This is an issue people have been arguing about for a very long time. In the context of a residential lease or rental agreement, internet folk-lore seems to be asserting that Civil Code § 1671(d) makes late fees illegal or unenforceable. The problem, however, is the last sentence of subparagraph (d) which is used by landlord pretty regularly to legally enforce late-fee provisions. I've never seen a Court side with a tenant on this particular issue and deny the landlord recovery of late fees in addition to rent. Conversely, most landlords in unlawful detainer litigation are advised to only seek recovery of rent in unlawful detainers - the late fees simply cloud the issue. So, if you were to pay your rent, but refuse to pay late fees, you could attempt to assert CC § 1671(d) as a defense to the eventual eviction by the landlord over the unpaid late fees, but I would not bet the farm on a judge ruling in your favor.

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