Question 1: What are some ways a landlord could deal with increasing water costs due to the unprecedented drought in California?

Answer 1: On April 1, 2015, for the first time in California history, Governor Jerry Brown signed an executive order to the nearly 400 Urban Water Suppliers directing them to implement water conservation plans. 

 “The Water Board shall direct urban water suppliers to develop rate structures and other pricing mechanisms, including but not limited to surcharges, fees, and penalties, to maximize water conservation consistent with statewide water restrictions.” (See Executive Order Not Yet Published – http://gov.ca.gov/anews.php?id=1-2015-April). Customers can review their water bill to determine their local supplier.

This event may cause landlords to experience an increase in their water costs, and seek ways to recover these costs from their tenants. The first step in that inquiry is to review the rental agreement-lease.  The lease controls whether the landlord bears utility costs or passes them on to the tenants – tenants cannot be charged for utilities if the lease is silent on the matter. If the lease is a term lease (e.g. a one year lease) and has not expired, then the lessor may not change the terms unless the lease so provides – very unlikely. The analysis below is limited to month-to-month leases, including the cases where the term (one year) lease has expired and converted to a month-to-month agreement by law. 

If the lease requires the tenant to pay the water bill:

Obviously, this is the best position to be in as a landlord, as you are not responsible for the cost of the tenant’s water use – who may or may not share your sentiments about water conservation. As a public service, you may want to inform your tenants of the drought and its history and the potential sharp increases in water rates in the area. With the potential threat to the tenants´ pocketbook, they may appreciate the information and respond accordingly. 

If the lease requires the lessor to pay the bill (or is silent on the issue):

The lessors options may be affected by determining if the rental unit is covered by a local rent control ordinance or not.  I will briefly address the first issue. 

Not Covered by Rent Control:

The lessor may simply serve a proper notice of change of terms of tenancy to either increase the rent to reflect the increased water costs, or require the tenant to become the customer of record.  

Covered by Rent Control:

Because water is a utility that would be considered part of the housing services provided to the tenant as part of the rent paid by the tenant, the lessor is not allowed to simply impose a rent increase to reflect the increase costs to the lessor of the water, or change the terms to make the tenant responsible for the water bill going forward. One suggestion is to write a letter to your tenant explaining that if the water bill increases measurably, the lessor may have to petition the local rent board for a rent increase to cover that increased cost. Absent some amendment to the local rent ordinance that specifically addresses this particular issue, that may be the lessor´s only option. Below is a review of the three main local rent control ordinances. However, each ordinance and its accompanying regulations should be closely reviewed for the details of each petition process. 

San Francisco: Utility pass-through petitions only cover electricity, gas, or steam heat.  A water rate increase will require the landlord to submit an Operating and Maintenance Expense Petition which requires a comparison of two years of all your operating expenses (garbage, water/sewer, insurance, property taxes, debt service, management, repairs, pest control, maintenance, and elevator service).  If the water bill increases, but other costs decrease, the petition may be denied. 

Oakland:  A landlord in Oakland is allowed to serve a notice raising the rent above the maximum allowed by the CPI Rent Adjustment to cover increased housing costs (such as an increased water bill).  A tenant may file a petition for any rent increase exceeding the CPI Rent Adjustment.  If the tenant does file the petition and the landlord wishes to contest it, the landlord must justify the rent increase in light of the increased operating costs.  While the petition is pending, the tenant is only required to pay the CPI rent without the increase for operating expenses.  

Berkeley: A Berkeley lessor who experiences significantly increased water rates and seeks to recover those expenses must file a Fourth District Court of Appeal upheld a Superior Court judge’s decision that found that charging bigger water users incrementally higher rates violates a voter-approved law that prohibits government agencies from charging more than the cost of a service.  There are a few important things to understand: 1) This does not apply to privately run water agencies only government ones; and 2) It most likely only applies to tiered water charging systems and not say a flat rate system that charges a penalty if you go over a certain amount – which may effectively accomplish the same goal and be the same in terms of costs to consumers. 

Activity in the Courts:  Recently,  the Fourth District Court of Appeals upheld a Superior Court judge’s decision that found that charging large water users incrementally higher rates (in effect, a tiered rate system based on volume) violates a voter-approved law that prohibits government agencies from charging more than the cost of a service.  The practical impact of this decision remains to be seen, as the water districts can be counted on to seek creative pricing structures that avoid this result. 

Question 2: Can I collect damages for extensive bathroom water damage caused by tenant’s lack of good housekeeping.  My tenant has lived in this apartment for over 30 years at about 20%-30% below market rent.

Answer 2:  If your rental unit is not covered by a rent control law, it would be easier to just serve a rent increase to capture the cost of the repairs, rather than try to apportion who is responsible (tenant’s housekeeping or just normal wear and tear over 30 years).  A rent increase to amortize the repair cost over a few years should work for both of you.   

Question 3: We have a tenant withholding rent this month because she believes there is mold in her unit.  What is the best way to proceed?

Answer 3: Mold, including its existence and remediation, is a subject for persons with expertise in that area, such that neither the tenant demanding a rent reduction, or the landlord responding ‘I have no such obligation,’ is going to be the opinion that a court will rely on when deciding whether mold actually exists, and if so, who is responsible and what remedies are available.  One, possibly standard, response to a report of mold in a residential unit is to contact both the insurance company and a mold remediation company to inspect and opine on the mold level, kind of mold and removal process. Once the parties have the report, and assuming there is agreement on the findings, you and the tenant should seek to agree on how to implement the recommendations, and any applicable rent rebate or reduction. If you disagree as to the report’s findings, perhaps agree to get a second opinion and try to merge the two (or three) reports into an agreed statement of the level of mold and the extent of remediation, including the amount of personal property cleaning or replacement that may be required. The alternative to an agreed resolution based on objective information is, often litigation between the landlord and tenant, which may result in relatively the same resolution, only at the cost of many dollars and much good will. 

Question 4: We gave a tenant 60 day notice to vacate due to continued returned checks and late rent payment. She says she cannot move out her furniture, does not have the money for movers or anywhere to go. She has thrown away all household goods but is leaving two beds, two dressers, a couch, TV and perhaps her cats. Her email also states ´don’t box anything up, you’ll never see me again.´

Answer 4: If the tenant states in writing that she is abandoning her remaining personal property and you may dispose of it as you see fit, I think you would not need to go through the otherwise required process regarding Notice of Right to Reclaim Abandoned Property when a tenant vacates and leaves personal possessions behind. However, it would be better if she sent such a confirming email, and also confirm that nothing left behind belongs to anyone other than her. If there is any doubt, the safer route is to comply with the process and serve the Notice of Right to Reclaim Abandoned Property, wait the 18 days, and then dispose of the property if it is collectively valued at under $700.00.

 

Question 5: My tenants gave a 30 day notice, but did not pay rent for this month. They said to use their security deposit. The deposit is not enough to cover the rent and any clean up or damages to the apartment will be fully charged to the tenant. The tenant understands that and will pay the difference. The tenant will also be turning in the keys earlier than 30 days. In this situation what should I do? Should I give a 3-Day and start the eviction process? Or should I just charge the tenant for the rest of her 30 days and any clean up or damages to the apartment?

Answer 5: If the tenant does vacate as she stated she intends to do, filing an unlawful detainer (eviction action) before she moves out for non-payment of rent for the current rent is possible, but probably not practical. If  the tenant vacates as stated, the Unlawful Detainer action ‘converts’ to what is called a standard civil action, meaning it is off the ‘fast track’ that Unlawful Detainers are given in terms of trial preference, and goes on the court’s regular trial calendar. Given the likely amount in dispute, it would be faster to just wait and file in small claims after the tenant moves if she fails to pay any legitimate costs incurred that would have been charged to her security deposit, i.e. unpaid rent, damage beyond normal wear and tear and cleaning. 

Question 6: Is there any difference between a rental agreement and a lease, and do they both have to be written to be legal?

Answer 6: An agreement between a lessor and a lessee (landlord and tenant) that covers any rental premises can be referred to either as a rental agreement or a lease, and in most cases can be oral or written. However, one exception involves leases or rental agreements for longer than one year, which must be written to be legally binding. Of course, for purposes of clarity between the parties of the terms of any agreement, a written agreement is far superior and generally preferred. 

Richard Beckman, of Beckman Blair, LLP has been practicing landlord-tenant law for over 24 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 415-871-0070; email rich@beckmanblairllp.com or by visiting the website www.beckmanblairllp.com