Legal Corner Q & A

How to Handle Ambiguities in Leases

By Various Authors

Q. I have a master tenant who “forgets” to let me know when her roommates turnover. Can I send her a notice incorporating all the points found in the new PPMA Lease, Paragraph 15.A (Assignment & Subletting)?

A. Oftentimes, master tenants do purposefully “forget” to inform the owner of a roommate turnover. One reason is that failure of the owner to take appropriate action may result in the new occupant obtaining the rent-controlled status of the original tenant. Hence, the golden rule for all San Francisco landlords is to (1) carefully manage your property, either directly or by way of a competent management company; and (2) once you learn of a new occupant, serve all occupants, including the master tenant, with a 6.14 Notice that you can obtain from the SFAA office. (At every meeting during the legal question period [now 6:00 p.m. - 6:30 p.m.], SFAA associate member attorneys direct the membership to keep on top of new occupants). Arguably, Costa-Hawkins makes service of 6.14 Notices in certain circumstances optional rather than mandatory, but why take a chance and spend thousands of dollars on legal fees to challenge the Rent Board? Please, manage your units and spend the little time and effort required to keep all new occupants “6.14-ed” within sixty days or sooner from the time you first became aware of their occupancy.

I have represented a landlord who was challenged by a subsequent occupant claiming original occupancy rights because the landlord delayed service of the 6.14 Notice well after the new person moved in (i.e., after 60 days). The landlord said the delay was caused solely by the concealment of the new occupant by the master tenant. This rationale does not always work. Landlords have an affirmative obligation to actively manage their rentals, so claiming ignorance is oftentimes a dead-end road. In this case, the tenant said that nothing was hidden from the landlord because the “new” occupant went to work every day and therefore could be seen coming and going.

Restrictions on subletting in San Francisco are governed by two documents: the lease and the Rent Ordinance. The lease usually defines how subletting or assignment of the leasehold can occur. For example, most leases contain a clause that requires any subletting to first be approved by the landlord in writing. The PPMA Lease goes a bit farther, with two choices: an absolute prohibition; or, if the landlord desires, an agreement to sublet with the understanding that any new sublessee is not an original occupant, has received a copy of the 6.14 Notice, and has signed a subtenancy agreement (Paragraph 15.A).

The Rent Ordinance also contains language, both in the statute and the regulations that are commonly referred to as the Leno Amendment named after its sponsor, Supervisor Mark Leno. “Leno” basically states that when you have two or more original occupants and one departs, you either have to permit a replacement roommate or suffer a decrease in rent. The rationale behind this law is that by renting an apartment that services more than one person, failure to keep the number of occupants at the original service level constitutes a “decrease in housing services.” In San Francisco, a decrease in housing services automatically allows the tenant to petition the Rent Board for a rent reduction. Some Administrative Law Judges at the Rent Board take the extreme position that in a two-person apartment where tenant A and B lived, failure to allow tenant A to replace tenant B is a 50 percent reduction in services, thereby allowing a 50 percent reduction in rent.

You cannot just send your tenant the PPMA language and expect it to become a lease covenant. Under the Rent Ordinance, a landlord cannot unilaterally impose a lease covenant of this type. Thus, always start with the PPMA Lease (available through the SFAA). The subtenancy agreement, currently under revision by the SFAA staff, should also be available shortly. However, with a good lease and good management, you probably do not need the subtenancy agreement.

Finally, be aware of the local laws in San Francisco that allow family members to live together. Even with the most restrictive subletting covenant in place [PPMA Lease, Paragraph 15.B], San Francisco has laws that allow a person to live with his or her family. “Family” is broadly defined, and definitely includes children, spouses, domestic partners, and parents. Even though the lease may prohibit subletting under any circumstances, I strongly advise against eviction when a family member has moved into the master tenant’s unit.

Actions against tenants for subletting and assignment are the most difficult and hotly contested cases. Supervisor Matt Gonzalez has just introduced legislation that threatens to prohibit all evictions for subletting as long as the number of occupants complies with the health and safety codes. Thus, before you consider evicting for an unlawful sublet, please consult a qualified attorney. In the meantime, keep a good supply of 6.14 Notices on hand.

– David Wasserman

Q. What language should I insert in my rental agreement to protect me against lawsuits resulting from terrorist attacks?

A. Absent a specific threat against a building, a landlord should not be liable for intentional criminal acts of terrorists. Landlord liability for criminal activity usually turns upon the issue of “foreseeability of harm.” If the FBI cannot foresee terrorist acts, neither can a landlord.
However, so long as there are lawyers, there will be plaintiffs seeking to capitalize on horrible disasters. The following language can be used to avoid some liability for terrorist acts: “The FBI has advised owners and managers of residential buildings that a general nonspecific threat of terrorist activities may exist. Although the statement sounds alarming, the FBI has advised residents to stay calm but to take reasonable and common sense measures if they see any suspicious activity. Report suspicious activity directly to the local FBI field office at the following number: 415-553-7400. Tenant assumes the risk of, and agrees to hold Owner harmless from, any injury or damage resulting from terrorist acts.”

– Clifford E. Fried

Q. If the tenant installs an extra shelf or cabinet, does the landlord then become the owner of it?

A. The lease/rental agreement usually determines who owns the improvements when the tenancy is terminated. The lease should be written so that it specifically deals with the issue in order to avoid any ambiguity and prevent future misunderstandings.

If there is no lease provision covering improvements, the law of “fixtures” applies. Under these rules, in general, improvements will be the landlord’s property. However, a court can look at all the circumstances to determine whether it was the parties’ intent that the improvements be a fixture. “Fixtures” are defined as items of personal property attached or affixed to realty in such a manner that they are considered part of the premises. If they are not attached/affixed, then they are personal property and belong to the tenant. A good question to ask in determining the status of an improvement is: to what degree is the item “integrated” into the premises and how difficult would it be to remove it? How were the shelves and cabinets installed? Different rules apply to (1) the unusual situation of “mistaken improvements,” where the tenant affixed improvements in a good faith but mistaken belief the he had a right to do so; and (2) a commercial lease where there are “trade fixtures.”

Usually, the lease has a provision relating to tenant alterations/improvements that cover (1) whether the tenant can make the alterations (almost always prohibited or requiring the prior written consent of the owner); and (2) the status of the alteration after the tenancy is terminated. Most commercial leases provide that all tenant improvements and fixtures become the owner’s property at the end of the lease term. The new PPMA Residential Tenancy Agreement (Paragraph 20) prohibits tenant remodeling, renovation and alteration of the premises, and states: “Upon termination of tenancy, owner shall have the option, at owners’ sole discretion, to require tenant to restore the Premises to the original condition as received excepting normal wear and tear...” This Agreement allows the owner to decide whether the tenant must remove the tenant’s alterations—in this case—the shelving and cabinets. If the alterations are well done and increase the value/rentability of the unit, the owner can decide to keep them.
– Lawrence M. Scancarelli

The information contained in this article is general in nature. David Wasserman is with Wasserman & Taxman, 567-9600. Clifford E. Fried is with Wiegel & Fried, LLP (415) 552-8230. Lawrence M. Scancarelli can be reached at 398-1644. © Copyright 2002.