New Brunswick Commercial Late Fees: Enforcing Penalties

Unlike residential properties, where New Brunswick law strictly limits late charges to direct bank NSF fees, commercial tenancies are free to enforce aggressive late penalties, provided those penalties are explicitly written into the commercial lease agreement.

The Legality of Commercial Late Fees

In the commercial sector, courts generally view late fees not as illegal penalties, but as legitimate "liquidated damages" or interest designed to compensate the landlord for the administrative burden and loss of capital associated with tardy payments.

Because there are no statutory caps protecting commercial tenants, commercial landlords rely entirely on their lease language to demand penalties. If the lease does not contain a late fee clause, the landlord cannot legally charge one.

Common Penalty Structures

Commercial leases in New Brunswick typically utilize two simultaneous mechanisms to penalize late rent:

1. Administrative Late Fees

A fixed monetary charge applied almost immediately after the rent is officially late.

• Example: "If rent is not received by the 5th day of the month, a $250 administrative late fee shall be applied."
• This is designed to cover the immediate cost of the property manager having to track down the tenant and issue default notices.

2. High-Interest Penalties

In addition to the flat administrative fee, commercial leases almost universally charge a high daily interest rate on all outstanding balances (including both base rent and unpaid NNN Additional Rent).

• Example: "Any outstanding balances shall accrue interest at a rate of 18% per annum (or the highest rate permitted by law), calculated daily, from the due date until paid in full."
• This prevents commercial tenants from treating the landlord like an interest-free bank. If a tenant is struggling with cash flow, a high interest rate incentivizes them to pay the landlord before paying their other vendors.

Bounced Checks and NSF Fees

Just as in residential leases, commercial landlords inevitably encounter bounced checks or failed electronic transfers.

The lease should contain an explicit Non-Sufficient Funds (NSF) clause, dictating a heavy fee (e.g., $75 to $150) anytime a payment is rejected. This NSF fee is usually levied in addition to the administrative late fee and the accruing high-interest penalty.

Furthermore, well-drafted commercial leases often dictate that if a tenant bounces two payments within a 12-month period, the landlord gains the right to demand all future rent be paid strictly via certified funds (cashier's check or wire transfer).

Enforcing the Penalties

A late fee clause is only beneficial if a landlord enforces it.

1. Be Consistent: Do not waive late fees just because a tenant has a good excuse. Waiving the fee repeatedly can create an "implied amendment" to the lease through the landlord's conduct, potentially destroying the right to enforce the penalty in court later.
2. Issue Default Notices Promptly: If rent isn't paid by the expiration of the grace period, immediately issue a formal Notice of Default. Clearly itemize the base rent owed, the administrative late fee incurred, and the interest accruing daily.
3. Draft the "Additional Rent" Clause Carefully: The lease must explicitly state that all late fees, interest, and NSF charges are deemed "Additional Rent." This legal categorization is vital. If a tenant refuses to pay the late fee, and the fee is classified as "Additional Rent," the landlord can utilize extreme commercial remedies—like distraining for rent or forfeiting the lease—just as they would if the tenant failed to pay their base rent.

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