If you are reading this article, you almost certainly know about the Tenant Protection Act of 2019 (Assembly Bill No. 1482), the state-wide rent control law, and you probably have carefully considered how this law affects you and your properties. You may not yet have fully thought through, however, how this law might affect your relationship with your resident manager – and, specifically, your ability to evict him or her once your employment relationship ends – or how the law might impact your strategy when hiring a new resident manager.
By way of background, if you manage or own an apartment building in the City of Los Angeles that is subject to the Rent Stabilization Ordinance (RSO), whether you can evict your resident manager when his employment ends depends on several factors – including how you have been paying him and the often-befuddling “resident manager” / “employee manager” distinction set out in the Rent Adjustment Commission Regulations (“RACC”). The Reader’s Digest version is as follows: a “resident manager” receives all the eviction protections provided to regular tenants under the RSO – unless, of course, he is an “employee manager.” An “employee manager,” on the other hand, is not subject to the RSO’s eviction protections (unless he already was a tenant before his employment as resident manager), and removing him from his unit therefore is far easier. He, along with anyone living with him, can be evicted without cause (unless you have approved them as actual tenants).
Whether a manager qualifies as an “employee manager” largely depends on how you pay him. To qualify under the RACC as an “employee manager,” the manager (1) must live on-site (which, of course, he does) and (2) receive a free apartment plus wages that meet minimum wage standards. You cannot credit any rent towards an employee manager’s minimum wages, nor can you engage in a “check exchange” – where he pays rent and you pay him full wages. Simply put, if you want your resident manager to qualify as an “employee manager,” the RACC requires that you provide him with a completely free apartment and pay him his full wages. But now let’s assume your property is not governed by Los Angeles’s RSO, but rather is subject to AB 1482. In other words, it was built between 1978 and 2005. And let’s further assume you have terminated your resident manager and now want to evict him, but he claims to be protected as a tenant under AB 1482.
As you probably know, AB 1482 requires “just cause” to evict a tenant who has “continuously and lawfully occupied an apartment for 12 months.” “Just cause” includes an employee’s failure to vacate after his termination as an employee, “as described in paragraph (1) of Section 1161 of the Code of Civil Procedure” – which makes a tenant guilty of unlawful detainer for continuing in possession after the expiration of the term for which the apartment was let to him, including when he became the occupant as an employee and the employment was lawfully terminated.
What, then, is the problem? The problem is that AB 1482 defines “tenancy” extremely broadly; however, unlike the Los Angeles RACC “resident manager” / “employee manager” distinction, AB 1482 establishes no clear delineation between a “tenant” and a “resident manager.”
So, for example, what if your manager was a tenant or occupant before you hired him as resident manager? Does his employment override his prior tenancy or occupancy, such that you have “just cause” for evicting him when the employment ends? Presumably not. Therefore, be forewarned – if you hire an existing tenant to be your resident manager, you may not be able to evict him when his employment ends.
What if your manager was paying rent or partial rent while employed as a manager or if you were applying rent towards payment of his wages? Is he now a tenant for the purpose of AB 1482? As we saw above, he would have tenant rights under the Los Angeles RSO in such circumstance, but it appears he probably would not under AB 1482. On the other hand, AB 1482 defines a “tenancy” to include any “lawful occupation of residential real property,” which obviously includes resident managers, so an argument at least exists that a resident manager who pays rent qualifies as a tenant.
Notably, unlike the City of Los Angeles RSO, AB 1482 does not include within its definition of “just cause” evicting a tenant to place a resident manager in that tenant’s unit. It therefore appears that under AB 1482, you cannot evict a tenant to place a resident manager in the tenant’s apartment. In this respect AB 1482 appears similar in to the Santa Monica rent control laws, which also do not allow an owner to evict a tenant to put in a manager.
So here is the punchline: if you own a property that legally requires a resident manager, i.e., has 16 or more units, and also is governed by AB 1482 (or your property falls under the Santa Monica rent control laws), then you need to think long and hard before hiring an existing tenant to be your resident manager. Why? Because … if that relationship does not work out and you need to terminate the resident manager’s employment, you will find yourself in an unenviable Catch 22. On the one hand, you will be obligated under State law to have a resident manager on site. On the other hand, you will have no apartment unit in which to place that resident manager, nor will you have the legal recourse of evicting a tenant. As a practical matter, this may force you to choose between two less-than-ideal options: to stay with the existing resident manager whose employment you really want to terminate, or to turn to another, “plan B” tenant to serve as resident manager (whom you presumably did not select to be resident manager in the first place).
Because neither option sounds very appealing, it is important to think ahead when you hire your resident manager.
Gary Ganchrow is a shareholder at Parker Milliken Clark O’Hara and Samuelian and Adjunct Professor at the USC School of Law. He regularly advises on, litigates and writes about a variety of employment, property management, and business matters. He can be reached at 213-683-6535 and [email protected]. This article is for informational purposes only, and should not be considered legal advice or establishing an attorney-client relationship.