What is the name of your state? California
I've been searching on the web for two days and also searched this forum but did not find a clear answer to my question about late fees for commercial leases. There's a lot of stuff about residential but it's not clear that this applies to commercial.
I entered into a lease on a commercial property commencing in July of 2003. My understanding of the lease was that rent was due on the first and late payments and interest would be imposed beginning on the 7th of the month. Here is the text of the lease:
LATE CHARGE ON DELINQUENT PAYMENTS: Tenant hereby acknowledges that late payment by Tenant to Landlord of any installment of Minimum Rent, or any other amounts or charges payable under the terms of this Lease will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such cost (sic)
include, but are not limited to, processing, administrative and accounting costs, and late charges which may be imposed on Landlord by the terms of any mortgage or trust deed covering the Premises. Accordingly, if Tenant shall fail to pay, when same is due and payable, any installment of Minimum Rent, or any other amounts or charges payable hereunder, Tenant shall
pay a late charge equal to the greater of One Hundred Dollars ($100) or ten percent (10%) of the delinquent payment, payable forthwith with the late payment. The parties hereto agree that such late charge payment represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. In addition, any Rent Payment
which is not made within seven (7) days after the same is due shall bear interest at the maximum rate an individual is permitted by law to charge.
(end quote of lease)
I paid the rent for July to October between the first and fifth of each of those months. There was no communication or other indication from the property management company (PMC) that anything was wrong with this.
I paid the November rent on the fifth of November. The billing statement for December's rent included a late charge of 10% of the rent ($397 on a rent of $3970). I did not examine the statement carefully and did not notice this charge, and paid my December rent on 12/6. The statement for January included another late charge of the same amount.
I called the PMC and spoke with a clerk there. She replied that any payments made after the third were subject to the late charge. I pointed out that there was no text to that effect in the lease; explained my interpretation of the lease regarding a grace period, and claimed it was an honest mistake and asked for forgiveness of the charges. She said she
would talk to her manager about it.
Well, this PMC is very hardnosed. They responded by sending me a demand letter by certified mail and assessed a $4.42 charge for doing so, even though there is no text in the lease which permits such a charge. When I called to ask what was going on, the clerk told me that there was no grace period, the charges would not be forgiven, and that any future rent payments would be due by the first or more late charges would apply.
I spoke to about half of the other tenants in the complex and none of them had ever had a late charge imposed even though they regularly paid between the first and third of the month.
After a couple more calls discussing it, the clerk told me that the charges would not be removed but that the PMC would not pursue it, either. I took this to be a face-saving move and let it go at that. Meanwhile, I have paid my rent on every month since January no later than the first of the month.
Seven months went by without any further discussion about these charges, then without warning I received a letter from this clerk saying that if the charges were not paid by 10/4, the PMC would deduct them from the security deposit and I would then be liable under the terms of the lease to restore the security deposit to its original amount.
Sorry if all this is too much information. Here are my questions:
1) For a commercial lease, would this charge ($397) be considered excessive by a court for being late less than one week? No one disputes that all payments were made within seven days and no interest charges have been imposed. I realize there is no sure answer to this but would like an informed decision on my chances.
2) If the answer to the first question is "no", is there anything else in the circumstances I described that I could argue to eliminate or reduce these charges, or does the PMC have me by the grapes?
Yes, I know I blew it by reading this to mean there is a 7 day grace period. In over 25 years of renting commercial properties, I have never had a landlord assert a no-grace-period policy.