Legal Q&A

Ex Marks the Spot

written by Various Authors

In the case of divorce, is a rent-controlled apartment considered an asset?

Q. A single man moved into a unit five years ago. He has since gotten married, gotten divorced, and moved out, leaving his ex-wife behind as an occupant. She is not on the lease, and her ex-husband is still paying the rent. Because they were married, is the lease agreement now hers?

A. An old joke: “Why is divorce so expensive? Because it’s worth it.” It sounds like your tenant gave up a valuable rent controlled apartment to his ex. On the other hand, maybe he was feeling a little spiteful and knew what he was doing all along—it was valuable to him (measured by the difference between his rent and market rate). By that same measure, it should be worthless to her.

A normal month-to-month tenancy isn’t an asset—it’s a continuing relationship between landlord and tenant that can generally be terminated in 60 days. Rent control also isn’t an asset. It’s a regulation. But because rent-controlled tenancies are also eviction-controlled, tenants have the potential to maintain their tenancies over time. The longer the tenancy, the wider the gap between contract and fair market rent, and the more valuable the tenancy is to that tenant.

At the same time, the Costa-Hawkins Rental Housing Act protects landlords’ ability to offer vacant apartments at whatever price they want, despite local price controls. And this deregulation even applies when an apartment is still occupied but is “vacated” by the last rent-controlled tenant. Your tenant’s tenancy is valuable to him, but to anyone else, it’s just a tenancy. Legal separation focuses on dividing “assets.” This could include some kinds of leases, like those with options to purchase, but again, a month-to-month tenancy is not an asset.

It’s good that he’s still paying the rent (because if you had accepted rent from her, she could argue that you created a tenancy with her directly, and at the lower rent!). But you should serve the increase soon. While she shouldn’t acquire new rights just because he isn’t living there, a local rent board rule purports to make your right to market rent expire 90 days after you have “actual knowledge that the last original occupant no longer permanently resides at the unit.” This rule has been around since before Costa-Hawkins, and previous versions actually sought to “elevate” subtenants to “original occupant” status if the landlord did something as trivial as responding to a subtenant repair request. Costa-Hawkins was adopted to eliminate rules like this, but the rent board is still applying them in rent arbitration hearings, so it’s safest to comply and avoid the argument.

Another (likely preempted) local law considers it “tenant harassment” if your rent increase “coerces” them to vacate (whatever that means). This year, SFAA sued to overturn that law, but the case is still pending. To stay safe in the meantime, it’s good practice to let both of them know you’ll be increasing his rent because he’s not living there, propose an amount, and ask if they have a different opinion on a fair price. Negotiating on price may lower your upside, but it will limit your liability. And if the ex takes over the apartment at the new rent, your tenant might be grateful for an amicable end to at least one of his relationships this year.

—Justin A. Goodman

Q. Former residents left behind a full apartment’s worth of furniture. They’re not responding to emails or calls. What do I do?

A. The answer to this question depends in large part on whether the rental unit is a residential or commercial unit. If the unit is a residential unit, the landlord’s options would be governed by Civil Code Sections 1951.3, 1987 and 1988. Taken together, these sections provide that when a tenant has abandoned personal property (i.e., furniture, papers, personal effects, etc.) at the rental unit, the landlord must post and mail a notice describing the personal property left behind by the tenant. The notice is called a Notice of Belief of Abandonment or a Notice of Right to Reclaim Abandoned Property. The notice should affix pictures of the personal property in question and accurately list the items.

If the notice is personally served, the tenant has 15 days to respond to the notice and reclaim the abandoned property. If the notice is mailed, the tenant has 18 days after the notice is deposited in the mail to respond.

If the tenant responds within the above referenced period, the landlord must return the tenant’s personal property to the tenant. If the tenant fails to respond by the above referenced period and the landlord “reasonably believes” the personal property is worth more than $700.00, the landlord must sell the property at a public sale by competitive bidding. However, if the landlord reasonably believes the property is worth less than $700, the landlord may retain the property for their personal use or dispose of it in any manner.

For commercial real property, the process is fairly similar, but is governed by Civil Code Section 1993. The key difference is that the landlord cannot retain for his own use or dispose of a tenant’s personal property after the above referenced period unless he reasonably believes the personal property is worth less than $2,500.00—a much higher threshold than the $700.00 figure for residential property.

Landlords should be careful to follow the letter of the law with regard to the disposition of abandoned tenant property.

—Johnathan Madison

Q. In my three-unit building, one tenant has filled the shared courtyard with her belongings, and now there is no clear path from the building’s backdoor to the courtyard exit. Is this a fire hazard? Can I have her move her things, despite our agreement stating the courtyard is for tenant use?

A. Tenant storage of personal property outside of a rental unit is a common problem, which is why it is important to ensure that all of your leases contain a provision negating a tenant’s right to store possessions anywhere on the property other than in the rental unit and any permitted on-site storage, such as in a garage or designated area.  Irrespective of the lease’s terms, and as is true in your case, while a portion of the property may be reserved for tenants’ use, that does not translate into the right to transform such space into an outdoor storage facility. Provided his lease does not permit the offending tenant (who I will refer to as “Allen”) to store items in the courtyard, Allen is in violation of his lease. Additionally, provided the other tenants (who I will call, respectively, “Bill” and “Charlie”) have the right to use the courtyard, they are being deprived of the use of such space. As such, you may be in violation of Bill’s and Charlie’s leases by failing to provide them the use of the courtyard.

Allen’s storage of possessions in the courtyard which blocks any paths of ingress to or egress from the property is a violation of San Francisco Fire Codes and you, as the landlord, have an obligation to maintain the property in a manner that is safe for all residents and in compliance with all laws, statutes, and regulations. For that reason, you must immediately clear the courtyard of Allen’s possessions. By failing to do so, you run the risk that the City Fire Department, Bill, or Charlie will take action against you for permitting a dangerous condition to exist on the property.

In addition to creating a fire hazard, the existence of Allen’s personal property in the courtyard may raise other concerns, such as the attraction of pests which is a nuisance as defined by California law and may subject you to liability from Bill and Charlie or the property’s neighbors.

Despite the possibility of potential claims against you by the City and/or your tenants, do not move or even touch Allen’s possessions. Doing so opens you up to possible claims for stealing, damaging, or otherwise harming Allen’s property. The removal of Allen’s possessions from the courtyard, unless otherwise agreed to by Allen, must be done by Allen, or by you but only pursuant to a Court order or other authority.

As a result of Allen’s actions, the property is currently in violation of City and County Fire Codes.  Actions to remedy this unsafe condition should be taken immediately.

—Susan K. Breed

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. Jonathan Madison with Fried & Williams LLP and can be reached at 415-956-8100. Susan Breed is with The Offices of Denise A. Leadbetter and can be reached at 415-572-5015.