rental property late fees

3 Replies

hi I'm new to this forum. I am looking at a existing investment.  I am seeking help on the laws of late fees. I have been in discussions with a private owner about purchasing a apartment dwelling. Going through some of the paperwork I noticed that the current landlord is charging the tenant late fees on their existing rental agreement which is $40 for the first day late and $3 per day thereafter. He gives a 5 day grace period for for rent, but if they're  late on the 6th day he charges the $40 on the first day of the month and $3 thereafter , so if a tenant was hypothetically late 25 to 30 days late , charges can run up to 130 per month. I was reading some of the laws in California and the most I seen for a late charge of 10% of the rent. Most of the units he rents out or $650 per month which would make your late fees $65 I wanted to see if this is legal the way he has it set up? or do I need to restructure everything?  if I do and if I do end up buying complex? Any legal help you could assist me with we greatly appreciate it Thanks.

I currently have a 5 day grace period as well with a $50 late fee no matter how many days late.  I am revising this to 3 day grace period.  You can always give an eviction notice.

Based on my reading of California law, and I am not a California licensed attorney so one should be consulted, such provisions are both possibly enforceable and possibly unenforceable, depending on the facts of a particular case. There are at least some statutory protections for late fees in the state. There are not, however, blanket disqualifications of late fee provisions based on percentile. It is about reasonableness as it relates to a specific case.

You should not act on any of this, as I am not licensed in your state. For future business endeavors, I would recommend having a close attorney friend. Also be advised that certain localities (cities) have even further late fee regulations.

@Lorie Madruga

Day one, week one of ownership sign new leases with tenants.  I would keep the late fee simple... $25-50 late fee if paid after the 5th.


Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here