SF Apartment : November 2016
All in the Family
by Various Authors
Q. A long-term tenant has passed away. His adult son, who previously lived in the apartment with his parents but now lives with his family in his own home, has taken over the below market-rate lease. He claimed his intention had always been to return to the apartment eventually. Is there anything I can do to increase the rent or start a new lease?
Yes. You should immediately serve a notice of rent increase raising rent to market. Under a state law known as the Costa-Hawkins Rental Housing Act, a landlord may impose an unlimited rent increase when the last original occupant no longer permanently resides in the apartment and the person remaining behind is a lawful subtenant or assignee. The subtenant or assignee has the right to contest the rent increase by filing a petition with the Rent Board or challenging the rent hike in superior court. The adult son will likely contest this bump by claiming that he is still an “original occupant” despite having previously moved out.
There is no definitive law or decision that resolves the question as to when someone loses permanent occupancy status. Rent Board rulings have been all over the map. Two recent Court of Appeal decisions permit children to take over their departed parents’ lease at the rent-controlled rate, but in both of those cases, the now-adult offspring had continuously lived in the apartment or had departed temporarily. Similar Rent Board decisions afford kids the ability to return and to resume their original occupancy status if the period of absence was “justified,” meaning for school, military service, extended work travel, and the like.
Here, you have a situation where the adult son lives with his family in his own home and is now taking advantage of his parents’ passing. His purported self-serving intention of wanting to come back should not be the determinative factor as to whether he should be able to resume his original occupancy status. Rather, because his absence was not temporary or transitory but instead permanent, the hope is that the Rent Board or superior court judge would hold that he was no longer an original occupant when his last parent passed away and that he cannot just unilaterally reinstate his prior original occupancy status because of the death.
The key, however, is to issue the rent increase immediately. The notice period will likely be sixty days as the new rent will exceed 10% of the current rate. During this 60-day period, you should not cash remitted rent from the son. As for starting a new lease, a Costa-Hawkins rent increase is an affirmation that the current tenancy with the current lease continues with a new monthly rent, so you can ask but cannot compel the son to sign a rental agreement.
The more complicated scenario is when an adult child returns during the lifetime of the parents. Had that occurred here, there would be a more compelling case that the son’s original occupancy status was reinstated. Indeed, there have been Rent Board decisions where an adult child divorces or undergoes a life change and does move back before mom and dad depart, and in some of those instances, the existing rental rate was deemed to remain intact.
In sum, you should immediately issue the rent increase. Retain a competent attorney to guide you through the process and gather evidence through a private investigator or any other reliable source to show when the son moved out, when he bought his own home, and when you first received notice of his alleged intention to move back in. If he is seen as simply trying to use the rent law not for his own legitimate housing needs but as a means to profit, then your rent increase should survive.
I purchased a tenant-occupied building. One protected tenant doesn’t have a lease. How do I proceed with late payments?
When you buy a property with tenants, you put yourself in the same position as the prior landlord, and have the same rights and obligations that the prior landlord had. So you, like your predecessor, are bound by the terms and conditions of the rental agreement with the tenant.
While most rental agreements are written, sometimes tenants occupy a rental unit under an oral rental agreement. An oral agreement is perfectly legal, but sometimes it may be difficult to ascertain the terms and conditions of an oral rental agreement when a new landlord takes over. This issue is often addressed by requesting the tenant to complete and sign an estoppel certificate. An estoppel certificate is commonly used in purchase/sales transactions and requests the tenant to provide information regarding the tenancy, including the rental amount, the rent due date, any grace periods or late fees, et cetera.
Without an express written agreement providing for a late rent payment fee, a landlord cannot lawfully charge one. While the landlord may be able to serve a nonpayment of rent notice and even possibly evict the tenant if the tenant does not timely pay the rent, the landlord may not charge the tenant any fee for paying the rent late.
You may consider requesting that the tenant sign a written rental agreement that includes a late rent payment fee. But the tenant is under no legal obligation to do so and probably will not agree to do so when a late fee is contemplated.
You may also consider unilaterally imposing a late fee with a 30-day written notice. But you may not evict the tenant for failure to pay the late fee because a tenant may not be evicted for violating a term of the tenancy that was unilaterally imposed. You may, however, be able to enforce it in a small claims court action.
In summary, absent a written rental agreement imposing a late rent fee, you cannot charge one. While you may be able to impose a late fee, as a practical matter, it may be unenforceable or at the very least, difficult to collect.
A long-term tenant got married a couple of years ago, but I never had communication with or accepted payment from his spouse. I recently went into the apartment to fix a leak and noticed that the original tenant no longer resides in the apartment. A quick internet search told me that he now lives in Oakland. Can I pursue market rent?
Yes, you can. Under the Costa Hawkins Rental Housing Act, “Where the original occupant or occupants who took possession of the dwelling or unit pursuant to the rental agreement with the owner no longer permanently reside there, an owner may increase the rent by any amount allowed by this section to a lawful sublessee or assignee who did not reside at the dwelling or unit prior to January 1, 1996.” The fact that the original tenant has married the subtenant does not automatically convert the subtenant into a master tenant or require that she inherit his rights to a controlled rent. As long as you’ve never done anything to make the spouse your tenant, you have the right to raise the rent, so long as the criteria in Costa Hawkins are met.
I had this very case before the Rent Board a few years ago. The tenant’s girlfriend moved in with him when he first took possession of the unit. Sometime thereafter, the owner became aware that she was living there, but never did anything to create a landlord/tenant relationship with her. Subsequently, the tenant and girlfriend married, and then divorced, and when the husband moved out, we served them with a Costa Hawkins Notice of Rent Increase. The now spouse of the original tenant argued that she was present with him when the owner showed them the apartment and when the lease was signed. She had asked the owner questions regarding the availability of public transportation, shopping, and other features in proximity to the unit, evidencing her interest in the location.
At the Rent Board hearing, based on all these factors, the wife argued that she entered into occupancy pursuant to the lease. She was unable, however, to show she had ever advised the owner that she would in fact be living in the unit until after she and her then boyfriend moved in. Indeed, the application from the boyfriend, and the lease itself, stated that only he would occupy the apartment. The Rent Board permitted the rent increase, finding that their subsequent marriage did not change the character of her occupancy, i.e. as a subtenant, and the landlord could not be held to have a relationship with her when he didn’t know she’d moved into the premises.
In your situation, the real challenge will be developing the facts. You must show that the husband no longer permanently resides in your unit. A quick internet search may not be enough to achieve that for you. It may behoove you to hire a private investigator to develop evidence of his residence elsewhere and/or put a security camera in, which will demonstrate his absence. Make sure that the rent checks are coming in only from the husband, and not the spouse, while you investigate and until you give the Costa Hawkins rent increase notice.
—Saul M. Ferster
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 Law Offices and can be reached at 415-567-9600. Steven Williams and is with Fried & Williams, LLP and can be reached at 415-421-0100. Saul M. Ferster can be reached at 415-863-2678.