Legal Q & A
written by Various Authors
San Francisco heavily regulates short-term rentals.
Read on to learn when you can intervene on your tenant’s Airbnb
Q. Per common area surveillance footage, I know my tenant is using the second bedroom in her unit for short-term rentals, despite this going against our lease agreement. She is using the rent controlled unit as a business, while I bear the burden of paying for insurance, taxes and maintenance. What recourse do I have?
A. San Francisco has an awkward relationship with land use. Sure, we have places to run businesses, and places to live, and even places for our guests to stay overnight. But sometimes these uses overlap (whether legally or illegally, and whether intentionally or not). San Francisco’s Residential Unit Conversion Ordinance (RUCO) addresses one of the blurry lines—between permanent residential use and “transient” rental use of housing units.
Short-term leasing in San Francisco is highly regulated. The Rent Ordinance only regulates rental rates on permanent residential rentals (at least 32 days). Over time, price controls turn these long-term rentals into affordable housing, so landlords have a financial incentive to offer short-term rentals, which will always fetch fair market price. The RUCO is a tool to prevent the loss of valuable affordable housing stock.
Under the RUCO, transient use is defined as occupancy for less than a 30-day term. Assuming the people you’re spotting aren’t subtenants (who are governed by different rules) or guests (who pay nothing for occupancy and who expect you to entertain them all weekend even though they said they were just here for a conference and only needed a place to crash), it sounds like your tenant is offering short-term rentals.
The prohibition in your lease is important, but it’s not the whole picture. The RUCO only allows tenants to offer their “primary residence” for short-term leasing. They must register their “business,” collect short-term occupancy tax, and obtain liability insurance. They must also live in their unit at least 3/4 of the year. A landlord’s initial remedy for violations of the RUCO is a 30-day notice to cure the violation of law. (The Rent Ordinance prohibits nuisance evictions based on the first, uncured violation of the RUCO.) While a tenant could withdraw their unit from the hosting platform, complete the registration process, and resume, the RUCO does not otherwise authorize short-term rentals where a lease prohibits it.
Therefore, if your lease prohibits short-term leasing, the only way for your tenant to cure this violation is to stop doing it altogether. If your tenant continues to do so after the 30-day notice, serve a pair of three-day notices to cure or quit (one for breach of the lease, one for the violation of law) to set up an unlawful detainer. Also, even if your lease didn’t prohibit short-term leasing, the RUCO—like San Francisco Rent Ordinance—prohibits a tenant from profiting from renting to others. Only an eviction for cause will recover the unit, but a landlord in this situation could also sue for violations of unfair competition law and disgorgement of the illegal profits.
—Justin A. Goodman
Q. Is it legal to reject a new tenant because he only wants to rent the unit for one year? I would prefer a minimum two-year lease agreement.
A. A landlord is generally entitled to decide how long they wish to rent their property, whether month-to-month, year-to-year, or for longer periods. It is possible for local ordinances to impose a specific rental obligation, such as in the City of Alameda, which requires every tenant to be offered a one-year lease at least once, but this obligation has not been adopted in San Francisco.
Landlords should consider for themselves what length of tenancy best suits them. Month-to-month tenancies give the most flexibility, whereas longer tenancies offer the stability of relatively reliable long-term income and fewer turnover costs. From a tenant’s perspective, a long-term lease sacrifices flexibility by offering a promise that the landlord won’t terminate the tenancy on short (30/60 day) notice.
Eviction controls upend this calculus by allowing month-to-month tenants to keep the option to vacate on short notice and the security that landlords will not unilaterally terminate their tenancies. This confers much of the benefit of a long-term lease to short-term renters, and accordingly makes long-term leases typically disadvantageous to landlords.
Since eviction controls tend to make even month-to-month rentals into long-term tenancies, the main difference with a long-term lease is that a year-to-year lease is harder to change than a month-to-month lease. For instance, if a landlord wanted to remove an attorney’s fees provision from a year-to-year lease, the landlord would have to give a year’s notice in advance of the change, whereas a month-to-month tenant would only get 30 days’ notice. Similarly, a landlord with a tenant on a two-year lease would not be able to terminate the tenancy for an owner move-in until the existing two-year tenancy expired.
On the other hand, a tenant who signed a two-year lease and vacated after 18 months would be liable for the remaining balance of unpaid rent, except that a landlord would be obligated to try to re-rent the unit as quickly as reasonably possible to mitigate the damages of the early breach. By then, the absconding tenant may have disappeared without recourse, or have few assets to attach. Usually, most of the value of a residential tenancy is in the property itself, not the value of the occupants.
The San Francisco Rent Ordinance does allow landlords to evict tenants at the end of a fixed-term lease, but only if the landlord offers another lease of “like” duration and under terms that are “materially the same” as the prior lease, and the tenant refuses. This requires the landlord to strictly adhere to a year-to-year (or more) renewal schedule with their tenants, never rolling over to month-to-month, and always offering leases that are substantially the same each and every time. These inflexible requirements are seldom, if ever, practical, and still give tenants all the decision power in the exchange.
Shorter tenancies may mean more screening and more turnover, but they also create opportunities to adapt and update your rental agreements to suit current market conditions. Relying on a long-term lease to guarantee income may miss the mark if the damages for vacancy are offset by being able to re-rent the property at a higher monthly rate. However, if rents are declining, or if the premises is difficult to keep occupied, then a longer-term lease may offer better protection.
—Matthew P. Quiring
Q. Due to a burst pipe, a tenant had to vacant his unit for one full month for repairs. His extensive renter’s insurance covered damage to his belongings and his temporary housing. I did not collect rent for the month he had to vacate. Other than repairing the damage and returning the rent, do I have other obligations to this tenant?
A. The implied warranty of habitability requires that rental units be safe and habitable—this includes having working plumbing. The landlord has the obligation to make sure that water pipes are in operable condition. You as the landlord have the responsibility to repair the pipe.
Whether you need to compensate your tenant for damage to their personal belongings depends on various factors. If your tenant caused the water pipe to burst, then you are not obligated to compensate your tenant. You can demand that your tenant pays for the cost of the repairs.
If the water pipe burst was caused by the landlord or no one’s fault, then you are responsible for compensating your tenant. You cannot charge rent for the time that the tenant was without his or her unit. So, it is good that you did not collect rent for that time. Also, your tenant may request reasonable compensation for any inconvenience, such as being without a kitchen and having to eat out. In those situations, you should request your tenant to provide reasonable documentation, (i.e. receipts). Additionally, any personal belongings that were damaged as a result of the water intrusion should be replaced or repaired by you.
In your situation, your tenant had renter’s insurance. Typically, tenants are not responsible for carrying renter’s insurance, although many leases require it. Your tenant’s renter’s insurance covered the damage to personal property. Any amount that was not covered by your tenant’s insurance and was a result of the water intrusion may need to be paid by you or your insurance company. If the landlord was at fault, the tenant may be able to make a claim and request the landlord cover the complete amount of damages.
—Angelica A. Sandoval
Q. I am required to install a fire alarm system with horns in my rental property. Do I need to install horns in sleeping areas if the common area horns can be heard from the bedrooms?
A. Owners must comply with NFPA 72–Fire Alarm Standards, which states that a 75-decibel alarm sound must be heard at the sleeping area “pillow level,” and if there is a door, curtain, or other partition between the pillow and the horn, then those items (i.e.; doors) must be closed to test the worst case scenario for sound annunciation at the pillow. Please note that sleeping areas are not just “bedrooms,” but any area used for sleeping (i.e.; a dining room or office converted to a sleeping room). This will be observed during the acceptance test by the SFFD.
From what I have experienced, it is very unlikely that you can have a horn in a common corridor and still obtain a 75-decibel low-frequency alarm signal at the pillow with all doors closed between the areas. Of course, a lot of this depends on the size of the units and the locations of the sleeping areas relative to the common areas where horns are installed. The building owner should discuss this with their fire alarm contractor, who will plan the system.
So, the answer is: it depends. The horn shall not only be heard, but it shall also produce at least 75-decibels at the pillow level, and it must be of the low frequency type horns. That is the difficult part to obtain without a horn in each sleeping area.
—Captain Ken Cofflin,
Port of SF Fire Marshall
[The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Angelica Sandoval is a real-estate attorney from Fried & Williams LLP and can be reached at 510-625-0100].
The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Justin A. Goodman is with Zacks, Freedman & Patterson, P.C. and can be reached at 415-956-8100. Matthew P. Quiring and Angelica A. Sandoval are with Fried & Williams LLP and can be reached at 510-625-0100. For more information on San Francisco fire alarm requirements, visit www.sf-fire.org.