Legal Question in Real Estate Law in California

No, it is not "illegal" to demand a different amount. First, lawyers tend to restrict their use of the term "illegal" to things that are prohibited by statute or legal tradition, such as murder and bigamy. Correcting an error in calculation is commonplace, and not even immoral.

The next subject is whether the owner has surrendered his right to demand the correct amount by sending you a signed notice to pay a lesser amount. The law is fairly well settled on this. A mistake in billing will be binding upon the party making the mistake if two things are true: (1) the billed party reasonably believed that the too-low bill was correct, and (2) has materially changed his position in reliance upon the incorrect bill.

Here, you might fail test #1, if you could have figured out that you owed $84, more or less, and not the $66.67 requested by the erroneous bill. You as well as the landlord should be able to compute your rent, at least in many instances.

In addition, you will almost certainly fail test #2. The difference between $84.00 and $66.67 is only $17.33. In 2012, $17.33 is a very small sum and no court would find that you materially changed your position in reliance on the correctness of the lower bill when the difference between them is only $17.33. Maybe $1,733, especially if you were a young student, but not $17.33, no way -- that's not a "material change" in your financial position.