When I was a kid, we’d play a game called “Telephone”. A group would sit in a line of chairs and the first person would whisper a statement into the ear of the person sitting next to him or her. Let’s pretend that the whispered statement was, “I enjoy driving fast cars”.
Then this person would whisper this statement (or what they think they heard) to the next person.
By the time this statement is whispered to the last person in line, that person reveals the statement to the group.
The game is such that, by the time the last person in line hears and then repeats the original statement, it is repeated as something like “I enjoy flying to Mars”.
The game may not sound like fun today, but this was before we had computers and we found simple ways to keep ourselves entertained.
So what does all this have to do with you, the Landlord?
As a property manager, I hear tenants every day make the same statement: “I received your notice of rent increase. The owner told me that he wasn’t going to raise my rent. Therefore, I will not pay the increase”. The issue here is one of contract law: Do oral agreements between a landlord and tenant constitute a legal contract?
I discussed this issue with my friend, mentor and co- host of the “Landlord-Tenant Radio” podcast, Attorney Dennis P. Block.
Zac: “I have a tenant that was served with a notice of rent increase. This tenant claims that he and the landlord had an oral agreement to reduce, not increase, his rent. Notwithstanding this claim, and one which the landlord denies, we served this tenant with a Three Day Notice to Pay Rent or Quit. Please comment.
Block: “Oral agreements have just as much validity as written agreements. They have the same legal power under the law. The only issue is, will both parties honestly admit, in court, to the substance of the original agreement.
It sounds here like we have a game of “telephone” where one party said something to the other party which was either misunderstood or, most likely, fabricated. Furthermore, most written rental agreements have a clause stating that the terms of the agreement represent the entire agreement and that no oral agreements will be honored, absent in writing by the parties. (Such an agreement can be found in AOA’s Rental Agreement and/or Lease (Form #101) at www.aoausa.com).
Zac: It’s been awhile since my days in law school, so please refresh my memory on this subject.
Are there not certain instruments which must be memorialized in a writing, such as the sale of real property?
Block: A rent increase does not have to be in writing to be enforceable. Indeed, a landlord and tenant may have a fully executed oral agreement. What does this mean? We both know, Zac, that if a landlord wants to raise the rent, he must serve a written 30 day notice (for an increase of less than ten percent) or a 60 day notice (for an increase of more than ten percent).
However, let’s pretend that I walk over to my (non-rent control) tenant on September 1, 2016 and say …”The current rent is $1,000.00 month. I could be getting $1,400.00 month for this unit. Will you agree to pay this amount? If the tenant agrees, pays me $1,400.00 month in September, October, and thereafter, and I cash these checks, doing so creates an enforceable oral contract between the landlord and tenant, for the new amount of rent.
Zac: Same question, but with a tenant in a rent controlled building.
Block: “The landlord may increase his rents once every twelve months and by the amount permitted by the Department of Rent Stabilization for that city. Having said this, the same scenario applies, as stated above. If the landlord and tenant orally agree to a rent increase (or decrease), and the landlord accepts and cashes these checks for a few months, an enforceable oral contract has been created.
However, a landlord (both rent control and non-rent control) may always by providing proper notification, increase the rent to the base rental amount, which existed prior to any oral agreement.
For example, if the tenant (rent control or non- rent control) loses his job and the landlord agrees to a $100 rent reduction for three months, the landlord may later serve the tenant with a notice of rent increase, demanding the original or “base” rent. This may be done even if resuming the base rent exceeds the increase amount permitted (Ex: currently 3% for the Los Angeles Department of Rent Stabilization.)
Closing Comments for Landlords
Always use a residential lease which contains a clause, requiring a writing to memorialize any agreement of a rent increase or decrease. Otherwise, you’ll be playing an expensive game of “Telephone” and subject yourself to unnecessary disputes and legal fees.
Zachary Lawrence JD is the owner of Parkside Property Management and Affordable Landlord Consulting. For management or consultation services, Zachary Lawrence can be reached at (310) 636- 1200 or [email protected]