Question 1: What is an ˜estoppel statement,’ and can I ask my tenant for one at any time?
Answer 1: An ˜estoppel statement’ is, generally, a form that the landlord provides to the tenant “ residential or commercial – to complete and return to the landlord, which outlines the specific status of the tenant’s rights and obligations, and also alerts the landlord to any problems the tenant claims exists in the tenancy relationship. It is usually requested by the landlord as part of pending sale transaction, as it provides necessary information to a prospective buyer of the terms of the rentals that provide income from the building, and also alerts the prospective buyer to any problems the tenant claims exists between the tenant and the landlord. In the absence of a lease provision requiring a tenant to sign an estoppel certificate, a tenant cannot be compelled to do so. Some residential leases require the tenant to return a completed estoppel statement within a certain time of the landlord’s request, or be in default of the lease, and there is no case or statute known to the author prohibiting such a provision. However, there have been arguments that the use of such provisions to force a tenant to routinely acknowledge the status of her tenancy, and any problems, may be a breach of the tenant’s right to quiet enjoyment.
Question 2: Can I refuse to rent to a prospective tenant who looks like he belongs to a gang? I really do not want any trouble-making tenants.
Answer 2: Because the rules against discriminating against prospective tenants based on their appearance are broadly written and interpreted, it would be difficult to provide guidelines for such a selection process that did not include personal characteristics of the various applicants that could be deemed illegally discriminatory.
In one reported case, the landlord of a mobile home park was sued by a tenant who had been shot by a fellow tenant who was alleged to be a gang member. The injured tenant’s attorney argued that the mobile home park owner had a legal duty to refuse to rent to applicants who appeared to be gang members.
The court, while sympathetic to the significant risks presented by active gang members among the tenant community, ultimately decided the proposed cure (refusing to rent to people who looked like gang members) was worse than the disease (the occasional injury caused by actual gang member tenants). As the court said: Gang members do not ¦ announce their gang affiliations on housing applications. If landlords regularly face liability for injuries gang members cause on the premises, they will tend to deny rental to anyone who might be a gang member or, even more broadly, to any family one of whose members might be in a gang. The result in many cases would be arbitrary discrimination on the basis of race, ethnicity, family composition, dress and appearance, or reputation. All of these are, in at least some circumstances, illegal and against public policy and could themselves subject the landlord to liability.
The court referred to non-housing cases which held that the state Unruh Civil Rights Act bars discrimination on the basis of unconventional dress and appearance or based on reputation or suspicion of criminal tendencies. As one court stated: mere suspicion based on past conduct and alleged reputed activities ¦ or on conversations ¦ with persons considered questionable did not justify expulsion from a business establishment. The court noted that Landlords would thus risk liability whichever choice they make.
However, it must be noted that a landlord who has sufficient factual information that a tenant or prospective tenant poses a foreseeable risk of harm to other tenants does have a duty to take reasonable measures to prevent such harm, including evicting tenants who have demonstrated a clear propensity for violence against other tenants. To what degree such tendencies would have to be apparent to justify denying an applicant on the ground of potential for violence (absent, as the court stated, placing his gang affiliation on the rental application) is as yet undetermined.
Question 3: Do I have to pay interest on security deposits?
Answer 3: Under general state law, there is no obligation to pay interest on a security deposit. However, certain cities have passed local ordinances which do require such interest payments to residential tenants. Locally, San Francisco and Berkeley have such requirements, but at least so far Oakland does not. While the general concept is roughly the same in all such cities (landlord must pay annual interest to the tenant on the amount of the security deposit), each city’s rules are slightly different. In Berkeley, for example, the landlord must pay simple interest at the rate equal to the average rate of interest paid on six months certificate of deposit by an insured commercial banks as published by the Federal Reserve Board on the first business day of each month. Security deposits may be co-mingled with other deposits, so long as the actual rate of interest imposed by the rule is paid. The Berkeley Rent Board website has a specific section entitled calculating the interest rate which can be found at www.ci.berkeley.ca.us/rent/geninfo/scc_dep_calc.hdml which can be consulted to calculate specific amount which the lessor may be obligated to pay her tenants.
If the unit is in San Francisco, Chapter 49 of the San Francisco Administrative Code requires landlords to pay interest annually on deposits held on residential property. Landlords are required to pay interest on all monies held over one year, regardless of what the deposit is called (e.g. ˜last months’, ˜pet deposit’ etc). Interest payments apply to all residential rental units in San Francisco, including those exempt from the Rent Ordinance, with one exception: where the rent for the unit is assisted or subsidized by a government agency, the interest payment requirement does not apply.
Interest must be paid every year on the tenant’s “annual due date.” For tenancies beginning after September 1, 1983, the annual due date is the same day and month the landlord received the deposit from the tenant. (If the tenant moved in and paid a deposit before September 1, 1983, interest was due on September 1, 1984 and every September 1st thereafter.)
If the tenant vacates before one full year of occupancy, no interest is due. Where a tenant vacates after one year of occupancy but before the next annual due date, the interest payment for the partial year period must be pro-rated and calculated using the interest rate in effect on the date the tenant vacates.
Generally, the tenant is owed simple interest at the rate in effect when the security deposit interest payment is due. If the deposit held is $1,000.00 and the applicable interest rate is 1.7%, then the interest payment due is $17.00. Pursuant to Chapter 49, if interest is owed for multiple years, the interest may not be compounded. For example, if the deposit held is $1,000.00 and interest for two years is to be paid on the annual due date of November 1, 2005, the landlord would owe the tenant 1.2% or $12.00 for 2004, plus 1.7% or $17.00 for 2005, for a total of $29.00. Other than payment of the past interest owed, Chapter 49 does not provide for any penalties for the late payment of interest.
To receive a list of interest rates for security deposits since September 1983, the Rent Board will fax it upon request by calling 415-252-4660 or visiting its website at www.sfgov.org/rentboard.
Question 4: If I advertise a unit for rent, and several people show up and want to rent the unit, can I pick the prospect I think will be most likely to not cause problems?
Answer 4: This question is similar to the prior question about rejecting an applicant on the basis of his or her appearance. Generally, a landlord should have written guidelines which accompany its rental applications which include the specific qualifying criteria for renting the available units. For example, one housing provider required that the applicant’s current and previous rental references be in good standing, that the applicant’s verifiable income must meet or exceed 2 1/2 times the monthly rent, and the applicant’s credit report must meet basic guidelines, unless a satisfactory explanation in writing can be provided. The Department of Fair Housing did not find these criteria objectionable. In general, applying such objective criteria, along with a ˜first come, first qualified, first approved’ process should insulate the lessor from proven claims of discrimination.
Question 5: If the tenant is behind on the rent, can I lock him out until he pays?
Answer 5: No. If the tenant is in breach of any rental obligation, the landlord’s remedy is to regain possession of the unit peaceably, by the tenant agreeing to vacate, or by legal means, which usually involves filing an eviction lawsuit known as the unlawful detainer. Locking a tenant out, known as ˜self help,’ is almost a guaranteed way to incur liability to the tenant, meaning you might end up owing the tenant money, rather then the other way around.
Richard Beckman, of Beckman Blair, LLP has been practicing landlord-tenant law for over 19 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 415-495-8500; email [email protected] or by visiting the website www.beckmanblairllp.com.