Feature
by Clifford E. Fried
Natural disasters can reduce the rental housing stock and leave many tenants homeless. Such was the case with the 1989 Loma Prieta earthquake. Under state law, when rental property is destroyed, the tenancy terminates. In most parts of California, when rental property has sustained significant partial damage, the landlord and tenant usually agree to terminate the tenancy. After the landlord rehabilitates the property, a new tenancy is created with a new tenant in place.
But things work differently in San Francisco because of our unique rent laws. San Francisco Rent Board Rules and Regulations Sec. 12.19 provides that when a tenant is forced to vacate a rental unit due to fire or other natural disaster, the landlord—within 30 days of completing repairs to the unit—must offer the same unit to that tenant under the same terms and conditions that existed prior to the tenant’s displacement. The refusal to allow a tenant to return to the rental unit under 12.19 constitutes a wrongful eviction. The wrongful eviction of a tenant in San Francisco makes the landlord liable for actual, treble and punitive damages, as well as attorney fees.
Many cases in point arose from the Loma Prieta earthquake. In one example, a contractor purchased a “red-tagged” building with severe damage from the quake. His intent was to repair the property and rent out the units. The seller of the building had said that all the tenants vacated because of the condition of the property and never returned. After eight months of construction, the new owner proceeded to rent the units. One previous tenant requested to move back and was allowed to reoccupy her old unit. A second tenant waited until her unit was rerented to a new tenant and then sued under 12.19, claiming the landlord refused to allow her to return to her home.
The defense’s evidence at trial was that the plaintiff received her security deposit back from the seller, signed a one-year lease elsewhere and that the buyer of the building spent over $220,000 to repair the earthquake-damaged property. The jury returned a verdict in favor of the tenant in the amount of $25,000. The award was increased to $75,000 under the automatic trebling provision of the Rent Ordinance, as well as the inclusion of attorney fees. On appeal, the validity of 12.19 and the jury award were upheld.
There are a few important lessons from the above case. First, Rent Board Rules and Regulations may have the same force and effect as the Rent Ordinance itself. Second, if your building has been severely damaged by a natural disaster and you have a choice between demolishing and repairing, go for the demolition. The building will then be exempt from the rent laws because it will be considered new construction. Third, even a modest award to a tenant can get out of hand because of the treble-damage provision and attorney-fees provision in the Rent Ordinance.
You should note that the cost—not reimbursed by insurance proceeds or by any other means—of capital improvements for necessary repairs prior to rerenting a unit that was damaged or destroyed may be passed through to the reoccupying tenant by filing a capital improvement petition at the Rent Board. But, if the landlord is reimbursed as a result of being properly insured or from satisfying a judgment against some negligent party, no passthrough will be permitted. The reason for this exception is obvious: it would be unfair for the landlord to receive a double recovery.
Tenants displaced by natural disasters are victims. However, landlords can become victims as well by not knowing about their legal obligations under the local rent laws.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. The information within this article is general in nature. Consult an attorney for any specific problem. Clifford E. Fried is a partner with Wiegel & Fried, LLP, 415-552-8230. Copyright © 2006, Wiegel & Fried, LLP. All rights reserved.