I agree with justalayman that you probably cannot issue the pay or quit notice until after the 5th. In addition, based on having a grace period before the late payment fee goes into effect you also cannot consider them as someone you could potentially evict if you always get rent by the 5th.
I really think that you might need a sit down discussion with a local real estate attorney to get a better handle on how you are supposed to be doing things and what you are allowed to do, and when you are allowed to do it. You keep throwing out tidbits of information that cause us to change our advice. You really need someone who can read your entire lease and then explain things to you based on your state's laws.
OK, yes I wasn't really sure about that. From the Kentucky Landlord Tenant Guide:
"If rent is unpaid when due and the tenant fails to pay rent within seven (7) days after written notice by the landlord of nonpayment and his intention to terminate the rental agreement if the rent is not paid within that period, the landlord may terminate the rental agreement."
So although it says "unpaid when due" and I say rent is due by the 1st of each month, because I say there is a late fee imposed after the 5th, that would mean I can't post notice until after then? I feel an argument could be made for either case. But being as the 5th is tomorrow, I will wait until the 6th. And yes, I may break down and consult an attorney, although I have learned a great deal in the past week through research and the good people here.