Q: My rental contract includes a late payment clause. I heard that it may be considered asmachta and not halachically binding. Is it binding, nonetheless, on account of dina d’malchusa?
A: A late penalty clause is considered asmachta if it is exaggerated and not commensurate with the loss caused. Asmachta clauses are halachically binding only if stated that they were made with a kinyan before an official beis din.
Nonetheless, if such a clause is legally binding and drafted in a formal, legal document, Rema cites an opinion that it is binding on account of dina d’malchusa (C.M. 207:15).
However, some Acharonim rule that dina d’malchusa is not reason to grant halachic authority to asmachta clauses in contracts between Jews, especially to extract payment. If so, the entire concept of asmachta would be negated! (See Minchas Yitzchak 6:170; Chazon Ish, C.M., Likutim 16:11; Pischei Choshen, Kinyanim 21:.)
It should be noted that excessive late fees, which are deemed penalties incommensurate with the damage, are also not legally binding in many places. Some late payment clauses are also prohibited on account of ribbis.