Feature
by Saul M. Ferster
By now, most landlords who belong to the San Francisco Apartment Association are hopefully using the latest version of the PPMA Rental Agreement for all new tenancies. There are a wide variety of reasons for you to do so, because the agreement omits of the standard attorney’s fees provision one finds in most generic off-the-shelf rental-agreement forms.The attorney’s fees provision in most residential rental agreements is more likely to hurt than help you, the landlord.
A reality in being a landlord in San Francisco is that life under the Rent Ordinance is at best uncertain. On the one hand, there is the body of California landlord/tenant law, and on the other, the requirements of the Rent Ordinance, and the two do not always mesh well. Frequently the Rent Ordinance imposes requirements on landlords that are not specifically defined and prescribes procedures not fully elucidated. Knowing whether to serve a three-day, a 30-day, or a 60-day notice may involve some guesswork. In addition, certain grounds for eviction such as drug use or loud, late-night parties can be difficult to establish. An eviction brought on such grounds may result in a verdict for the tenants simply because the landlord carries the burden of proof, and the jury does not know whom to believe. Other times, the Rent Ordinance is so vague or unclear that nobody really knows what is required, including the judge, and the landlord is more or less flipping a coin on his/her chances of success in proceeding against the tenant. What this means is that the outcome of litigation is never known for sure. What is known is that the attorney’s fees provision generally benefits the tenant only, because if the landlord wins, the likelihood of collecting attorney’s fees from the tenant is small.
Except in certain special statutory situations, the prevailing party in litigation is not entitled to recover attorney’s fees as part of the costs of the suit. As with other clauses in leases and rental agreements, the attorney’s fees provision was initially included to provide the landlord with recovery of such costs incurred when a tenant default necessitated legal action. However, my experience and I imagine yours as well shows that tenant non-performance either results from lack of means (the tenant cannot afford to pay the rent) or some sort of an attitudinal problem (“the world is mine, all others be damned!”). Indeed tenants with a chip on their shoulder the size of Nevada tend not to be particularly successful in dealing with other people, which means they often get thrown into the category of those with limited or no means. If you get a judgment against most residential tenants for attorney’s fees, you will never see a dime of it. A judgment is only paper, a mere proclamation by the court that you are owed something. You still have to find the money, if any, and collect it. To have a judgment against General Motors is one thing but quite another to have one against some dead-beat tenant with no job, or only a marginal one. The collection effort itself can be costly and fruitless.
Unfortunately, in our pro-tenant climate in San Francisco, the attorney’s fees provision will not only fail to benefit the landlord but may lead to ugly and unintended results. This is because a landlord, no matter how “poor,” has at least one asset —the property—subject to collection by the tenant.
Let’s say, for example, you bring an action against a tenant who has not paid the rent, because he can’t afford it since he/she doesn’t have any money. You might think this would be a simple matter of serving the three-day notice, filing the court complaint and getting a judgment. But when you file your complaint, lo and behold, in comes a responding pleading from a law firm representing your tenant. The plea alleges all manner of groundless habitability problems and insists that the tenant does not owe what you have demanded. How, you may ask, is this tenant who can’t afford to pay your rent able to go out and hire Cheatum, Bleedum & Scheister? The answer is simple—your attorney’s fees provision. The law firm is willing to take the case, because if the tenant can convince a jury that the rent owed is something, anything, less than what your three-day notice demands, the tenant will have five days in which to pay the reduced amount in court. Even if the habitability issues are largely bogus, the jury might reduce the amount owed. Having done so, the tenant then becomes the prevailing party, even though the reduced rent was awarded to you, and the tenant is entitled to recover attorney’s fees from you. I have seen several cases where I am convinced that in the absence of the attorney’s fees provision, the matter would have ended quickly and simply rather than in the involved and expensive procedure that developed as a result of it. With the prospect of prevailing party attorney fees in hand, the tenant may now be able to raise the rent money necessary to make that result happen.
To rewrite the clause to provide attorney’s fees to the landlord as prevailing party only would not prove helpful, because California Civil Code §1717 makes all attorney’s fees provisions reciprocal, no matter what they say. The truly unfortunate part of the whole landlord/tenant situation in San Francisco is that those landlords who tend to get hurt the most by being caught in draconian situations are the small “mom and pop” operations—often less sophisticated in their approach or less knowledgeable than some of the bigger landlords and management companies. Many of these small owners bring to the legal arena archaic rental agreements with clauses more suited to damage the landlord than to help. Also, they usually do not have wrongful eviction insurance. Sometimes these very same people want to take the biggest chances, and as a result they often become the biggest financial losers.
But take heart! You are not stuck forever if you have
an old lease or rental agreement containing the attorney’s
fees provision. You are
entitled, under Section 827 of the Civil Code, to change
the terms of tenancy to a month-to-month tenancy with
a 30-day written notice. Under
Section 12.20 of the Rules and Regulations of the Rent
Board, you may not evict a tenant for breach of a unilaterally
imposed condition, but
there is nothing that prohibits you from imposing a
In conclusion, while the attorney’s fees provisions
may be desirable in your commercial leases, they are
generally not so in your residential
rental agreements. Don’t sign agreements containing
them, and if you have them in old agreements get rid
of them. Your life will be much
simpler.
The opinions expressed in this article are those of the author and do not necessarily reect the viewpoint of the SFAA or the SF Apartment Magazine. Saul M. Ferster is an attorney who specializes in landlord/tenant law. He can be reached at 415.863.2678 . Copyright ©2003 San Francisco Apartment Magazine