I am a landlord. I have rented my house to someone with the lease agreement specifying that the interest rate on the past due rent will be 18% per year. Is this interest rate illegal? If so, what is the maximum interest rate that can be charged on a past due rent?
Answer
Why are you calling it interest when it is not a loan? Isn't it really a late fee?
If the property you rent is in Los Angeles, it may be subject to the Los Angeles Rent Stabilization Ordinance (LARSO). LARSO allows late fees to be set forth in a lease agreement, but they need to approximate the damages suffered by the late payment. If a court thinks they are a penalty, they will refuse to enforce them. Your 18 percent per annum late fee appears to be a penalty at face value.
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