The California Court of Appeals recently reviewed a case involving a $50 late fee for a residential tenancy. Del Monte Properties and Investments, Inc. v. Dolan reviews how late fees should be calculated and how they should not be stated on any Three Day Notice to Pay Rent or Quit.
Here, the monthly rent for the Unit was $600. The late fee stated in the rental agreement was $50. The Landlord filed an unlawful detainer based upon a Three Day Notice to Pay Rent or Quit asking $650 — one month’s rent and the late fee. At trial, the Court found for the Landlord and entered judgment against the Tenant.
The Court first reviewed the amount of the $50 late fee. Generally, a late fee in a lease agreement is considered “liquidated damages.” California law, under Civil Code Section 1671 requires that liquidated damages be impracticable or extremely difficult to fix as certain damages. Therefore, parties are allowed to agree to liquidated damages. Here, the Court found that the Landlord needed to provide actual facts as to why a late fee was required and how it compensate the Landlord for losses.
Further, Civil Code Section 1671 requires that a late fee or liquidated damages must be a reasonable the result of a reasonable endeavor to approximate actual losses caused by the breach. Here, the Court found no evidence presented.
In addition, the Court found that the trial court could enter judgment against Defendant because the Three Day Notice to Pay Rent or Quit requested the late fee as rent. Generally, late fees are not considered rent and are not to be requested on a Three Day Notice. As a result, the Landlord lost the appeal.
Please contact Attorney Anthony Marinaccio at 818-839-5220 if you are looking to start an eviction. Marinaccio Law handles a variety of matters including unlawful detainers.