legal corner q&a
Mind the OMI Gap
by Various Authors
Q. Our tenant just asked if she could add her new husband to the lease. Can we deny her request?
A. Yes, and you absolutely should deny this request. Adding someone to a lease agreement may make the new person a co-tenant. Under a state law known as the Costa-Hawkins Rental Housing Act, rent can be reset beyond rent control limitations when the last original occupant who occupied a unit pursuant to a rental agreement with the owner no longer permanently resides there. In other words, if the wife is the only person on the lease and moved into the unit before living with the husband and, several years down the road, the wife vacates, leaving the husband behind, the landlord can raise rent without regard to the local rent control limitations by invoking Costa-Hawkins.
However, if the landlord placed the husband on the lease when he moved in, the husband could successfully argue that he is a co-tenant as opposed to being the wife’s subtenant, and thereby defeat the owner’s attempt to raise rent in the event the wife leaves. For this same reason, landlords should be careful about accepting rent checks from subsequent tenants, although oftentimes wife and husband will submit a check from a joint checking account. (In such a circumstance, the owner may accept the joint check; incidentally, do not accept two checks, one from each spouse, for their respective portions of the rent.) Some landlords worry that a failure to put the husband onto the lease means that he will not be bound to the rules of the rental agreement. Yet state law essentially binds the husband, as a subtenant, to the terms of the master lease agreement in so far as if he, or the wife, breaches the lease, the entire tenancy, including the husband’s subtenancy, is forfeited. As such, there is no appreciable harm in keeping the husband off of the lease.
Costa-Hawkins states that an acceptance of rent by the owner will not waive a landlord’s right to establish new rent when the last original tenant leaves unless the owner has received written notice from the last original tenant that she is leaving and thereafter accepted rent from the subsequent occupant.
The San Francisco Rent Board, following a line of court cases, has expanded this “waiver argument” to include instances where the landlord recognizes, through actions, a subsequent tenant as a co-tenant; for example, waiver may occur if the landlord accepts rent directly from the subsequent occupant, negotiates rent increases with him, and/or corresponds directly with him about matters related to the tenancy. If such direct acknowledgment occurs, the husband could successfully argue that he has become a co-tenant, even though he did not sign the rental agreement.
Therefore, it is imperative that owners ignore subtenants. They should not be added to a rental agreement. They should not be required to submit applications or to sign subtenant agreements. Rent should not be accepted from the subtenant. Most importantly, when the last remaining original tenant vacates, a rent increase notice, and, if desired, a new rental agreement, should promptly be issued by the landlord and served on the subtenant, who then becomes the master tenant with a new “at market” base rent.
— David Wasserman
Q. Are there any circumstances in which an owner can move out of a unit less than three years after an OMI eviction? My wife is about to be transferred to a new job out of state. Am I really not allowed to move with her until the three years are up?
A. This question reveals a common confusion about the requirements of the Owner Move-in Provisions of the Rent Ordinance. Section 37.9a(8) states in pertinent part, “The landlord seeks to recover possession in good faith, without ulterior reasons, and with honest intent, [f]or the landlord’s use or occupancy as his or her principal residence for a period of at least 36 continuous months.”
These requirements merely set forth the owner’s required state of mind in order to do the eviction. The intent to remain in the subject premises as the owner’s principal place of residence for at least 36 continuous months must be held in good faith, with honest intent, and without ulterior reasons at that time. If so, the owner is entitled to evict.
Of course, unforeseen circumstances may evolve that cause the owner to vacate the unit in less than 36 months. A wife being transferred to a “new” job out of state, if unanticipated, is one of those circumstances. In such a case, the owner should be permitted to move with his wife. (There is a substantial difference, however, between someone whose job is being transferred, and someone who has actively sought a job elsewhere.) The unit must be offered back to the evicted tenant at the last rent being paid, and if the tenant no longer wishes to occupy, it may be offered to the general public, but at the same rent. (This rent
restriction may be invalid as preempted by the state Costa-Hawkins Rental Housing Act.)
Unfortunately, no matter the legal analysis, if an owner fails to occupy for the minimum 36 months, he is inviting a lawsuit. The tenant will not bother to consider new facts or resolve doubts in the owner’s favor, but will undoubtedly charge failure to comply with the Rent Ordinance.
The result can be, and often is, a wrongful eviction lawsuit. Such lawsuits can easily reach six-figure judgments, because the tenant damages are automatically tripled, including their attorneys’ fees, moving expenses, and the difference between market rent for the unit and the rent the tenant had been paying for the unit, for the period the tenant would have occupied absent the eviction. Even if you win, the defense costs can be oppressive. Hopefully, you’re carrying wrongful eviction insurance.
Nevertheless, to avoid a lawsuit, I would advise you to remain in the premises until the 36 months has run, legal rights notwithstanding. While there may be a big gap between your technical rights and the practical way these situations are viewed by potential litigants and courts, you don’t want to find yourself falling into that gap.
— 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. David Wasserman is with Wasserman-Stern and can be reached at 415-567-9600. Saul M. Ferster can be reached at 415-863-2678. Copyright © 2008 by Black Point Press. All rights reserved.