legal corner q&a

By Various Authors

Q. Can I safely follow advice given to California landlords generally, as opposed to San Francisco landlords specifically?

A. Sometimes. A case in point is the “Sacramento Report” by Monica Williamson published in the December 2007 issue of this magazine. While that article has several points that work well for San Francisco landlords (like the information on security deposits), some of the advice is totally inappropriate for property owners in the city. The article is excellent for landlords whose property is located elsewhere in California. However, I frequently tell my clients that they don’t own property in California—this is San Francisco!

The portion of the article that you as a San Francisco landlord need to ignore is the portion dealing with the screening of, and acceptance of, “co-tenants.” The advice given by Williamson is, generally, that all new tenants to the unit should be screened in the same way as any other tenant, and all should be placed on the rental agreement. While this may work wonderfully in Concord, Modesto or Santa Barbara, it could be disastrous for you as a San Francisco landlord, because it will confer original tenant rights (such as artificially depressed rents) on the revolving door roommates you are forced to put up with under the San Francisco Rent Ordinance. There is some dispute among San Francisco landlord attorneys as to whether or not you should even screen new occupants. This involves a balancing of risks between having someone in your building for whom you have no information, which many landlords feel is intolerable, and the risk of bringing the applicant closer to you as your direct tenant, rather than a subtenant, and thereby creating a rental agreement between you and the new party, possibly making him the equivalent of an original tenant.

You can, of course, mitigate the effects of such co-tenancy by timely service of a 6.14 Notice. Unfortunately, all too often landlords are late in service of the notice, or they inadequately perform or document service; valid service of the Section 6.14 Notice is then difficult to prove when the time comes to do so. My opinion, and that of many landlord attorneys, is that it is best to keep as much distance as you can between yourself and the new occupant. This frequently means not screening the new occupant, certainly not putting the new occupant on the rental agreement, and serving a 6.14 Notice informing that occupant that he is not an approved subtenant, or co-tenant, and will not be recognized by the landlord as such.

I frequently see advice in the Chronicle real-estate section by landlord attorneys that doesn’t deal specifically with San Francisco. They also give tips that don’t necessarily apply here. Therefore, it’s clear that you must take advice given generally for California landlords with a very large grain of salt.

- Saul M. Ferster

Q. I recently informed a tenant that her rental agreement did not allow her to have a cat. She said that it did, and sent me a copy of “the lease,” which is not the same lease that I gave her when she first moved in. I have no idea where she got a copy of this lease, as it is not used elsewhere in the building. What should I do?

A. First of all, if you intend to enforce your lease covenant that prohibits pets, you should not accept any rent payments from the tenant until the issue has been resolved to your satisfaction; otherwise the tenant could raise an argument that you have waived the breach. It may be that the tenant is attempting to bluff you in order to test how far you would go to enforce your agreement. Your refusal of the rent payment will underscore how serious you are, call the tenant’s bluff and possibly cause the tenant to back down. However, this would, obviously, require the tenant to either give up the cat or give up the apartment, which might be a pretty difficult choice, so you might be in for a legal battle.

Your next step should be to consult with legal counsel concerning a possible eviction lawsuit based upon a three-day notice to cure the breach of the lease covenant. The three-day notice should refer to the lease covenant that you intend to enforce and spell out how the tenant must cure the breach. As the plaintiff, it would be your burden to prove the actual terms of the rental agreement, and that the tenant has breached those terms, by a preponderance of the evidence. In meeting with your attorney, you should review any evidence supporting your version of the lease and tending to show that the tenant’s version is a forgery. Supporting evidence could include any transmittal letters or other correspondence related to the lease negotiations, the dates of the lease documents, and any evidence of payment of the first month’s rent and deposit. Evidence could include your testimony that you had never used the printed form of agreement produced
by the tenant, and testimony that you consistently apply a “no-pets” policy to all
of your tenants.

I presume that it is clear to you that the signature on the tenant’s version of the lease is a forgery. Your attorney may recommend hiring a handwriting expert to help prove the forgery. You could also present other witnesses who are familiar with your handwriting and signature who could testify that they do not recognize the signature on the tenant’s version as yours. Just like in any other kind of eviction lawsuit, the tenant can demand a trial by jury—and probably will do so. Therefore, it is important to try and get your ducks in a row before starting up such a serious and probably costly endeavor.

Your attorney will likely recommend that you precede any such three-day notice with a written demand letter to the tenant warning her that you intend to start eviction proceedings unless the tenant promptly cures the breach. Such a letter could turn out to be useful evidence of your good faith in order to show the jury—which will decide whether to evict—that you gave the tenant a chance to fix the problem first.

Believe it or not, you are not alone, and variations of this “forged lease” problem have come up several times recently. As you may know, tenants in San Francisco have the benefit of free or inexpensive legal assistance to fight evictions. Perhaps for this reason, dishonest tenants are trying to get away with outrageous frauds because they assume that the landlord will not take them on in litigation. You have every reason to push back.

- Michael C. Hall

Q. I just purchased a new building and three subtenants want to sign a new lease. Should I have them move out first?

A. While it may seem logical and good business to have whoever is residing in your unit actually reflected on the lease agreement that controls the unit, don’t forget that the San Francisco Rent Ordinance often defies ordinary logic, usually to the detriment of the landlord. Adding people to a lease or creating a new lease with those subtenants will make those individuals the “tenants” of a landlord, and very possibly grants them “original tenant” rights under the ordinance, and thus would hinder and delay your ability to increase the rent to market rate.

The question does not indicate whether an “original tenant” still resides in the unit along with the subtenants, but since you ask whether the subtenants should “move out,” it seems that there is no longer any “original tenant” in the unit. Presumably, your intention in wanting the subtenants to “move out” and then sign a new lease agreement and move back in is to obtain a fair market rent.

The Rent Ordinance frowns upon any action that can be construed as a sham and/or is a waiver of tenant’s rights. Having three subtenants move out and then move back in to give the appearance of a new tenancy at a higher rent would violate the Rent Ordinance; the tenants could later argue that they were coerced to sign a new lease agreement and pay higher rent for a unit they already occupied under rent control protection.

But, the state Costa-Hawkins Act may be applicable in your situation. The Costa-Hawkins Rental Housing Act (California Civil Code Section 1954.53(d)), and the local corresponding provision, San Francisco Rent Ordinance Section 37.3 (d), authorizes an unlimited rent increase in some circumstances where the original occupant no longer permanently resides in the unit and the remaining subtenant did not reside in the unit prior to January 1, 1996.

However, subtenants can challenge the unlimited rent increase if they can show that the landlord waived her rights to increase the rent by: (1) affirmatively representing to the subsequent occupant that they may remain in possession of the unit at the same rental rate charged to the original occupant; or (2) failing, within 90 days of receipt of written notice that the last original occupant is going to vacate the rental unit or actual knowledge that the last original occupant no longer permanently resides at the unit, whichever is later, to serve written notice of a rent increase or a reservation of the right to increase the rent at a later date; or (3) receiving written notice from an original occupant of the subsequent occupant’s occupancy and thereafter accepting rent, unless, within 90 days of said acceptance of rent, the landlord reserved the right to increase the rent at a later date.

You should review the previous landlord’s tenant files to see whether a 6.14 Notice or other reservation of rights to increase the rent were served on the subtenants, or when actual notice was received that the last original tenant vacated the unit. The presence (or absence) of those documents will determine whether an unlimited rent increase under Costa-Hawkins would overcome any challenge by the subtenants.

Even if you are unable to serve a rent increase under Costa-Hawkins, do not forget that the subtenants are still bound by the terms of the lease agreement of the original tenant, even though they may not be listed on said agreement.

- Marina Franco

Q. Our garage has no storage areas, and the rental agreement states that no storage areas are available. Despite that, old tires, a computer table, and tools and equipment keep being left in the garage. We leave notices that the items need to be removed and have received no response from the tenants. Can we issue a 24-hour notice of removal and dump the objects? How can we impose a deterrent fine to stop this pile-up from happening in the future?

A. You can request, as you have, that the tenants remove the objects within a certain time period. However, if the tenants fail to remove the objects within that time period you should not unilaterally “dump” them. Also, absent a lease provision that complies with law, including the requirements for liquidated damages, you cannot impose a deterrent fine to penalize the tenants, should they store objects in the garage in the future.

However, you should have the right to enforce the lease covenant that states that no storage space is available (and that it is not a housing service). It would strengthen your legal position that the breach of covenant was “material” if you could show, through the warning letters, that the tenants intentionally left the items there or that the items themselves or their placement was an issue, for example that they blocked egress, or were a potential fire hazard. Enforcement of the lease covenant would be by service of a Three-Day Notice to Perform Covenant or Quit. The notice will provide three days in which to remove the improperly stored objects. If they fail to remove the objects within the three-day period, then an unlawful detainer complaint (an eviction action) can be filed after expiration of the notice.

Since the tenants’ storage of personal items in violation of the lease is not an immediate threat to the other tenants in the building or the structural integrity of the building, and since a possible tenant defense could be that any breach was not “material,” you should not serve the notice immediately upon discovering the presence of the improperly stored items. You should inform the tenants in writing of the covenant in the lease and the items you want removed, as you have already done. You have to assume, prior to commencing any legal action against a tenant in San Francisco, that your motives for serving the notice will be scrutinized. If a landlord sends warning letters to the tenant before an eviction notice, it would show a judge or jury that the breach was material and that the landlord took action only as a last resort.

A landlord wants to make sure that he or she does not waive his or her right to enforce the covenant in the lease by allowing the tenant to violate that provision for a substantial period of time without enforcing the covenant. Finally, in the future, you may want your lease to be really clear as to what the tenant’s rights/obligations are regarding storage. It is not clear from the question whether the tenants have parking. A tenant may argue that having a parking spot permits some storage of items, unless it is stated otherwise in the lease agreement.

- Lawrence M. Scancarelli
and Jerod Hendrickson

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The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of SFAA or SF Apartment Magazine. The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Saul M. Ferster can be reached at 415-863-2678. Michael C. Hall can be reached at 415-512-9865. Marina Franco is with Wasserman-Stern and can be reached at 415-567-9600. Lawrence M. Scancarelli and Jerod Hendrickson can be reached 415-398-1644. Copyright © 2008 by SF Apartment Magazine. All rights reserved.