SF Apartment : November 2017

LEGAL Q&A

Reduce and Renew

Q.  On a yearly lease that has been renewed twice with increases, the tenants are asking for a rent reduction. I’m willing to give a temporary rent reduction for one year. Is there a way for me to legally do this, and then base future rent increases on the previous non-reduced rate?

A. The mechanics of rent control and contract law unfortunately do not encourage acts of spontaneous generosity. The precise details may be dictated by the specific provisions of your lease, but generally the potential options are as follows:

You might informally agree to accept less rent from your tenants without objection. This is viable so long as no dispute arises later. However, as the question suggests, the lack of a formal adjustment may imply a waiver of the actual rent for the premises, and could lead to an effectively permanent rent reduction. This is especially true if the tenant develops any expectation that the reduction would continue indefinitely, or if the endpoint is in any way unclear. This is therefore the riskiest path.

Another alternative would be to mutually amend the lease with a temporary rent addendum. The addendum can state on its face that a rent reduction is applicable for a specific period of time, and then the rent is restored to the original value. If the same lease is renewed again in the future, the amendment would remain in place, but inoperative, since the effective dates would have passed. However, if the tenants change their mind during the reduction, or at any time after, they may petition the rent board for relief from an unlawful rent increase, despite the fact it was written into their contract. The possibility for open-ended uncertainty unfortunately makes even a mutual agreement an unattractive solution.

A safer method would be to accept the lower rent amount, but with a receipt issued to the tenant every month stating that you are conditionally accepting the partial payment, but reserving the right to request the balance in the future. You may then choose not to enforce the balance outstanding. This explicitly reserves your rights to avoid the waiver, but allows you to accept reduced rent temporarily. You may cease reserving your rights once you decide the original rent should be due. This also has the advantage of allowing you to withdraw the “reduction” earlier if you decide the basis for the reduction no longer exists.

Another possibility is for the tenants to continue paying the base rent upfront, and then the landlord refunds a portion equal to the rent “reduction.” That ensures that the rent is paid in full, and the “reduction” becomes a gift transaction, rather than a rent transaction. This has the clear advantage of requiring the tenants to perform in good faith to receive the discount, but obviously requires the tenants to possess the money to begin with. If the tenants do not, a variation could have the landlord gifting the “reduction” to the tenants first, who turn around and pay the rent in full. However, in that case the landlord bears the full risk of loss.

Because there is no established safe harbor for landlords to temporarily reduce rent for their units, the regrettable result is that it is better to strictly enforce the lease in full, without any charity. But if you must forebear receiving rent to preserve a good tenant, either issue a refund after receiving the rent in full, or clearly reserve your rights to collect the full amount, in writing, after each and every partial payment by your tenants.

—Matthew Quiring

Q.  In my eight-unit building, monthly rent includes one parking space per unit. Per the lease agreement, tenants can park one car with a license plate that matches what they indicated in the agreement. The agreement states that violations will result in the loss of the parking spot. I’ve noticed that a handful of cars are not listed. What are my options?

A. There are a few ways to approach this issue.

Talk to your tenant: Unsatisfying for a legal Q&A, but this would be the simplest way to make sure your tenants are the ones parking in their spaces.

Sever the parking space from the tenancy: The Rent Ordinance defines “rental unit” to include “housing services” (like “garage and parking facilities”). Since 2006, it has required landlords to have the same “just cause” to “sever” these housing services as to terminate the tenancy itself. (The change aimed to stop “inverse” rent increases and evictions, where landlords took away essential parts of the tenancy.) However, the city has still not created any specific mechanism for how a landlord is supposed to do this. Your lease clearly contemplates the forfeiture of the parking space based on this breach, but an unlawful detainer is not equipped to “evict” a portion of a tenancy.

In theory, you change the terms of the tenancy to disallow parking. Rent Board Rule 12.20 prohibits a landlord from evicting based on breach of a unilaterally imposed term (except those otherwise authorized by the Rent Ordinance). Arguably, because your tenant is in breach (a just cause to “sever” the parking space), this is an authorized change.

Evict: Breaches supporting an eviction must be of a material term of the lease. Your provision ostensibly goes to the heart of the contract: you need to know who is entering your property for safety/liability reasons. On the other hand, the lease itself limits the remedy to “loss of parking.” So if the tenant is allowing others to park in their space, even after you changed the terms to remove parking, you could serve a three-day notice, not for the trivial breach of how their using the space, but for the unauthorized use once they’ve lost it.

Again, severing terms like this is a bit novel. You would also need the right “dominant motive” in proving up your case—that is, you’re enforcing valid provisions of the lease dealing with safety and lawful use, not using an eviction as a pretext to recover a submarket unit. (Good facts: they rent the space to strangers for a profit; Bad facts: they just forgot to tell you about their new Kia Sorento this whole time.) Ultimately, this would be a difficult lawsuit to win, but even bringing a good faith lawsuit will gain you ground, as tenants may lawfully waive their rights in settlement of an unlawful detainer action.

Enforce the Contract: Again, severing housing services is tricky, and the above approach is nuanced, but you also have a contract you can enforce. Even if the breach is immaterial (for purposes of eviction), you can still sue for damages. You could also seek a declaration of rights to the space going forward, or even enjoin its use. This raises the stakes on both sides (and always check your lease for an attorney fee provision before filing a lawsuit), but this is the most balanced way to enforce your contract rights.

—Justin Goodman

Q.  The Department of Public Works posted a notice on my property stating that I am required to repair uneven sidewalk due to a tree root. I’m surprised, because I received the notice at the end of June, just a few days before the city assumed responsibility for street trees (Prop. E). Am I still liable now that Prop. E is in effect? 

A. In November 2016, San Francisco voters passed Proposition E, which requires the city to maintain trees on sidewalks adjacent to a property owner’s property, and also to repair sidewalks damaged by such trees. This law went into effect on July 1, 2017. Previously it was the property owner’s responsibility to maintain such trees, and the property owner was liable for damage resulting from a failure to do so.

Under Proposition E, any local law that imposes liability on property owners who fail to maintain such trees is no longer enforceable so long as the damage occurred on or after July 1, 2017, and was the result of the city’s failure to maintain such trees. Proposition E does not impose liability on the city for damage that occurred as a result of the property owner’s responsibility to maintain such trees prior to July 1, 2017. In other words, it is not retroactive.

Accordingly, if the damage occurred as a result of your failure to maintain such trees prior to July 1, 2017, then you may remain liable for that damage.

—Steven Williams

Matthew P. Quiring and Steven Williams are with Fried & Williams, LLP and can be reached at 415-421-0100. Justin Goodman is with Zacks, Freedman & Patterson, PC, and can be reached at 415-956-8100.