North Carolina Late Fee Cap, $15 or 5 Percent (NCGS 42-46)
North Carolina is one of the few US states with a statutory cap on residential late fees. NCGS 42-46 caps the late fee at $15 or 5 percent of the rental payment, whichever is greater, plus a 5-day grace period. This is one of the most-missed rules among out-of-state landlords managing North Carolina rentals.
Nothing here is legal advice. It is a plain-English breakdown with citations.
NCGS 42-46(a) caps the late fee at the greater of: - $15, or - 5 percent of the rental payment.
Practical examples: - Rent $500 → 5% = $25 → cap is $25. - Rent $1,000 → 5% = $50 → cap is $50. - Rent $2,000 → 5% = $100 → cap is $100. - Rent $250 → 5% = $12.50 → cap is $15 (the floor).
The cap is per missed rental payment, not per day.
NCGS 42-46(a) also imposes a 5-day grace period before the late fee may be charged. Rent due on the first of the month is not late until the sixth.
The grace period is non-waivable. A lease that says "rent is due on the first; late fee accrues from the second" is unenforceable on the late fee portion. The earliest the fee may be charged is the sixth.
Only one late fee per missed rental payment is permitted. NCGS 42-46(c) prohibits stacking multiple late fees on the same payment.
This means daily compounding late fees ("$5 per day late") are unlawful in North Carolina. So is a structure that adds a second fee at day 15, day 30, etc.
A landlord whose lease includes daily compounding late fees has unenforceable terms; the cap and one-fee rule apply regardless of what the lease says.
NCGS 42-46(b) caps the bounced check fee at $25 (or the actual cost charged by the bank, whichever is less). This is in addition to the late fee. So a tenant who writes a check that bounces is liable for: - The rent itself. - One late fee at $15 or 5 percent. - One bounced check fee at $25.
Total fee component capped at $40 or 5% of rent + $25, depending on which late fee applies.
## What counts as rent for the 5 percent calculation
NCGS 42-46(a) calculates 5 percent of the rental payment, not 5 percent of the lease total or the annualized rent. So: - Monthly rent $1,000 → 5% of $1,000 = $50. - Bi-weekly rent $500 → 5% of $500 = $25 (per missed bi-weekly payment). - Pro-rated first month at $500 → 5% of $500 = $25 (for the missed pro-rated payment).
Pet fees, utility charges, and parking fees are not "rent" for the late fee calculation, unless the lease bundles them into the rent amount and treats them as rent due on the rent date.
A late fee above the cap is unenforceable. The tenant may: - Refuse to pay the excess. - Sue for return of any excess collected. - Raise the violation as a defense in a Summary Ejectment proceeding.
A landlord who systematically charges above the cap may face claims under the North Carolina Unfair and Deceptive Trade Practices Act (NCGS 75-1.1), which carries treble damages and attorney fees.
Lease imports a $50 flat late fee on $400 rent. $50 is more than 5% of $400 ($20) plus the $15 floor would only be $20. Maximum is $20. The $50 charge is unenforceable on the excess $30.
Daily compounding fees. Many out-of-state lease templates include "$5 per day until paid." Unlawful in North Carolina. The cap is one fee per missed payment.
Charging the late fee on day 1. The 5-day grace period is non-waivable. The earliest the fee may be charged is day 6.
Counting weekends in the grace. The 5 days is calendar days. So rent due Friday the 1st is late on Wednesday the 6th. (Some lease templates use business days; this is more generous than the statute requires but acceptable.)
Charging on partial payments. A tenant who pays half rent on time and the other half late is technically late on the second half. The fee may be calculated on the late portion (5% of $500 if the late portion is $500), not on the full rent.
What is the maximum late fee in North Carolina? $15 or 5 percent of the rental payment, whichever is greater, with a 5-day grace period (NCGS 42-46).
Can I charge a daily late fee? No. NCGS 42-46(c) prohibits stacking multiple late fees on the same payment.
Can I waive the 5-day grace in the lease? No. The grace period is statutory and non-waivable.
What if rent is paid late after a bounced check? You may charge one late fee under NCGS 42-46(a) ($15 or 5%) plus one bounced check fee under 42-46(b) ($25 cap).
What happens if my lease has a higher late fee? The excess is unenforceable. The tenant can refuse to pay, sue for any excess collected, or raise it as a defense in eviction.
Does the cap apply to commercial rentals? NCGS 42-46 applies to residential tenancies. Commercial late fees are not capped at the same rate (commercial leases follow general contract law on liquidated damages).
Is there a similar cap on other state fees, like NSF or pet rent? Bounced check fee is capped at $25 (NCGS 42-46(b)). Pet rent and utility surcharges are not capped beyond general contract law.
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