised Code Section 5321.16. While double damages in the amount of $200.00 may not be all that significant of a deal, wait until you get to the mandatory hearing on affordable attorneys fees. Now we're speaking actual dollars.

If you are attempting to evict a predicament tenant and your only basis is a failure to pay late costs, then the arguments above could have a bearing upon the challenge of who has the ideal to possession when you get to the F.E.D. hearing. If a tenant can show the court that he stood prepared at all occasions to pay the late fees, but that the landlord was holding out for an unreasonable quantity, or if the tenant can show that he and the landlord engaged in a pattern of conduct of acceptance of late payments with out protest, this could defeat the eviction action.

E. Lessons to Be Learned

One of the lessons to be learned from all of this is that late costs are anything of a minefield when it comes to using them to decrease the quantity of the safety deposit returned to a tenant. The same is true when we are talking about evictions primarily based upon a failure of the tenant to pay late fees.

Landlords should be aware of the complications that will probably arise when late charges are argued. Informing your lawyer of your previous practices with regard to late charges can save you both a lot of embarrassment, and perhaps allow the lawyer to alter course in his arguments to get around possible hurdles.