Question 1: I have a duplex in Oakland with an illegal unit (garage conversion), with a tenant on a lease from August 2016 to August 2017. The tenant reported to city and city requested me to take down the unit. If I ask the tenant to move, besides a relocation fee do I pay him back all the rent he had paid to me? Does he have to pay me the remaining months’ rent until lease expires? Can he sue me?
Answer 1: Generally, renting an illegal unit creates many potential legal issues, from dealing with the City, to terminating the tenancy, to defending claims by the tenant for various state and local law violations. Many of the issues raised by renting a ‘non-permitted unit’  are legally unsettled, which means they become claims that can not be completely resolved without a court decision. For example, there is no definitive case law that states whether the tenant is entitled to have the landlord return all the rent the tenant paid. Both sides – the landlord’s attorney and the tenant’s attorney – can point to cases that support one argument or the other, but I have not seen any court actually rule on that issue.

One rule that had been very clear until recently was the the landlord could not compel the tenant to pay rent, though if the tenant failed to pay the rent, the landlord could bring a non-payment eviction case and get the tenant evicted (just without a money judgment, as would be the case in legal unit cases). However, even that ‘rule’ has been recently called into question by a court that held (in southern California) that the landlord may not even serve a three day notice to pay or quit on a tenant in an illegal unit. This would prevent the landlord from bringing the eviction case, and would require the owner to use another legal theory to remove the tenant. Various local laws that apply also can make the analysis complicated, and so in each case, an independent legal analysis is essential for the landlord to make an informed plan of action.

 

Question 2:  Is it legal to give the credit report of a rejected applicant to that applicant to use for other applications?
Answer 2: I don’t think there is any legal prohibition to providing the applicant a copy of the credit report you obtained. As you probably know, if the tenant was rejected because of the credit report, you are required to provide the applicant with the notice of adverse action (check the AOA website for the form 140).

An adverse action is any action by a landlord that is unfavorable to the interests of a rental applicant or tenant. Examples of common adverse actions by landlords include:

  • Denying the application;
  • Requiring a co-signer on the lease;
  • Requiring a deposit that would not be required for another applicant;
  • Requiring a larger deposit than might be required for another applicant; and
  • Raising the rent to a higher amount than for another applicant

If you reject an applicant, increase the rent or deposit, require a co-signer, or take any other adverse action based partly or completely on information in a consumer report, you must give the applicant or tenant a notice of that fact – orally, in writing, or electronically.

An adverse action notice tells people about their rights to see information being reported about them and to correct inaccurate information. The notice must include:

  • the name, address, and phone number of the consumer reporting company that supplied the report;
  • a statement that the company that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it; and
  • a notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get a  free report from the company if the person asks for it within 60 days.

The adverse action notice is required even if information in the consumer report wasn’t the primary reason for the decision. Even if the information in the report played only a small part in the overall decision, the applicant or tenant must be notified.

While oral adverse action notices are allowed, written notices provide proof of FCRA compliance.

Question 3: For our single family rental units with propane gas it is standard for property owners to be financially responsible for the propane tank rental, and the tenants are responsible to pay for the propane only. It is done this way as a propane tank is generally thought of as a part of the unit, similar to a water heater.

We have an owner who would like the tenant to pay the tank rental. Is this appropriate?
Also, if the tenant can be required to pay for tank rental, then are they allowed to switch propane companies at their discretion as opposed to what the property owner may have in place?
Thank you for your assistance.
Answer 3: It is not legally clear if the lease can make the tenant responsible for providing the means by which heating is provided to the unit, though I am fairly certain the courts would not allow it. If the house heater requires propane gas, then making the tenant responsible for actually providing the gas tank might be the equivalent of not providing heat to the unit, which would be a habitability violation. I think I would recommend your client keep it simple and stay with your standard arrangement.

Question 4: What are the advantages for creating an LLC, through which we rent our single family property?
Answer 4: That is a much more detailed question that can be adequately aswwered here, but generally, operating your rental unit through a properly formed and maintained LLC is done to reduce the exposure to your other assets in the event an accident or other claim related to the rental exceeds available insurance, or is not an insured event, and the judgment creditor seeks to satisfy the judgment from the owner’s other assets. But unless you operate the rental through a property management company, you will likely still have personal liability to a tenant if you personally are the cause of whatever claim is being raised (i.e. your management conduct led to a wrongful eviction, or failure to maintain the property etc). Since even if the property is owned by the LLC, the property has to be managed by some person, who would be liable to the tenant in addition to the property-owning LLC. But if that person is a property management company, then the liability shielding goal of the LLC is usally preserved (meaning only the assets owned by the LLC would be laible to the judgment creditor, i.e. the successful tenant in a lawsuit).

Question 5:  There are three tenants in a two bedroom apartment. One of the tenants is moving out. The two remaining want to stay. They are okay tenants, but with occasional loud parties, about which I receive complaints (but have only documented once). I would like all of them to vacate the unit so I can choose new tenants. They are on a month to month lease. Can I ask them all to move out at the same time? There are a total of nine units in the building located in Daly City, CA. I don’t believe there is rent control. Thank you for your advice.
Answer 5: Since Daly City does not have eviction control laws, and the tenants are month to month, you can serve a basic 30-60 day notice (30 if tenancy is under one year, 60 otherwise), or you can negotiate with the remaining tenants to remain in place, either under the existing lease, an amended lease, or a new lease.

Question 6: Did Pacifica enact a rent control law recently?
Answer 6: On April 10, after an extended public hearing, Pacifica’s city council voted 3-2 to tie rent increases to the consumer price index and adopt “just-cause” eviction regulations. A required second vote will take place April 24, after which, if approved then, the new rules would go into effect May 24. The city had announced it would have a hearing on May 8th to discuss whether to place more permanent provisions on the November ballot. If the measure does not go on the ballot, the interim measure will expire Sept. 1.

Per state laws, rent control would only apply to multi-family properties built before 1995. Although some rent-control measures rolled back rents to a previous date, the Pacifica ordinance does not. The new rules would also prohibit evictions without cause, similar to provisions in more long-standing rent control cities such as San Francisco, Oakland and Berkeley.

Question 7:  A tenant gave us a 30 day notice to move out (30 days fall on the end of May).

But he already moved out and gave the keys back. Can we rent the unit out before the 30 days expire? Or do we need to wait?
Answer 7:  If the tenant stated in writing an intention to vacate and then surrendered the keys, that is generally sufficient to terminate the tenancy and allow the landlord to retake possession and re-rent. But I’d send a confirming email or phone call or letter to the tenant just to be clear.

Question 8: We advertised a property with a rent of $2,700.00.  We have potential renters, but they have 4 adults and 2 children, which means increased expenses for us. Can we increase the rent? Or are we bound to stick to the advertised rate?
Answer 8:  Anytime a landlord increases the rent due to the number of people, it can be construed to be ‘discrimination against families…’ so it comes with some amount of risk to do so. It is not recommended, because even the allegation of family discrimination can be costly to defend.

Question 9:  I have tenants that moved in August 2016. They now state they have bed bugs and they admit having bought a used couch. The couch was bought two months ago and the bed bugs showed up last week. We have the bed bug addendum in place and I want to know who is responsible for paying for the pest control company?
Answer 9:  As I have written in the Q&A column previously, it is completely a fact-based issue. If the tenants brought the bugs, they are responsible. If not, it is the landlord’s obligation to treat the bug infestation. If it is a close call on who is responsible, an offer to split the treatment cost is the best option. If the parties can’t agree, they may need a third party to decide (small claims court, usually).

Question 10:  If a tenant agrees, can I insert in the lease that e-mail notification is acceptable in lieu of normal USPS mailing or door posting for 24 hour inspection, 3-day, 30 day or 60 day notices?
Answer 10: While a Notice of Intent Enter can be served by email if the tenant agrees in writing to accept such form of notice, that likely does not apply to termination notices, or rent increase notices, which must be served according to the rules set out in the applicable statute (usually, first by attempting to deliver the notice to the tenant, then by handing it to someone other than the tenant at the premises and mailing a copy to the tenant, or if no one is home, by posting the notice on the door and mailing a copy to the tenant addressed to the premises. Certain notices, such as rent increases and termination notices (as opposed to Notice to Cure or Quit, e.g.) can be served by mail, though termination notices are limited to registered or certified mail.

 

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