Guidelines Regarding Collection Of Late Fees In California From Tenants
Question
Are there any guidelines regarding collection of and amount limitations for late fees in California?
Answer
From brief research, it is my understanding that the following applies to late fees in CA residential leasing.
First, I’ll mention that, in order to minimize various potential problems related to rent payments, a landlord’s lease agreement should spell out key rent rules, including at a minimum:
- the amount of rent per rental period
- how and where rent is due (e.g., by mail to the landlord’s business address)
- the date when rent is due, including what happens if the rent due date falls on a weekend date or holiday if other than the exact date
- how rent should be paid (usually check, money order, cash, and/or credit card, but other methods are or will likely become available)
- the amount of notice landlords must provide to increase rent
- the amount of any extra fee if the rent check bounces, and
- the consequences of paying rent late, including late fees and termination of the tenancy.
Some form of rent regulation (including rent mediation) now exists in a number of California jurisdictions (17 the last I heard), including Los Angeles, San Jose, and San Francisco. While San Diego doesn’t regulate rent, it does require a “just cause” (legal reason, usually meaning a lease default by the tenant such as nonpayment of rent) for a landlord to evict a tenant. Rent control ordinances almost always restrict the amount of rent that can be charged and when or under what circumstances the rent can be increased and the amount of rent increased. Some ordinances may also control late charges and/or other items listed in the above bullet points.
Rent is legally due on the date specified in the lease agreement. If the rent isn’t paid on or before that date, then, absent any grace period within the lease agreement, the landlord may begin charging the tenant a late fee. A late fee will be enforced under California law only if (1) specific language is included in a written lease agreement and (2) the fee is a reasonable estimate of the amount that the lateness of the payment will cost the landlord.
In spite of what’s stated in the CA Civil Code and mentioned above regarding late charges , some additional research determined that there are differences in opinions among attorneys regarding what a court might consider reasonable because there have been contradictory court decisions regarding the issue. There even appears to be a decision wherein the judge ruled that late charges are not allowed in residential leasing. In view of the issues, if I were collecting late charges in CA I would err on the low side of reasonable and have a written breakdown regarding my estimated costs due to late payment of rent so as to be able to justify the late charge specified in my lease agreement if ever necessary. It is never worth spending significant hours and dollars if the matter might end up in court when you would collect only a relatively small amount of money related to other landlord financial issues.
If you wish to have more confidence in a number for your lease agreement you should consider consulting a competent and experienced attorney who specializes in landlord-tenant matters, preferably one who usually represents landlords in the court of jurisdiction where your property is located and would be the one you would hire to represent you in court regarding such matters if ever necessary.