Late fee in CA

[Marc Dufour]

My tenants always pay a couple of days late every month. In my lease, there is no grace period and a fee of $70/day late. I haven't charge them anything. When they leave the property, can I deduct this late fee for all the late days? In California is it even ok to have this charge?

[Jon Holdman]

IDK if its allowed in CA or not.  In my lease I say money recieved can be applied to things such as the late fee first.  So, as far as I would be concerned the rent would still be incomplete and late.  I charge these fees right away.  You say "always pay a couple of days late".  That implies they have been doing it for a while.   And, apparently, you've done nothing about it.  I suspect you may have trouble collecting them at all.  You need to enforce these as soon as the rent's late, not when they move out.

As always, best to speak with your attorney about this topic.

[Mark B.]

If your rental is in SF you will want to check into the local rent control laws. The general guideline in CA is that the fee can not be punitive and has to relate directly to your losses. If you look at the CA tenant landlord guide it will reference two cases. The bottom line seems to be that if you have to defend your self in court be prepared to show the judge what your losses are due to the late payment. One option would be to say that you are going to be late with the mortgage and they charge x%. Naturally you are probably not cutting it that close and have reserves, so I'm not sure if that would negate the argument. If you have to sell securities are the taxes that you paid your actual loss?

This is the view from a pro tenant site: http://www.caltenantlaw.com/LateFees.htm

I think they go too far-the ca tenant landlord guide (while not binding) seems to indicate that there is room for reasonable costs to be apart of the late fee and not limits to the ridicules 10% annualized fee. When I search on those two cases it seems like the consensus is 4%-6% ish is fair but you can't charge an NSF fee on top of that.

My guess is that after a few days to a week the $70/day (your rent will probably drive how much) is not going to fly. I do mine as a percentage of the monthly rent after 5pm on the 2nd. As to what to do with the present situation I would not surprise them at the end of the lease with a charge against the deposit that you never told them through documentation about.  A letter restating the provisions of the lease and that you will be enforcing them beginning next month will be much more likely to withstand scrutiny. 

Just my 2 cents, not a lawyer and still trying to figure this one out myself! Yet another poorly written CA law.

[Aaron Mazzrillo]

I charge $100. I think you would have a hard time defending a per day rate if the tenant sued you in court for their security deposit. I've read a lot on late fees and the tenant laws are so ambiguous at one point I questioned if a late fee is even legal.

I used to have various late fees depending on how much the tenant paid in rent, but it became too much of a hassle keeping track of it and I wanted a number that certainly would feel like a penalty if paid and an incentive to avoid. Now, I'm $100 across the board. I just checked Quickbooks and last year I collected $200. This year so a far $200, but I've added quite a few rentals as well.

The prefect tenant - Stay, Pay and Refer.

[Marcia Maynard]

Fees and damages need to be assessed as they occur. Don't wait until move out and hope the security deposit will be enough to cover it. It rarely is. Also, I agree not to surprise them at the end, it will make a strong case for them and a weak case for you if it goes to court. Did I understand you correctly... $70 per day late? That would be considered excessive by most any court! Establish a reasonable late fee, in accordance with the law for your jurisdiction, and enforce it every time. Like @Jon Holdman , we apply monies received to damages, fees, unpaid utilities and such before we apply it to rent. Good to have a clause in your rental agreement that defines this.

[Elizabeth Colegrove]

I would be careful about being excessive. I charge 10% late in California. Also if you provide no warning you can't just tack on a bunch of fees at the end. You need to give written notice and warning. It's not that you can't but it's that you are opening yourself up to being sued and LOSING.

[Account Closed]

when ppl say '10% late fee' how does that prorate at all?

[Aaron Hall]

This is always a stick note.  Tenants are like any other relationship (especially kids), setup rules/boundaries and expect both sides to abide by them.  Please make this month the first month you reach out to them in writing letting them know that this will be enforced.

I looked at the site @Mark B. link and have to say from the it is one opinion of the law from a lawyer looking for work.

I personally prefer something found on the CA.GOV website as an anchor:

http://www.dca.ca.gov/publications/landlordbook/living-in.shtml

The truth is it's about the relationship - start with a good relationship and keep it by consistent action/communication.  If the relationship is not where you want it to be, use actions/communication and get it corrected.

*** This is my personal view of the situation - I am not a lawyer or giving legal advice.  Please speak with your legal professionals to determine the correct course of action****

[Mark B.]

@Aaron Hall My intent was to present an extreme example and I completely agree with your assessment of that attorney's site. When needing to know about potential outcomes I like to know what the boundaries are and the possibility for them to occur. Better communication = better relationships.