The Property Management Shop

How to Beat the Game of Musical Chairs

by Marc Wilson

Q. I rented an apartment to a married couple back in 1998. The tenants broke up in 2000, subsequently divorced and the ex-husband moved out of the apartment. The wife, as the remaining original occupant, continued to reside in the apartment with her daughter. Later, the wife’s new boyfriend moved into the apartment and has lived there with the mother and daughter for over a year. Last week, I received a rent check from the ex-husband, so I deposited his check. When I called the wife, she told me that she, along with her new boyfriend and daughter, had vacated the apartment. She went on to tell me that her ex-husband had moved back into the apartment and would be living there from now on. Do I have to accept this guy as my tenant? He moved out over two years ago. The rent is $200 below market, and I want to raise the rent? What should I do?

A. These things happen. You can safely assume that the ex-husband never imagined that he would ever be moving back into the apartment after he had vacated. He probably did not even anticipate that the opportunity would present itself. This is all about the rent. I assume that if you rented the apartment to the ex-husband once, that he was then and is still now an “acceptable” tenant. You don’t want possession of the apartment. You just want market rent.

My suggestion is for you to simply file a petition for a rental increase with the San Francisco Rent Board. There will be a hearing, you will present your argument, the tenant will present his argument and then the hearing officer will render a decision. I would be reluctant to serve the tenant with a rent increase pursuant to Costa-Hawkins and then follow that notice with an eviction notice should the tenant fail to pay the increased rent. I don’t believe that all of the facts are on your side for this scenario.

Your particular situation does not warrant an aggressive position, one that might subject you to a wrongful eviction claim should the tenant prevail. Your case is weak, because you do not have nor have you ever solicited a formal notice from the ex-husband that he had in fact vacated. Nor have you ever received or solicited notice from the tenant in possession regarding the status of the occupants. Similarly, you never served the subsequent boyfriend a 6.14 Notice regarding his tenancy. Now you’ve accepted and cashed a rent check from the ex-husband. All of these facts fail to buttress your claim that the ex-husband had permanently vacated. I can guarantee you that the ex-husband will claim that he either never vacated the apartment or that he never wished to relinquish his right to live in the apartment. Your best choice is to mediate this issue down at the Rent Board. I would guess that you have a 25 percent chance of a favorable judgment.

For a lot of people, the amount of time, energy and money that they are inclined to spend monitoring and managing this type of issue will depend on the tenant’s rent relative to market rent. The lower the rent relative to its market value, the more motivation there is to get that market rent. You should not conduct your management affairs on a case-by-case or rent-by-rent basis. You should have a set of policies and procedures that dictate what you do and when you do it. Don’t get lazy just because the tenant’s current rent is at or above market. Time goes by—one, two years and then ten years. A mistake that you made in the first year of the tenancy could very well cost you $500 or $1000 a month in lost market rent ten years down the line. In this case, your mistakes three or four years ago might very well cost you $200 a month or $2,400 per year. If you figure $2,400 in yearly rental income at a value of 10 times, the gross rent is $24,000. See how these little things can add up?

What could you have done that would have improved your situation today? What policies and procedures could you follow that would insure tenants could not vacate and then re-occupy at their whim? For starters, if a tenant informs you that a co-tenant is vacating, request that the tenant send you written notification of this fact. Similarly, you should request written notification from the tenant who is actually vacating. When the wife got her new, live-in boyfriend, your standard procedure should have been to have the new boyfriend sign a 6.14 Notice—to ensure that you are not agreeing to three adults occupying the apartment. You should have simply attached an addendum to the 6.14 Notice clarifying the fact that the ex-husband is no longer a tenant, and that the new boyfriend is a subsequent occupant who has been served a 6.14 Notice.

You should follow these procedures not only in those “low-rent” circumstances but all the time—as a matter of policy and procedure. In today’s climate of falling rents, complacency seems so easy. Don’t get lazy or lax just because you are receiving market rent today. Lax management has a way of catching up to you.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of the SFAA or the San Francisco Apartment Magazine. Marc Wilson has been managing and selling San Francisco apartment buildings for over 15 years. Please send your questions concerning property management issues to Marc Wilson at 1699 Van Ness Avenue, SF, CA 94109. He can be reached at 415-229-1275.