SF Apartment : October 2017

MASTERS OF DISASTER

Death and Taxes

by Dave Wasserman

This is a very relevant yet complicated question that almost every landlord inevitably faces at some point. Indeed, I myself have faced numerous tenant deaths both as a landlord and as a landlord attorney. While researching this topic, I came across many websites not just from authorities in California but also from all over the nation. The consensus, while uniform in many respects, leaves much to your discretion and furthermore highlights the fact that not every scenario has a clear-cut answer. I will try to shed as much light on this topic as possible. The following are the most common basic scenarios.

When a Tenant Dies Alone Inside of the Apartment

Property managers, at some point, will become familiar with the unnerving situation of having a tenant who is elderly and/or infirm that goes missing. It has been a while since anyone has seen her, and building residents begin asking if she is okay. I advise managers that, in such instances where the tenant lives alone, a “wellness check” may be in order. While not technically permitted by law, a legitimate wellness check is seemingly tantamount to an entry for an emergency purpose which, under the Civil Code, requires no notice. Wellness checks often reveal the worst-case scenario: a deceased tenant whose body has not been discovered for days. Incidentally, wellness checks sometimes expose a tenant in need who cannot get to a phone, so these entries may save lives.

If you find a deceased tenant, immediately contact the police. Do not disturb anything inside the apartment except for running water or appliances that should be turned off for safety. The police will contact the coroner. In most instances, once the body is removed, the unit is sealed pending an investigation by the coroner’s office. The coroner must rule out foul play and determine the cause of death. State law strictly prohibits you or anyone else without permission from “breaking the seal” and entering the apartment. As such, even if the investigation drags on, never enter the apartment (or allow anyone else to go in) until the coroner has removed the seal.

While the investigation is occurring, try to track down the tenant’s next-of-kin. Ideally, someone will emerge as a testator or trustee with legal authority to dispose of the tenant’s personal property. Make sure you see evidence of this authority, such as a court order or official trust document. Even if a responsible person emerges, remember that no one may enter the residence until the apartment is released with the coroner’s permission.

Once the coroner signs off, work with the deceased tenant’s estate to remove the personal property as quickly as possible. Many estate representatives want to leave the items in the apartment for the sake of convenience, forgetting that you as the landlord would like to start the process of rehabbing and re-renting the unit. I generally advise giving the estate representative one or two months to clean out the apartment, but not much longer. At the end of this period, I advise management to carefully catalog and photograph what remains and to thereafter place these items in storage at which juncture the heirs may take their time in deciding what to claim or toss. You want to set a firm but reasonable schedule so that the apartment is not out of use indefinitely. At the end of the process, the security deposit will be returned to the estate minus deductions allowed by law: Such deductions are limited to unpaid rent, recognizing that the tenancy ends with death, so rent deductions beyond the month of passing should not be taken; cleaning charges to return the place to its level of cleanliness that existed at the inception of the tenancy; and costs to repair damages beyond normal wear and tear.

When a Tenant Dies Outside of the Apartment

In many situations, a tenant dies in a hospital or otherwise outside of the home. In that instance, the coroner will not be involved. When you learn of the death, change entrance locks immediately. If you have contact information about next-of-kin, reach out right away and inform them that you will work with them to gain access once you verify their legal authority to act on behalf of the estate. Do not give out the new key, and when you grant access, you need to let the representatives in and out of the apartment during every visit. Next-of-kin should not be given free reign under any circumstance but should be supervised.

Not surprisingly, many family members or friends of the departed use a tenant’s death to claim a rent controlled apartment for themselves. In California, residential leases cannot be bequeathed as the tenancy ends upon death. Even when the tenant dies in the apartment, the lock should be changed provided the coroner consents and is given a new key. Indeed, you do not know who the tenant may have given keys to during her life, and I have experienced tough legal situations where a family member or friend suddenly moves in and then falsely claims to have always lived there. This is a battle you do not want to have.

As is the case when the tenant dies inside of the apartment, begin the process of working with the estate to remove all personal effects. Set a schedule thirty to sixty days out, and thereafter catalog what remains for storage. In both situations, do not accept “rent” from anyone, including the estate. Rental compensation for the days when the unit is offline because of the stored personal property ought only to be demanded and received in a probate proceeding upon formal submission of a creditor claim to the probate court. Accepting payment from a friend or family member could, in places like San Francisco, serve to inadvertently create a tenancy.

When a Tenant Dies and Others Remain in the Apartment

In many situations, a tenant dies and there are others living in the apartment. If these “others” are co-tenants, meaning they are on the lease or you have accepted rent from them in the past, the tenancy continues unchanged. Yet if they are strangers to you, and you are not sure as to when they moved in, consult a landlord-tenant attorney immediately to explore your ability to adjust rent to market under the Costa-Hawkins Rental Housing Act. Elderly tenants often have caregivers or live-in friends who are quite eager to assume the same low rent the decedent was paying. If you accept that payment or fail to promptly notice an increase, you might be forced to accept a new leasehold at the same rent for the next thirty or so years.

When There Are No Heirs or Family Members

Sadly, sometimes a tenant dies and no one comes forward to claim the body or possessions. When this occurs, change the locks immediately and coordinate the required inspections and sign-off through the San Francisco Medical Examiner’s Office. In my experience, this office works quickly to complete its investigation and to thereafter give you permission to dispose of the tenant’s remaining items. In general, the process takes a couple of months. During that time, you may move the tenant’s possessions into storage and begin the rehab work.

Other Hiccups

As referenced above, family members or friends may move in quickly and claim to be tenants. Recent changes to the rent law restrict the ability to evict unapproved occupants, but you may still (and should) promptly issue a market-rate rent increase under Costa-Hawkins. The same family members or friends may elongate the process for disposing of the decedent’s property. Remember, be firm about the move-out schedule, and constantly reiterate the plan to place unclaimed items in storage. (There is no defined time period for maintaining unclaimed possessions in storage, and this author advises that you try to store unclaimed items for up to a year.) Occasionally, the heirs will object to any movement of possessions. If they obtain a court order to this effect, you must obey it. Otherwise, catalogue, photograph and move everything as planned. In almost every circumstance, change the locks promptly after death and supervise all entries unless there are persons legitimately living there at the time of death.

Common mistakes to avoid include accepting rental payments from family members, allowing family and friends to have unrestricted and unsupervised access to the apartment, and permitting the move-out of items to go on indefinitely. Remember, absent an order from the coroner or the probate court, you are in charge of the process. Consult with an attorney to avoid costly mistakes. In sum, whatever you do, never turn over unfettered possession of the apartment to the decedent’s family or friends and, no matter how tempting to do otherwise, refuse their offers of compensation for the months that possessions are being retrieved and stored, even if you believe that they are acting sincerely.

David Wasserman is with Wasserman-Stern Law Offices and can be reached at 415-567-9600.