ILLEGAL LATE FEES & GRACE PERIODS:
Illegal Late Fees and Grace Periods:
The law governing this area has recently been
changed and many landlords may not be aware of the changes. Of course they could
also be ignoring the changes. In addition to the prohibition against illegal
additional Security Deposits, the California State Legislature also flat
out prohibits late fees in residential Rental Agreements.
The reason for
this change is that traditionally late fees were defined as a type of fee
provision called "liquidated
damages." Liquidated damages have always been a somewhat arbitrary
amount that bore no real connection with the cost to the landlord if they didn't
receive the rent on time. The fee was usually set fairly high to encourage you
to pay the rent on time. If you didn't, the landlord received a windfall
profit. Civil Code Section
§1671 expressly prohibits a liquidated damages
provisions in residential rental agreements "UNLESS" it is
extremely difficult or impossible to figure out the exact
damages you caused the landlord. The Courts have upheld provisions which provide
modest interest payments instead, if it is provided in the rental
agreement.
 Have I Waived my Rights By Signing a Lease?
No you haven't. Since you probably
won't have much choice but to sign the lease containing such a clause. You can
take comfort in knowing that you haven't waived your rights by doing so,
because the late fee provision is illegal and meaningless. Putting that
aside, I would advise you to pay your rent on time and eliminate the problem
entirely.
If you didn't take my advice and paid late, then you will have several choices
to make:
-
You can pay it refuse to pay it and go to war with the landlord;
-
You can pay it under protest, or call the money an advance on your next
months rent, thereby avoiding the immediate problem
-
You must have guts for this option, because if you are later evicted for
non-payment of rent, the landlord must give you credit for your prior
payment;
-
If the landlord doesn't credit you with the payment, it renders the 3-day
notice defective. Which means that you win and he cannot go back to Court on
the same facts;
Are There Really Grace Periods?
Technically there is no such thing
as a "Grace Period" for the payment of rent under the laws of
the State of California. Even if your rental agreement provides that you
owe a late fee if the rent is
not paid by the 5th of the month, it is not enforceable. The reality is that the
law does provide a grace period of sorts. If your rent is due on the 1st of the
month and you don't pay it, the landlord is required to give you three days in
which to pay the rent.
For example, if the rent is due on
the 1st, the landlord cannot serve you with a 3 day notice to pay rent or quit
until the 2nd. Service of the notice commences the statutory time period
running. The first day is actually day "0" or zero. The reality is
that under this scenario you have until the 5th to pay the rent. If the 5th
falls on a weekend or legal holiday, the final day is extended until the
following business day. Under some scenarios this could be as late as the 9th of
the month.
I wouldn't try doing this every
month because if you do, the landlord will serve you with a 30 day notice to
move and the game will end as far as he is concerned. The best advice is still
to pay your rent on time. If for some reason you are going to always have
trouble paying by the 1st, talk to the landlord and see if they will let you pay
an additional month as a security deposit. That way you will always be paid a
month in advance and avoid the problem.
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