Recently, more and more students have visited the A.S. Legal Resource Center with leases that contain completely unreasonable or excessive fees for violations of the lease. These clauses are routinely included in rental agreements, but are rarely legal. So, why do landlords continue to use them? Short answer: because they think they can, they want to deter tenants from violating the lease and because most tenants do not realize they are illegal.
True Story: A lease contains the following clause: “Tenant agrees that no animals shall be permitted in or about the premises for any reason at any time. If any animal is found in or about said premises, Tenant is subject to an animal penalty of $500.00 plus charge for damage. Said animal must be removed immediately from the premises or continuation of animal fee of $20.00 per day rent will occur.”
Beware if your lease has a clause like the one quoted above. These late penalties and fees are actually “liquidated damage” clauses because they establish in advance the monetary damages the tenant will owe if he or she violates the lease, regardless of the actual damage the landlord suffers. Liquidated damages in residential leases are normally void unless the landlord and tenant agree it would be “extremely impracticable or difficult to fix the actual damage.” (Civil Code Section 1671(d)).
Landlords, however, are rarely in this situation because they can usually calculate the amount of damages they suffer. So, in the clause above, the landlord is not only charging a penalty of $500 (illegal) for the mere presence of an animal, but also charging a fee of $20.00 per day if the animal remains on the premises (illegal). Both of these charges are illegal because 1) they do not represent any actual monetary damage the landlord incurred, and 2) any damage the pet causes while staying on the premises is not extremely impracticable or difficult to calculate. If the pet pees on the carpet and the carpet has to be cleaned, the landlord can hire someone to do it and recover that cost by deducting it from the tenant’s security deposit.
So, when are liquidated damages allowed? Liquidated damages are allowed only in situations where it would be extremely hard to measure the consequences of the lease violation, and both the tenant and landlord have to agree upon the fee in advance. Even then, the fee amount must be a reasonable estimate of the damages the landlord will likely suffer. For example, a lease may provide a $500 charge for having a ‘keg party’ on the premises because it would be impracticable to calculate all the damage — picture garbage and red Solo cups all around the grounds of the nicely-cared-for apartment complex, a beat-up living room couch thrown from the balcony and potential future renters turned off because they think it’s a party complex. Essentially, it looks like a pigpen and may have deterred future high-paying tenants and it would be difficult for the landlord to determine the extent of damage to his or her rental value from the violation. In that case, the law allows the landlord to assess a liquidated damage fee, agreed upon in advance by the tenant and landlord. Remember though, the amount agreed upon must be reflective of a “reasonable endeavor” by the landlord to determine the amount of damage. If the fee is excessive, it amounts to a penalty and is not legally valid.
Keep these considerations in mind when handed an invoice from your landlord this year for some lease violation. Even though you signed the lease, you did not waive your rights to challenge the fees. If you need help pursuing your landlord or looking over your lease, please stop by the Legal Resource Center upstairs at the Pardall Center on Pardall Road. Drop ins are welcome Monday through Friday 11-5.
Corydon Graves, Esq. is an A.S. Legal Resource Center Associate & Government Affairs Advisor