How California law treats commercial late charges.
Civil Code 1671 sets the test for liquidated damages, which is how we read a late charge in a commercial lease. Here is that test, and why we found no statute that sets a percentage.
The test for commercial leases
Except for the consumer contracts and residential leases listed in subdivision (c), a liquidated damages provision is valid unless the party challenging it shows it was unreasonable under the circumstances when the contract was made (1671(b)). Commercial leases fall under this rule.[1]
Residential leases and consumer contracts use a stricter test, in subdivisions (c) and (d).[1]
Our readingThe statute doesn't mention late charges. We read a late charge in a commercial lease as a liquidated damages provision; ask counsel about a specific clause.[1]
No percentage in the statute
Checked October 2026 against official sources
Each statement above links to the official page it comes from. We read every one on October 25, 2026.
- 1Civil Code 1671
Liquidated damages, the rule we read as governing late charges in a commercial lease (1671(b)).
leginfo.legislature.ca.gov, checked October 25, 2026
Change log
- October 23, 2026First version, checked against the official text.
- October 25, 2026Checked again against the official text. Marked as our reading that a late charge is judged as liquidated damages, since 1671 doesn't name late charges.
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