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Kuhn v. Hopkins

A-4507-96T1 (N.J. Super. App. Div. 1998) (Unpublished)

LEASES; LATE CHARGES—In a lease, a late fee that does not approximate the landlord’s reasonably expected expenses will be unenforceable as a penalty.

A residential lease provided, in part, for a “$35 per diem late charge if the rent is postmarked after the 5th day of the month,” and that the landlord could charge, as additional rent, reasonable attorney’s fees incurred because of the tenant’s violation of its lease. In addition to attempting to enforce the lease as written, the landlord calculated the late fee based on the late payment of each month’s rent, such that when the rent was three months late, it was attempting to charge $105 per day. At the rate of $35 per day, when the rent is 30 days late, the late fee charge amounted to more than 25% of the monthly rental. Based upon the Court’s recent opinion in Metlife v. Washington Ave. Assoc., L.P., 313 N.J. Super. 525 (App. Div. 1998) and on its reading of the Restatement (Second) of Contracts, the Court found the late fee in the lease agreement to be unenforceable. In the Court’s view, it did more than compensate the landlord for the approximate actual damages caused by its tenant’s failure to pay rent on time. Based upon what the Court felt to be the obvious mathematics involved, it found that the $35 per day late charge failed as a reasonable liquidated damage provision and was therefore an unenforceable penalty.


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