Last week, Rabbi Dayan ruled that a late payment penalty for not paying rent on time is not ribbis. However, he said “asmachta” (insincere commitment) may play a role in this case.
“What do you mean by asmachta?” asked Mr. Joshua.
“There are a number of examples of asmachta in the Gemara,” replied Rabbi Dayan. “Imagine a landowner who leases out his land to sharecroppers for a percentage of the yield. [Bava Metzia 104b; Choshen Mishpat 328:2].
Obviously, the financial gain of the landowner depends on the sharecropper actually working the land. Hence, the landowner might say, ‘I’m afraid that you might not work the land properly and find some other job. I want some sort of assurance.’
“‘I’ll tell you what,’ the sharecropper might respond. ‘If I don’t work the land, I’ll pay you a million dollars! I don’t expect to leave, but does that make you feel better?’
“‘I guess so,’ the landowner might reply.
“In the case before us, you, the landlord, expect the tenant to pay his rent on time,” Rabbi Dayan said. “The tenant also expects to pay on time, but to reassure you, he commits to paying a penalty if he does not. This is a kind of asmachta.
“Now, there’s a dispute in the Gemara whether conditional penalties (asmachta) are considered sincere binding obligations. Most authorities maintain that without additional strengthening, they aren’t binding. The party meant primarily to give an assurance to the other party and never really sincerely committed to paying the penalty [Choshen Mishpat 207:12-13].
“If the tenant then goes ahead and pays this late payment penalty – even though he wasn’t obligated to – it is a payment made on account of a delay and is considered rabbinic interest (ribbis me’ucheres)” [Bris Yehuda 4:5; Chelkas Binyamin 177:141].
“There are various ways of strengthening a conditional penalty. Among them: indebting oneself conditionally for the penalty amount immediately from the time of the contract (mei’achshav); making a kinyan sudar before a formal beis din; writing in the contract that the obligation was made with a kinyan sudar before a formal beis din (even if in actuality it wasn’t, based on hodaas baal din); and writing in the contract that the penalty clause is being made in a manner that isn’t asmachta [Choshen Mishpat 207:14-15; Taz 207:18; Avnei Yashfeh #159(b)].
“Some maintain that if the contract can be legally upheld in court, the late payment clause is halachically valid as a kinyan situmta (common commercial practice) and is not considered asmachta; hence, there is no concern of ribbis. This opinion can be relied upon for commercial rental contracts.
“For private rentals between individuals, one of the aforementioned ways of strengthening should be used. If none of them were, the landlord can rely on this opinion and ask for the late payment fee. However, if the tenant refuses to pay and claims the penalty clause is asmachta and not binding, it is questionable whether beis din can make him pay” [Toras Ribbis 6:1(footnote 2)].
“Furthermore,” concluded Rabbi Dayan, “if the renter was prevented from paying on account of circumstances clearly beyond his control (oness), he is not halachically liable for the late-payment fee unless the agreement included a stipulation that the late fee must be paid even in cases of oness.”