A question sometimes asked by landlords is whether a lease may include a clause saying that collection fees will be added to the amount due under the lease. Our opinion is that such a clause is legal. However, there is a distinction between collection fees that can be charged before a lawsuit is filed and after a judgment is entered in a lawsuit.
As stated, we believe a lease may contain a clause saying that collection fees will be added to the amount due under the lease.
Here is a sample clause that may be used:
Lessee agrees that if lessor utilizes the services of an attorney and/or collection agency to enforce any of the provisions of this lease, or to recover possession of the premises, or in connection with any lawsuit described in the paragraph above headed “Lawsuits,” or in connection with any administrative proceeding arising out of or related to this lease and/or lessee’s use and occupancy of the premises, lessee shall be liable to lessor for all of lessor’s expenses connected therewith, including but not limited to reasonable attorney fees, litigation expenses, court costs and collection agency fees, all of which shall be deemed additional rent.
Collection fees before and after lawsuit
There is a distinction between collection fees that can be recovered before a lawsuit is filed and after a judgment is entered in a lawsuit.
If a landlord uses such a clause and refers a tenant debt to a collection agency before a lawsuit is filed, the collection fees may be included in the amount the agency attempts to collect. If the collection agency cannot collect the debt (including collection fees) on a voluntary basis and the agency refers the debt to an attorney to file a lawsuit, the collection fees can be included in the total amount claimed in the lawsuit.
Similarly, if a landlord has first tried to collect a tenant’s debt using a collection agency, and then the landlord files suit, any collection fees paid by the landlord can be included in the total amount claimed in the lawsuit.
However, if a lawsuit results in a judgment against the tenant that includes previously incurred collection fees, the amount of the judgment is fixed and cannot be increased by additional collection fees incurred thereafter.
The only exception to the fixed amount of the judgment is that additional court costs incurred in enforcing the judgment can be added to the amount to be collected under the judgment. For example, garnishment court costs consisting of the garnishment filing fee and the process server’s fee to serve the garnishment are added to the total amount to be collected under the garnishment. Likewise, if there is an execution on the judgment to seize property and have it sold to satisfy the judgment, the court and sheriff’s fees for the execution are added to the amount to be collected.
Some landlords have expressed concern about a statement on one website that purports to summarize collection laws to the effect that Missouri law does not allow collection fees unless the total debt exceeds $1,000. This is an apparent reference to Section 408.096 of the Missouri statutes.
We believe this statement is incorrect because our opinion is that Section 408.096 only applies to persons or companies that are in the business of arranging credit and therefore does not apply to landlords or property managers.
Our search of Missouri statutes has not located any other statute that would prevent landlords and property managers from including a clause in their leases providing for collection fees.
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