legal Q&A
Nipped in the Bud
by Various Authors
Q. How is an in-process nonpayment of rent eviction impacted if the tenant declares bankruptcy?
A. As a preliminary matter, landlords should be aware that a tenant’s bankruptcy filing does not terminate the tenancy and, in fact, may not be used by the landlord as grounds for termination, even if a bankruptcy filing constitutes a breach of the lease under the terms of the rental agreement.
Under bankruptcy laws, any action already filed against the debtor, including actions to recover property from the debtor, is automatically stayed upon the filing of the bankruptcy petition. The stay includes eviction actions, which means that if the landlord has already terminated the tenancy and an eviction action is pending, the tenant’s bankruptcy filing triggers an automatic stay of that action. A creditor, including a landlord, who attempts to proceed with an action while the automatic stay is in effect may be liable for both actual and even punitive damages. It is thus important for the landlord not to attempt to proceed with the eviction action once the landlord has become aware of the tenant’s bankruptcy filing.
The landlord’s remedy is to seek an order from the federal bankruptcy court lifting the automatic stay as to the eviction action. Absent a showing of extraordinary circumstances, obtaining such an order is generally a straightforward matter and is more or less a rubber stamp when the landlord’s termination notice predates the bankruptcy filing.
Once the landlord has obtained the order lifting the automatic stay, the landlord may simply resume the pending eviction action; it is not necessary to start over with a new termination notice or a new action. It should be noted that the relief from the automatic stay is usually limited to the landlord’s right to recover possession of the subject premises from the tenant. As for the recovery of any unpaid back rent or unlawful detainer (hold over) damages that may have been sought in the eviction action, the landlord is often limited to staking a claim against the tenant’s bankruptcy estate, along with all other creditors.
If the landlord has already obtained a judgment in the eviction action by the time the tenant files the bankruptcy petition, the automatic stay is only effective for 30 days. Thus, there is no need for the landlord to seek an order lifting the stay if the sheriff’s eviction has not yet happened. The landlord merely has to wait out the 30 days (from the date of the bankruptcy filing) before proceeding with the sheriff’s eviction.
—Fredrik Emilson
Q. For the last three years, I have rented out my condo and not raised the rent. I want to raise the rent this year. I know the unit does not fall under rent control, but is there any maximum on the rent increase? Also, is the procedure for raising rents different for a nonrent controlled unit?
A. There is no maximum on the rent increase; you are free to raise the rent to any level that you like. Your decision is governed by the marketplace and common sense, not by the San Francisco Rent Board. You do not have to worry about calculating the annual rent increase or specifying any banked rent increases, like you would under rent control.
The procedure for raising rent is basically the same whether the unit is rent controlled or not. You must give written notice at least 30 days in advance if delivered personally, and at least 35 days in advance if the notice is mailed. However, if the rent increase is greater than 10%, you must give at least 60 days advance written notice if delivered personally, and at least 65 days advance written notice if the notice is mailed. You may mail the notice by regular, first class mail.
However, under California Civil Code section 1942.5(a) you may not raise rent in retaliation against the tenant for having exercised tenancy rights, such as complaining about defective conditions. If the tenant has lodged complaints, a subsequent rent increase so high that it exceeds the bounds of common sense might be challenged on the basis of retaliatory motive.
—Michael C. Hall
Q. I have a long-term, elderly tenant in a three-unit building. The unit has not been updated in 20 years, and it has windows and floor coverings in need of replacement. However, the tenant has not complained or requested repairs. Am I open to a lawsuit in the future if I continue to defer the maintenance
on this unit?
A. Deferring maintenance, even in the absence of a tenant complaint, can bite you in more ways that you may anticipate. First, if the deferred maintenance leads to habitability issues, such as inadequately weatherproofed windows, which may cause arctic drafts or mildew or mold around the frames, you could find yourself (long in the future when things have, for whatever reason, become less than cordial between you and your elderly tenant) defending a lawsuit, charging you with failing to provide a habitable premises. Unfortunately, some of the case law opens the door to landlord liability even in the absence of a tenant complaint if the landlord knew, or should have known, of the defect. You already have that knowledge, and are on notice.
Even conditions that don’t rise to the level of habitability defects can wind up in a tenant petition for a reduction in rent based on a reduction in service. The reduction in rent is measured from one year prior to the time the tenant files the petition, unless the landlord had actual notice of the problem, from any source, before that. If that is the case, the Rent Board will permit the rent reduction all the way back to the time notice was acquired, regardless of how many years that may be. Substantially worn floor coverings and windows in need of repair could very well lead to a tenant petition for a reduction in service.
That petition may not come for quite some time, possibly when you and the tenant have a dispute over another matter, and the tenant retaliates by filing it, on advice of his new, rabid attorney. What I have found is that tenant petitions for a reduction in service frequently result in relatively small monthly rent reductions (like $25 or $30) that burgeon over the years into losses greatly exceeding the replacement or repair cost for the service deemed withdrawn. It is foolish indeed for a landlord to risk having to compensate a tenant many times over for a problem that would have been minimal if taken care of in a timely manner.
Finally, heaven forbid that the old coot, excuse me, elderly gentleman, should trip on a ripple in your defective carpet and break a hip, leading to surgery and years of pain and suffering, or worse. Your liability might then be quite substantial.
In short, if you know the problem exists, take care of it. It’s like doing a minor car repair before the problem escalates, leaving you and your broken down Packard stranded on a lonely, dark country road in the middle of a windy night, with the temperature dropping below zero.
—Saul M. Ferster
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. The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Fredrik Emilson is a principal with Cornerstone Law Group and can be contacted at 415-357-2099. Michael C. Hall can be contacted at 415-512-9865. Saul M. Ferster can be contacted at 415-863-2678. Copyright © 2009 by Black Point Press. All rights reserved.