Copied from California Tenants Rights Handbook
Late fees are illegal. The law regarding residential late fees is almost 30 years old. In 1978, Civil Code 1671 was amended to outlaw virtually all late fees in residential rental agreements. The problem is that it did not use the word "late fees," but instead used the technical legal generic term "liquidated damages," which would functionally include a late fee by its meaning. In the case of Orozco v. Casimiro [(2004) 121 Cal.App.4th Supp. 7] it was decided for the first time, by an appellate court which identified late fees as "liquidated damages" within the meaning of Civil Code 1671, and declared them to be illegal and void, absent extraordinary circumstances. If the landlord puts them in, your signing the agreement does not waive your rights to not pay them, get them back if you did, or sue the landlord for trying to get them.
§1671. Validity of Liquidated Damages Provisions
(a) This section does not apply in any case where another statute expressly applicable to the contract prescribes the rules or standard for determining the validity of a provision in the contract liquidating the damages for the breach of the contract.
(b) Except as provided in subdivision (c), a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.
(c) The validity of a liquidated damages provision shall be determined under subdivision (d) and not under subdivision (b) where the liquidated damages are sought to be recovered from either:
(1) A party to a contract for the retail purchase, or rental, by such party of personal property or services, primarily for the party's personal, family, or household purposes; or
(2) A party to a lease of real property for use as a dwelling by the party or those dependent upon the party for support.
(d) In the cases described in subdivision (c), a provision in a contract liquidating damages for the breach of the contract is void except that the parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.
In the California Landlord Law Book; Rights and Responsibilities;NOLO Press
Pg.71 Late Charges
"Some cities with rent control ordinances explicitly regulate the amount of late fee." Late fees can not exceed 4% to 6% of the rental amount. Structure of the late fee policy in the lease agreement must be carefully explained.
See California Civil Code 3302