In previous articles, Keith T. Becker of DeDe’s Rentals and Property Management addressed a variety, within an agreement to rent, of clauses and items that we intentionally INCLUDE or EXCLUDE from our rental contracts.  This third article addresses a few additional details.


1. Late fee. In a perfect world, we’d never have to even consider late fees, because in that perfect world, all tenants pay rent on time. However, realistically, it happens. Rent is occasionally late. It’s important to clearly identify in your rental contract when the rent is due, when it is late, and if so, what the “late fee” will be. However, you also need to be careful about what percentage charge for a late fee. The “fair” amount of a late fee has not actually been determined. However, California’s usury laws cap the interest rate on any LOAN at 10% per annum. While tenant’s rent due is not itself considered a loan, it’s reasonable to apply similar standards. The amount of a late fee applied to rent should not be too high, for example in the range of 12-15%. Instead, it should be a reasonable estimate of the landlord’s actual inconvenience or damage, as caused by tenant’s failure to pay on time. How could you classify actual damage? If the tenant delays payment of rent, landlords could conceivably suffer delay in paying their own mortgage, or having to borrow money from someone to take care of personal expenses in lieu of the cash flow that would otherwise be generated by rent received. These types of circumstances could qualify as  reasonable examples of the actual damage a landlord could suffer. Every landlord must assess his own situation and independently determine the nominal amount of the late fee. If the amount of the late fee charge is too high, it could be considered void. Between 3%- 6% of the overdue rent payment is usually considered fair, but again, every property owner’s situation is different. It is important to note that a late fee charge in the rental agreement is not supposed to be an opportunity to make profit, but to compensate for damages that the landlord would reasonably incur. Sonoma County property management firm, Dede’s Rentals, uses 6% as the late fee; feeling reasonably confident that it can be rationally substantiated as a fair fee.


2. Important disclosures for properties built before 1978/1981.If your property was built before 1981, even if you are using a pre-formatted template, you need to make sure you include an asbestos disclosure in the rental agreement. If your property was built prior to 1978, you need to make sure you have a lead disclosure. Each property owner has a legal obligation to notify prospective tenants of known lead and/or asbestos hazards that may be present in the property, and to provide a lead paint and asbestos disclosure to the tenant before or at the time of the rental agreement signing. There are standardized forms available, and a standardized process to identify the existence of asbestos and lead paint hazards – or alternately, to acknowledge that there are no KNOWN hazards. Even when there are no known hazards, the appropriate documents and processes must be implemented, if the house was built pre-78 (lead) or pre-81 (asbestos). If as a landlord, you are not familiar with these disclosures and processes, Dede’s Rentals in Sonoma County is the property management firm to help you address your management needs.

We hope this information about late fees and hazard disclosures will help our clients and friends throughout Sonoma County and all of California as they create and implement their own residential rental contracts. If you have any questions, please feel free to contact us.