Hello everybody.  From what I have observed over the decades, most apartment owners are law abiding investors who endeavor to conduct their business ethically and with integrity.  Indeed, they have too much to lose to intentionally violate the myriad of federal, state and local laws that apply to residential income property.

However, occasionally some transgressions will unintentionally (or even willfully) occur, such as under reporting rental income, overstating expenses, or maintaining unsanitary buildings in violation of health and safety codes (i.e., “slumlord” housing).

This month, I will discuss various legal privileges that may allow an owner to keep confidential information concerning those violations that owners would not want to be made public, particularly in a courtroom.

The 5th Amendment: Most readers are aware that the Fifth Amendment of the United States Constitution affords a person the right not to testify in a criminal proceeding in a manner which might tend to incriminate him.  What is less commonly known is that the 5th Amendment against self-incrimination also applies in civil litigation so long as the party asserting the protection (and the court) reasonably believe that the information sought could be used against the individual in a criminal prosecution

Lawyer/Client Privilege:  This privilege is fundamental to our system of justice.  Any statement made in confidence between an attorney and his client, or between an attorney and an individual who is seeking the attorney’s advice or consultation, is privileged against disclosure.  Neither the lawyer nor the individual can be compelled by the state, the federal government, local agency or any American court to disclose those discussions.

The individual is designated as the “holder of the privilege,” meaning that only he has a right to waive it.  Then, if the client waives this privilege, his attorney reveals the contents of the confidential communication.  That is to say, because the lawyer is not the holder of the privilege, he cannot disclose the discussions without his client’s consent. Exceptions exist where litigation is between the lawyer and a former client and under circumstances where the lawyer believes that the disclosure is necessary to prevent a criminal act likely to result in the death of, or substantial bodily harm to, another person.

Also, a client waives the attorney-client privilege if he uses a letter or other document he wrote to his attorney or his attorney wrote to him, to refresh his recollection for testimony he gives in a deposition or a trial.  Thus, lawyers typically counsel their clients not to utilize any confidential paperwork exchanged between the two of them to refresh the client’s memory prior to giving testimony. 

Communications Between Spouses:   There are two privileges concerning married individuals. One is the “spousal” privilege and the other is the “confidential marital communication” privilege.

The spousal privilege prevents a spouse from being called as a witness or having to testify against the other spouse who is a party to the proceedings.  Certain exceptions apply if the proceeding is brought between the spouses, but those are beyond the scope of this discussion.

The confidential marital communications privilege is related to the spousal privilege.  This privilege allows persons who were married at the time that confidential communications were made between them from having to testify as to those communications at a later time, even if they are then divorced.

Physician/Patient Privilege:  As a general rule, neither a physician nor his patient can be compelled to disclose confidential communications between them concerning the health of the patient.  Exceptions include disclosures of confidential information where the lawsuit is brought between the physician and the patient or in which the patient has filed a lawsuit seeking reimbursement for personal injuries.

Psychotherapist/Patient Privilege:  A psychotherapist means a person who is, or is reasonably believed by the patient to be, a psychiatrist, a licensed psychologist, a licensed clinical social worker, a school psychologist, a licensed marriage and family therapist, a psychological assistant working under a licensed psychologist, a registered nurse who possesses a master’s degree in the psychiatric mental health field, among others.  The privilege is similar to that of the physician/patient privilege.  Generally, neither the psychotherapist nor the patient can be compelled to disclose confidential communications between them, even those concerning under reporting of rental income, if the topic comes up during the therapy session.

Clergy Privileges:  A privilege exists between a member of the clergy (including priests, ministers, rabbis, etc.) and his congregation or penitent involving confidential communications between the two.   Certain exceptions exist when the issue involves sexual assault.

Domestic Violence Counselor:  A privilege exists against the compelled disclosure of confidential communications between qualified “domestic violence counselor” and a victim of that violence.

Political Vote:  A person is privileged to refuse to disclose the nature of his vote at a public election where the voting is by secret ballot unless he votes illegally or he previously made a disclosure of his vote.

Trade Secrets:   While complicated, a business or an employee of the business has a privilege to refuse to disclose trade secrets concerning the business.

Privilege of the Press:  A publisher, editor, reporter or other person connected with the press (whether radio, television, newspaper, etc.) cannot be adjudged in contempt for refusing to disclose the source of information used in connection with his services.  That being said, apartment owners would be wise not to disclose incriminating information to the press.

Settlement Offers:  Evidence that a person has in compromise or for humanitarian motives, furnished or has promised to furnish, or offered money or any other thing of value to another, is inadmissible at trial to prove the offeror’s liability.  In order to facilitate settlement of cases, the California State Legislature has enacted laws which encourage individuals to make monetary and other offers of settlement which, if not accepted by the recipient, cannot later be used by the recipient to prove culpability or an admission of wrongdoing.

Invasion of Privacy:  Both the federal and state Constitutions guaranty a person a right of privacy.  This area of the law is extremely complex.  A person’s right to privacy is often balanced against any important public interest to have the private fact or matter disclosed.  Areas, in which a right of privacy is often claimed, are personal banking affairs, associational privacy, privacy in sexual relations, personal financial information, business customer lists and tax returns.

While each of these areas has some aspect of a right of privacy involved, the privilege against disclosure is not absolute.  As noted above, the individual’s right to keep the information confidential must be balanced against the public interest for disclosure.  Based on that evaluation, a court will then determine whether or not the information must be disclosed.

Accountants/Clients: Surprisingly, communications between a client and his accountant (even a CPA) are not privileged.  For that reason, a client should be particularly careful when making statements to an accountant concerning past or present improprieties.  For example, a client who reveals to his CPA that he failed to report rents and fabricated expenses, should be aware that the accountant may be compelled to disclose that information by judicial process, such as at a deposition or at trial.  Accordingly, a client should be cautious when speaking with his accountant about known improprieties.

Parents/Children: Unfortunately, there is no privilege by either a parent or the child from disclosing communications made between the two of them.  That is true no matter how confidential or private the communications may be.  In my opinion, there should be such a privilege so as not to undermine guidance that parents give to children, the guidance children seek from their parents, or otherwise betray family trust.

Concluding Remarks

Although other privileges exist, the most common ones which might apply to apartment owners are listed above.  The fact that neither the state, the federal government, nor the court can compel an individual to disclose certain confidential information distinguishes this country from many others.  Still, integrity and honesty remain the best policy.

 

Dale Alberstone is a prominent litigation and transactional real estate attorney who has specialized in real property law for the past 40 years.  He has been appointed to periodically serve as a judge pro tem of the Los Angeles Superior Court and is a former arbitrator for the American Arbitration Association.  He also testifies as an expert witness for and against other attorneys who have been accused of legal malpractice.

Mr. Alberstone has been awarded an AV rating from Martindale-Hubbell.  An AV rating reflects an attorney who has reached the heights of professional excellence and is recognized for the highest levels of skill and integrity.       

The foregoing article was authored in February 2018.  It is intended as a general overview of the law and may not apply to the reader’s particular case.  Readers are cautioned to consult an advisor of their own selection with respect to any particular situation.

Questions of a general nature are warmly invited.  Address correspondence to Dale S. Alberstone, Esq., ALBERSTONE & ALBERSTONE, 1900 Avenue of the Stars, Suite 650, Los Angeles, California 90067.  Phone:  (310) 277-7300.