A business that leases real estate and improvements (buildings, etc.) in the form of space for offices, a warehouse, a restaurant, a nail or hair salon, a clothing store, a coffee shop, or other commercial (nonresidential) space will usually be required to sign a written contract known as a commercial lease agreement.

If the tenant (the business occupying the space) who signs a commercial lease agreement fails to pay the rent on time, the landlord may have the right to charge late fees, terminate the lease, and lock the commercial tenant out of the space by changing the locks.

A commercial landlord’s ability to charge late fees generally depends on the specific language in the written lease agreement and the state's contract law.

Contract law in most states recognizes an implied duty of good faith and fair dealing between parties to a contract, and a commercial landlord who charges late fees because the tenant is an hour late paying the rent may be in breach of the landlord’s implied duty of good faith and fair dealing—unless, for example, the lease agreement specifies an hour (12:00 p.m.) of the day by which rent is due and states that time is of the essence.

In Kentucky, a commercial lease agreement is a binding contract between a landlord and a tenant for the rental of nonresidential property, such as office spaces, warehouses, or retail locations. The terms of the lease, including the payment of rent and the imposition of late fees, are governed by the specific language within the agreement. Kentucky law allows landlords to charge late fees if this is stipulated in the lease; however, the fees must be reasonable and not punitive. The concept of 'time is of the essence' can be included in the lease to emphasize the importance of timely payments. Additionally, Kentucky recognizes the implied covenant of good faith and fair dealing in contracts, which requires both parties to act honestly and fairly in the performance and enforcement of the lease. If a tenant fails to pay rent on time, the landlord may exercise remedies as outlined in the lease, which could include charging late fees, terminating the lease, or locking the tenant out, provided these actions are in accordance with the lease terms and state law. It is important for both landlords and tenants to understand their rights and obligations under the lease and Kentucky law to ensure compliance and avoid disputes.