talking business
Apples for the Students
by David Wasserman
As the start of the academic year approaches, I’d like to salute the valuable educational opportunities offered by SFAA and its dedicated teachers. I am happy to report that I have been an instructor for over 10 years. I will likewise admit that teaching is, without a doubt, my favorite contribution to the industry.
I currently co-instruct two courses, “Landlord 101” and “Understanding Subtenancies and Roommates.” After introducing the presenters and greeting the attendees, I speak to the importance of supporting SFAA; I remind the audience that SFAA acts as the primary advocate for our needs at city hall. In addition, its services for local owners are unparalleled. Members receive benefits offered by no other residential property trade organization. The classes represent just one of many perks. Members also receive this magazine and are encouraged to attend the monthly membership meetings, where staff organizes an array of speakers and trade sponsors who impart their perspectives on current events. Members can also quiz the free legal panel before each membership meeting, and thereby receive gratis legal advice from three or four of the industry’s top legal talent. Each year, SFAA updates and edits its library of forms for online use, including the ever-improving SFAA Residential Tenancy Agreement, which stands alone as the best acceptable San Francisco lease agreement. We even have an annual trade show and industry awards ceremony.
In the educational classes, I tell my pupils that I feel their pain. As a small landlord, I can relate to the pressures and pitfalls of landlording. Writing checks and thwarting problematic tenants are not theoretical to me. Indeed, I sincerely hope that the old saying “Those who can’t do, teach” is not an absolute theorem. If it is, my life’s work shall be insurmountable.
Teaching provides me with an opportunity, not only to stay apprised of the industry’s latest quirks and developments, but likewise offers the experience, outside of my office, to hear real stories and opinions about what makes management work. As an attorney, my professional exposure is limited to serious problems, after they have arisen. In the classroom, I work with owners without the duress of imminent litigation and profound animosity. Their stories are far more reflective of the norm. Indeed, most landlords never need lawyers, and it’s healthy to speak about what works and how, in most instances, owners and tenants work together.
Landlord 101
To this end, my cherished theme of “Landlord 101,” also titled “Managing Your Own Property in San Francisco,” is repeated throughout each of the two-part segments: we are here to put lawyers out of business, and the goal is to ensure that you never have to hire our law firms. To the relief of my colleagues, such a notion is fantasy, but the goal is noble and realistically attainable to some degree. The first two-hours of the two-part class begins with a discussion about choosing tenants. We talk about marketing a unit in order to contract the highest possible rental value. In rent-restricted places like San Francisco, superb marketing is not a luxury but an absolute necessity.
The class is reminded that SFAA, in addition to its other services, provides essential tenant screening services. I also use this opportunity to chastise anyone who would fail, in today’s internet age, to adequately perform background checks. I remind the audience that many of my attorney peers have evicted tenants more than once from different locations, so to forego a nominal charge in order to run credit, check for past evictions and verify references is inexcusable, to say the least.
The next topic is fair housing. Tenant attorneys are increasingly fixated on suing housing providers for discrimination. While most know that state and federal laws disdain the practice of selecting tenants other than for financial qualification, the majority are unaware of how to establish truly impartial application and evaluation standards. To complicate matters, many wonder whether or not they are compelled to accept Section 8 prospects, and to those wondering the same thing who are reading this article I say, “Come to our next class!”
We also spend a substantial amount of time on drafting the proper lease agreement. A bad lease means you have handcuffed yourself, and possibly ruined any chance you may have had to enforce normal house rules and regulations. Not surprisingly, we tout the SFAA agreement as the gold standard, but we also explain what lease covenants should be in every document. Unfortunately, many members buy buildings and inherit tenants with substandard agreements. Thus, these owners need to understand what rights they have, and lack, during the tenancy. I submit that this part of the class is quite sobering, especially when you add to the mix the local rent law’s one-sided biases and onerous restrictions.
The class then proceeds to the big tenant move-in day. We instruct on how to use the SFAA Move-In Checklist form, how to collect and increase rents, and late fees. We also explain the myth of withholding rent to repair the unit. Students are apprised of their obligations to pay security deposit interest, and under what finite circumstances they are allowed to enter the unit once occupied. Part one ends with a frank discussion about the warranty of habitability, meaning what each owner needs to do with regard to maintenance and repairs. To ensure that everyone returns for the following week’s lecture, we touch on harassment and nuisance claims that tenants may bring against the irresponsible owner.
Part two opens with the bad news about the local rent law. Not only are you restricted as to how much rent can be raised, but a tenancy goes on forever unless terminated by the tenant or by the landlord for one of 15 “just cause” reasons. Each just cause is explained and analyzed, and, contrary to popular belief, one of the grounds is not that the lease has expired. Most in the audience perk up when the tenant “fault” reasons for eviction are discussed, such as nonpayment of rent, breach of lease covenant or commission of a nuisance. Each class is different, but every time attendees delve into what type of conduct warrants eviction. Truthfully, I cannot always define with precision behavior that will eject a tenant in this town, but our class discussions are always intense and insightful. We then progress with a recitation of the often confusing and detailed requirements of performing a “no-fault eviction,” such as the owner/relative move-in, illegal unit removal or Ellis Act. The class is treated to a detailed explanation of how the legal process begins, such as the acceptable ways to serve the eviction notice, when the court action is initiated and what to expect should the case proceed to trial and judgment. We end on a lighter note by speaking about how you should discard what a tenant leaves behind, and when you can avoid the legal process altogether if the tenant abandons the unit. Time permitting, we conclude with a highlight: approaching tenants to initiate, and perhaps consummating, a voluntary buyout of the tenancy.
Understanding Subtenancies and Roommates
“Understanding Subtenancies and Roommates” is for more advanced owners who are already entrenched in this business. It was revamped in late 2008 after the industry decided to steer away from the traditional practice of serving 6.14 notices (if you don’t know what a 6.14 notice is, then you are ahead of the curve) and instead treating subtenants pursuant to a state law known as Costa-Hawkins. In San Francisco, owners are often required to accept subtenants. For example, when a co-tenant leaves, the remaining tenant has the right to bring in a replacement roommate. In addition, tenants have the right to live with their immediate family members, even if the lease restricts subletting. More importantly, a landlord’s actions, or inactions, may afford a subtenant the same rent-controlled rights of the master tenant; in those cases, when the master tenant vacates and leaves behind a subtenant, the owner can neither evict the subtenant nor raise the rent beyond the rent control restrictions.
In sum, managers who do not know how to navigate the tricky waters of roommates and subleasing may find themselves stuck with chain tenancies, wherein the original lease holders have long ago left for greener pastures, yet the rent remains terribly constrained. For two-plus hours, we talk about how one avoids this travesty, while analyzing potential traps and techniques that tenants, and even the Rent Board, use to confer upon subletters what only the original lessees should have.
I could fill all of the magazine’s pages with descriptions and details about each of these two classes. Yet that would act as a disservice, as the contents of each class change every time we embark on a new series. Laws get modified, new court decisions are published and our perspectives are continuously enriched by your input and our own experiences. I have often promised SFAA staff that, if they will let me, I plan to keep teaching even after my board tenure expires.
Lastly, I want to acknowledge and thank my co-instructor, Curtis Dowling, for his volunteer time and effort. Curtis and I co-teach both classes, and his contribution is invaluable. I have known Curtis since we were both students at St. Ignatius Prep here in the city. Curtis went off to University of Pennsylvania and then to Hastings Law School. Upon becoming a lawyer, he worked under both Clifford Fried and Andrew Zacks, before co-founding his own firm, Beckman, Marquez & Dowling. Unlike my more limited resume, Curtis has fashioned his career on challenging parts of the rent law for being unconstitutional and procedurally infirm. In essence, my co-instructor embodies academia, but he knows how to do as well as how to teach.
As you read this educational issue of the magazine, I want to stress how fulfilling I find the classroom to be, and I invite all of you to take our classes so that we can combine our collective wisdom and better perfect the difficult task of residential property ownership and management.
The opinions expressed in this article are those of the author, and do not necessarily reflect the viewpoint of the SFAA or the SF Apartment Magazine. David Wasserman is the president of SFAA. He can be contacted at Wasserman-Stern Law Offices, 415-567-9600. Copyright © 2009 by Black Point Press. All rights reserved.