Late Fees on Invoices in California
What California contractors and small businesses need to know about charging late fees, interest rates, prompt payment laws, and mechanics lien deadlines.
Max Interest Rate
10% per annum (simple interest) or 2% per month, whichever is specified in the contract
Small Claims Limit
$12,500
Small Claims Court (Superior Court)
Mechanics Lien Deadline
90 days from completion for direct contractors; 30 days from a preliminary notice for subcontractors
California Prompt Payment Act
California Prompt Payment Act, Cal. Bus. & Prof. Code § 7108.5
California requires progress payments to contractors within 30 days of demand. Retention must be released within 45 days of project completion. Public works have additional protections.
Late fee rules for California invoices
California courts evaluate late fees as liquidated damages. They must be a reasonable estimate of harm, not a penalty. 1.5% monthly is generally upheld.
California's default legal interest rate is 10% per annum. Contracts may specify higher rates, but usury laws cap non-exempt loans at 10%.
Important disclaimer
This page provides general information about California late fee rules. It is not legal advice. Laws change, and your specific situation may have unique factors. For disputes involving significant amounts, consult a licensed attorney in California.
Demand letters and mechanics liens in California
California does not require a demand letter before filing a mechanics lien, but a 10-day Stop Payment Notice can be served. Demand letters are standard practice.
Mechanics lien deadline: 90 days from completion for direct contractors; 30 days from a preliminary notice for subcontractors. A 20-day preliminary notice is required.
Sample late fee clause for California invoices
“Payment is due within the terms specified above. A late fee of 1.5% per month (10% per annum (simple interest) or 2% per month, whichever is specified in the contract maximum per California law) will be applied to all balances remaining unpaid after the due date. Pursuant to California Business & Professions Code § 7108.5, the undersigned reserves all rights to pursue collection including but not limited to mechanics lien filing, small claims action (up to $12,500 in Small Claims Court (Superior Court)), and referral to collections.”
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Start Free TrialFrequently asked questions — California
What is the maximum late fee I can charge on an invoice in California?▾
In California, California's default legal interest rate is 10% per annum. Contracts may specify higher rates, but usury laws cap non-exempt loans at 10%. Always disclose late fee terms in your contract or invoice before work begins.
Does California have a prompt payment act?▾
Yes. California requires progress payments to contractors within 30 days of demand. Retention must be released within 45 days of project completion. Public works have additional protections.
What is the small claims court limit in California?▾
The small claims court limit in California is $12,500. Claims are filed in Small Claims Court (Superior Court). You generally do not need an attorney for small claims.
How long do I have to file a mechanics lien in California?▾
In California, 90 days from completion for direct contractors; 30 days from a preliminary notice for subcontractors. A 20-day preliminary notice is required.
Do I need to send a demand letter before filing a lien in California?▾
California does not require a demand letter before filing a mechanics lien, but a 10-day Stop Payment Notice can be served. Demand letters are standard practice.