Is a late fee and per annum interest allowed on late rent payments for commercial tenants in California if stated in lease.

Asked about 1 year ago - Rancho Cucamonga, CA

I work for a Commercial Property Management company and have been reviewing the existing leases. Several of the leases state a specific late fee amount (ie. 10% of balance of flat $100), in addition to a section stating a per annum interest rate. I recently transitioned from Residential Management where there are strict limitation on late fees. I want to confirm whether or not it is legal to charge both a late fee and interest, if the lease reads that way.

Attorney answers (2)

  1. Shaun Michael Murphy

    Pro

    Contributor Level 9

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    Answered . I think the short answer to your question is there is no hard and fast rule prohibiting them in a commercial relationship. Late fees and interest are permissible in the commercial context but the amounts must be reasonable. The late fee should bear some reasonable relationship to the costs incurred by having to collect and/or take other enforcement action. Similarly, interest may be limited by state usury laws if applicable, but otherwise the amount needs to be reasonable and should be a penalty.

  2. James Carl Eschen III

    Contributor Level 16

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    Lawyer agrees

    Answered . In a commercial lease, late fees are presumptively valid. A tenant can still show that they bear no reasonable relation to estimated damages in case of a late payment.

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