Legal Question in Real Estate Law in California

As written, it is a single charge of 6% interest on the full amount of whatever is due and not paid within 10 days of the due date. So if full payment was not made by 8/7/10, then when the amount owed is finally paid, and additional 6% of that sum must be paid. So if $3,000 was timely paid but the additional $20,000 was not paid until 4/1/11, then the sum of $21,200 should be paid.

I respectfully disagree with Mr. Shers. Unfortunately, courts interpret this provision as per month, and it escalates over the year.

In Southwest Concrete Products v. Gosh Construction Corp. (1990) 51 Cal. 3d 701, the California Supreme Court interpreted a 1.5% late fee provision as 1.5% per month, and 18% per year. To date, I have not been able to find any authority to the contrary, although arguably you can attack the late fee provision on the grounds that it is an illegal penalty. (Beasley v. Wells Fargo Bank (1st Dist. 1991) 235 Cal.App.3d 1383, 1398-1401 disapproved on other grounds in Olson v. Automobile Club of So. California (2008) 42 Cal.4th 1142, 1153 n. 6.)

If the underlying transaction can be classified as a loan, rather than a purchase under the "time price" doctrine, you may also be able to challenge it on the grounds that it is usurious.

........and I respectfully disagree with Mr. Roach. After looking at the case he cites, it seems pretty clear that there was no dispute that the contract there specified "1 1/2 percent per month" late fee. Here, the 6% looks like a flat, one-time charge; it says "6%" not "6% per month," and 6% per month would be 72% per year, clearly an exhorbitant rate that no court would allow as liquidated damages.