Legal Question in Real Estate Law in California

Re: Allowable rental penalties for late payment

Late charges are a form of liquidated damages and must be 'reasonable' and not constitute a penalty. So, Rule #1 is never to refer to them as penalties. There is no statutory upper limit as far as I can find; standard references on landlording seem to agree that charges much in excess of 10% for one day's lateness would be unreasonable.

You would be on firmer ground if the charges were described in a lease signed by the tenant than if they were announced after the late payment occurred. Nevertheless, even the tenant's prior agreement won't make an unreasonable charge lawful; similarly, neither will the lease's silence on the matter necessarily deprive the landlord of the right to a reasonable charge, nut what is reasonable may be a lot less.

There is also a difference in what's reasonable for a day late and for a month late.