Legal Q&A

Below are questions asked by rental property owners regarding California rent control laws followed by answers provided by Attorney Richard Beckman.

Question 1:  Is there any update on the lawsuits against the eviction moratoriums in Oakland, Berkeley and Alameda County?

Answer 1:  The case Williams et al v. Alameda County Board of Supervisors is a lawsuit in the Northern District of California federal court, filed in early March, and which requests the judge to, in essence, invalidate both the Alameda County eviction moratorium and the Oakland city version. Basically, the argument is that the city and the county have violated various constitutional protections against arbitrary and capricious legislation. A hearing is set for September 29th, 2022 on the plaintiffs’ motion for summary judgment. If that motion is granted, invalidating the two ordinances, the city and county will likely appeal those rulings, and the primary issue will be whether or not the moratoria remain in effect pending the appellate process.

Meanwhile, the City of Alameda filed a similar lawsuit against Alameda County, entitled City of Alameda v. The Superior Court of Alameda County. This is an appellate case which the City brought against the Alameda Superior Court, based on the Court’s refusal to issue an unlawful detainer summons on a non-payment of rent case. When the judge explained, she was compelled to ‘follow the rule’ (i.e., the local eviction moratorium), the City brought its appellate action arguing that the County has no legal right to impose laws, including eviction moratoria, on incorporated cities such as Alameda. Alameda city is not arguing that the moratorium is unconstitutional, but rather that the county exceeded its jurisdiction by seeking to impose county regulations on incorporated cities such as Alameda. The basic argument is that counties are permitted to impose regulations etc. on the areas under their jurisdiction, which is generally considered the unincorporated parts of the county. It, the county, may not reach into incorporated cities, such as the city of Alameda, and impose county regulations etc. There are exceptions in states of emergency, but having read the city of Alameda complaint, I believe they have the better argument. Should the City prevail, it stands to reason that the Alameda County moratorium would also be invalidated in other incorporated cities in the county, such as Fremont and Hayward (to the extent the individual cities do not impose their own eviction moratorium…)

Stay tuned!

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Question 2: Just a quick question – we wanted to confirm before proceeding with a tenant of ours. We have a tenant that just moved in July into our San Jose apartment building. The lease allows 3 adults and 2 children. Within days of moving in and over the month, we saw a gentleman living in the unit that was not approved. The lease states no subletting. We spoke to them last week about the situation and they want to add him to the contract. My question is can we make a new contract adding this gentleman and change the price of rent due to changed circumstances with the new contract? Thank you.
Answer 2: Assuming your property is covered by San Jose’s apartment rent ordinance, which includes apartments with three or more units that were built and occupied prior to September 7, 1979, you are allowed you to raise rent by 5% for an additional tenant who is not a family member, subject to jointly filing a petition with the tenant for such increase. 

A landlord and tenant may file a petition for an increase in the tent of up to five percent (5%) for an additional tenant (other than the tenant’s spouse, domestic partner, parent, dependent or foster child, or minor in the tenant’s care). Such increases in the maximum allowable rent, as adjusted, will terminate if the additional occupant leaves. (SJMC Section 17.23.350.C).

Details on that procedure can be found at the websites below:

https://www.sanjoseca.gov/home/showpublisheddocument/51237/637157188999600000

https://www.sanjoseca.gov/your-government/departments/housing/renters-apartment-owners/apartment-rent-ordinance

The rent board website provides forms for the owner and tenant to jointly submit a petition for the requested increase, which must be submitted by the tenant. Assuming you obtain an approval for rent increase, a 30- day notice of Change of Terms due to the additional tenant can be given to the tenants. The new terms will take effect 30 days after notice is given. You will not have to terminate the lease. However, as an alternate approach, you and the tenants can agree to terminate the existing lease, and then enter into a new lease to include the new tenant at the new rent, and avoid the petition process.  

However, if the tenants won’t cooperate and your lease prohibits unapproved subtenants or other non-guest occupants, you have the option of serving a notice to cure or quit, to require the additional occupant to move out, or the tenant’s risk having their tenancy terminated. This is a significant incentive for them to cooperate in the petition process

You should review the rent board website and confirm that you are in compliance with the registration requirement. Owners must update the occupancy information for each of their apartments in the Rent Registry on an annual basis. The Rent Registry allows the City’s Rent Stabilization Program to monitor changes in tenancy and rents, and track allowable rent increases. To log in to the Rent Registry, please visit https://sjrentregistry.force.com. You will need City-issued login credentials to create an account.

 

Question 3: If documentation for repairs was not submitted with the security deposit refund within 21days, are the tenants entitled to the full deposit times two plus attorney’s fees? The full amount they are asking for would be $13,500.00 (based on $6,000.00 deposit, $6,000.00 damages and $1,500.00 attorney fees).
Answer 3:  Fortunately, the penalty for missing the accounting and documentation deadline is not so drastic. The security deposit statute, Civil Code 1950.5, should always be reviewed by owners and property managers prior to the termination of a tenancy, whether the tenancy is being terminated by the owner or the tenant, as it contains necessary information regarding the tenant’s right to a pre-move out inspection, to provide the tenant an opportunity to address any identified damage the owner intends to charge to the tenant’s security deposit. But assuming the owner fails to comply with that aspect, or the 21-day accounting deadline, the primary issue is whether the owner acted in ‘bad faith.’ If so, the penalty you mention in your question can be imposed. 

Otherwise, the only detriment is that the deposit must be returned to the tenant, regardless of any damages, or unpaid rent etc., that the deposit might otherwise have been used for. Specifically, if, within the statutory 21-calendar-day period, the landlord fails to provide the tenant with the requisite written accounting of the portion of the security deposit to be retained, the right to retain all or any part of the security (Civ.C. § 1950.5(e)) has not been perfected and the landlord must return the entire deposit to the tenant. In other words, the landlord forfeits the benefit of the § 1950.5(g) “summary deduct-and-retain” procedure. [Granberry v. Islay Investments (1995) 9 C4th 738, 745, 38 CR2d 650, 653]

However, forfeiture of the statutory summary deduct-and-retain procedure does not also forfeit the landlord’s right to claim damages for unpaid rent, repairs and cleaning (Civ.C. § 1950.5(e)). Damages authorized by Civ.C. §1950.5(e) are recoverable in a subsequent judicial proceeding (e.g. small claims court), provided the landlord proves by a preponderance of the evidence that he or she suffered the damages and that the amount claimed is reasonable. [Granberry v. Islay Investments, supra, 9 C4th at 745, 749-750, 38 CR2d at 653, 656]

“Bad faith” retention of a tenant’s security deposit exposes the landlord to a statutory damages penalty of twice the amount of the deposit, in addition to liability for the aggrieved tenant’s actual damages (Civ.C. §1950.5(l). “Bad faith” is not defined in the statute, but is generally understood to mean asserting a right without any reasonable belief that it is factually or legally permitted.

Whether a “bad faith” finding might also affect the landlord’s right to recover Civ.C. §1950.5(e) damages by affirmative action or setoff remains undecided. [See Granberry v. Islay Investments, supra, 9 C4th at 750, 38 CR2d at 656, fn. 6—“Because the jury did not find that [landlords] here acted in bad faith, we do not consider and therefore express no opinion regarding the rights of landlords who have acted in bad faith”]

Notwithstanding noncompliance with §1950.5(g), and assuming the owner did not act in bad faith, the landlord’s §1950.5(e) damages claim may be pursued by affirmative suit against the tenant or by the equitable defense of setoff in the tenant’s suit for a refund of the security deposit.

 

Question 4: What is the maximum that rent can be increased? Is it 10%? What is the length of time to notice tenants for the rent increase? This property is in unincorporated Contra Costa County. Owners are “mom and pop” type landlords. Just individual owners.
Answer 4: Pursuant to California Civil Code Section 827, rent increase notices of 10% or less only require a 30-day notice, though if the notice is served by mail, rather than on the tenant personally, you must add five days to the notice period. In other words, if you want the notice to take effect on the first of the next month, the notice must be mailed at least 35 days before that first of the month date. If the increase is greater than 10%, the notice period is 90 days, with the same extra five days if mailed.

As for the amount of the increase, any rental unit more than 15 years old is subject to either local or state rent control. Given your location, it is likely your unit would be covered by the state law, AB 1482 – Tenant Protection Act of 2019. That law limits rent increases to 5% above the most recent annual cost of living index, the CPI for the year ending in April. However, regardless of the inflation rate, increases are limited to 10%.  Increases served this year fall into the maximum category, as the inflation rate, expressed in the CPI issued in April is above 5%, so the 10% increase is the maximum amount allowed for units subject to that law.

However, single family homes are generally exempt from state rent control, if the tenants have been properly notified that the home is exempt. That basically requires the notice to be in the lease, or added to the lease by an addendum that is served on the tenant as a 30-day change of terms of tenancy. More information on that form can be found in the AOA website forms.

 

Question 5: We have tenants that gave a 30-day notice on August 6 to turn the keys over on September 6. They chose not to do a walk through due to their own personal reasons. We found out that they have already moved and have left the property. They did not notify us that they were leaving early and the owner found out on the 29th. They paid for the month of August. Can we prorate the rent daily until the 30th day, August 6th? 

Also, if the owner does the work themselves (paint and cleaning), how do we provide a receipt? Can we invoice the ex-tenant by stating the work was done by the owner themselves? With a rate per hour and how many hours it took? 

The ex-tenant does not want to provide a forwarding address. They want the owner to leave it in the mail box of the rental. We do not feel comfortable since we would like to have them sign as proof that they received their portion of the security deposit and letter. What options does the owner have? 

Answer 5:  Tenants are responsible for rent until the expiration of the notice of termination. As such, you can prorate the rent daily until September 6. The only exception to this is if you rented the apartment to another tenant after July 29th but before August 6th. In that case, you have ‘mitigated the damages’ you incurred and the former tenants are given the benefit of that mitigation in the amount you received from the new tenants for that brief period. 

As most readers of this column know, California’s Code of Civil Procedure Section 1950.5 provides the entire set of rules related to security deposit, and is a must read for all those who rent units to residential tenants. That section allows a landlord to charge for repairs and cleaning done by their employee. The landlord must provide to the tenant an invoice or itemized statement describing the work done, time spent and reasonably hourly rate. The relevant portion is copied below: 

(2) Along with the itemized statement, the landlord shall also include copies of documents showing charges incurred and deducted by the landlord to repair or clean the premises, as follows: (A) If the landlord or landlord’s employee did the work, the itemized statement shall reasonably describe the work performed.  The itemized statement shall include the time spent and the reasonable hourly rate charged. 

From <https://codes.findlaw.com/ca/civil-code/civ-sect-1950-5.html>  

The tenant does not have to provide you with a forwarding address. In that case, it would not hurt to include with the accounting statement a brief statement that the tenant wanted the security deposit mailed to the prior tenancy address, then mail the security deposit along with the itemized list of charges via first class mail to the rental prior address. The landlord can obtain receipt confirmation that it was mailed, but no receipt signature required. 

You also have the option of agreeing with the tenant before the expiration of the 21 days to have the itemized charges and security deposit be delivered electronically (email). This should be stated in writing. However, even if there is no such agreement, it would not hurt to email a copy of the accounting, with a copy of the check (redacted of important bank information etc., in case the email is inadvertently read by an unauthorized recipient).

 

Question 6:  I have rented a home to three people. One is the primary tenant’s mother who I needed as a cosigner. I had her sign the rental agreement using AOA forms. The mother now wants off the agreement, however the other two tenants won’t qualify. Am I obligated to take her off the current rental agreement? They have been in the unit for over two years. If I take the mother off, I would need to terminate the tenancy.
Answer 6: Without seeing your specific agreement with the tenants and the mother, my comments are limited. If the mother is listed on that lease as a co-tenant, and its now month to month, she can simply give notice of termination of her ‘tenancy’, and that would relieve her of any future responsibility after the 30-day notice. If she signed a true guarantee agreement, she has likely more continuing liability for the tenancy. Since the tenants have been in possession, they are likely covered by either local or state eviction control, which does not allow a tenancy to be terminated by the owner without a ‘just cause’ ground. Losing one tenant, even one most financially responsible, would not permit termination of the remaining tenants’ tenancy. Of course, the remaining tenants are still obligated to pay the rent timely etc., and failure to do so is a ‘just cause’ to terminate the tenancy, unless the tenants are protected by a local eviction moratorium such as still exists in locations like Alameda and Solano counties.

 

Question 7: I heard of a recent California court case that addressed an issue you wrote about previously. During the period from August 19, 2020 through the end of June, 2022, you stated that the state law (originally AB 3088, ending with AB 832) prohibited local cities and counties from passing their own laws that were more protective of tenants than the state law, but you indicated there was ambiguity in the state law that led others to argue such restrictions were in fact not in effect. Has that ever been addressed?

Answer 7: Thank you for asking, and yes, a recent California court did weigh in on that issue. In Arche v Scallon, the court took the opposite position I thought it would, regarding local cities’ and counties’ ability to pass covid-related eviction moratoria between August 19, 2020 and July 1, 2022. I thought the language was clear, but this appellate division panel felt otherwise. However, while this is a published appellate opinion, it is issued by the appellate division of the Superior Court, rather than one of the higher-level District Courts of Appeal. Appellate division opinions are issued for disputes that arise from what is known as the limited jurisdiction department of the Superior Court, which is where this unlawful detainer case originated. And while the decision is binding on the parties and the court that ruled initially on the matter, it is not a binding decision that other courts must follow, so until the California Supreme Court should rule on that issue, which decision would be binding on all lower courts, my ‘take’ on the law may still be persuasive to other reviewing courts. However, this decision can be cited as one that other judges at the trial level can follow, so it will likely have some impact on similar cases.

Richard Beckman, of Beckman Feller & Chang P.C., has been practicing landlord-tenant law for over 26 years, primarily in rent-controlled jurisdictions such as San Francisco, Oakland and Berkeley. He represents clients in a broad range of real estate-related disputes, including partition of co-ownership interests, purchase contract disputes, insurance coverage analysis and land use. Mr. Beckman also specializes in all aspects of landlord-tenant issues, representing landlords and tenants in residential and commercial matters. He can be reached at 510-548-7474; email [email protected] or by visiting the website www.bfc-legal.com.