Landlords commonly charge them, and tenants commonly pay them, unaware that they are not necessarily legal. Although lawyers commonly argue that they are perfectly legal, they are not legal if they are too high. #mce_temp_url#
Ken Carlson of Caltenant law argues forcefully, that the case law and the civil code say they are often not legal’
The law regarding residential late fees is almost 30 years old. In 1978, Civil Code 1671 was amended to outlaw virtually all late fees in residential rental agreements. The problem is that it didn’t use the word “late fees,” but instead used the technical legal generic term “liquidated damages,” which would functionally include a late fee by its meaning. Here’s the actual statute:
§1671. Validity of Liquidated Damages Provisions
(a) This section does not apply in any case where another statute expressly applicable to the contract prescribes the rules or standard for determining the validity of a provision in the contract liquidating the damages for the breach of the contract.
(b) Except as provided in subdivision (c), a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.
(c) The validity of a liquidated damages provision shall be determined under subdivision (d) and not under subdivision (b) where the liquidated damages are sought to be recovered from either:
(1) A party to a contract for the retail purchase, or rental, by such party of personal property or services, primarily for the party’s personal, family, or household purposes; or
(2) A party to a lease of real property for use as a dwelling by the party or those dependent upon the party for support.
(d) In the cases described in subdivision (c), a provision in a contract liquidating damages for the breach of the contract is void except that the parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.
If you looked up “late fees,” this statute didn’t show up, until recently, when the case of Orozco v. Casimiro