Cal. Civ. Code § 1671 governs liquidated damages in a contract for real property (i.e., a residential or commercial lease) and states in pertinent part: “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.” (Emphasis added.) Cal. Civ. Code § 1950.5 governs security deposits and provides for the manner with which a landlord may apply a security deposit. A reasonable interpretation of both statutes would suggest that a liquidated damages provision may be added to a lease agreement in contemplation of potential damages or a breach wherein the scope and amount of resulting damage cannot be reasonably anticipated by the contracting parties. Thus, a liquidated damages provision triggered by a repair related breach may not be enforceable if the cost or amount of repair is readily anticipated by the contracting parties upon execution.
If you are a Landlord in Los Angeles and have a Residential or Commercial Lease inquiry, contact one of our Los Angeles Real Estate Attorneys today for a free consultation and case evaluation.