Legal Corner Q & A
by Various Authors
Q. I want one of my tenants to become a manager while I am away. His role would be to notify me of any repair or maintenance needs. If this happens, would the tenant become an employee of mine? What are the legal issues for me to consider?
A. Resident managers are subject to stringent and complex state and federal employment laws. These laws are strictly enforced by the courts and govern everything from working conditions and taxes to wages and compensation structures. In California, buildings with more than 16 units must have an on-site manager who lives at the premises. In all buildings, the tenants must be informed whom to notify for demands or service of process. Good management practices dictate that all residents receive the manager’s working hours and emergency contacts.
In this situation, the owner lives on-site and is the manager. When away, however, the owner appoints a tenant to act as the responsible party. Arguably, this tenant may be a part-time employee. If the tenant is performing regular management services when the owner is absent, then the owner may be responsible for paying wages and taking deductions for social security, income tax, unemployment insurance and disability insurance. In addition, California law requires employers to maintain workers’ compensation insurance.
California law also limits the amount of rent credit that an owner may bestow on a resident manager. Generally, if a rent credit is used to satisfy part of the owner’s minimum-wage obligation to an employee, the credit may not exceed two-thirds of the fair market value of the apartment, but no more than $381.20 per month for a single person or $563.90 per month for a couple (effective January 2002 and adjusted annually). The owner is also liable for the acts of a manager carried out during the course and scope of employment (for instance, if the tenant serving as manager injures someone or damages property, the owner will be deemed the responsible party).
The owner in this situation is setting himself up for trouble. The tenant cannot take on this part-time responsibility without wage payment and possible rent credits. Once this door is opened, the owner is subject to state and federal laws governing employer-employee relationships. The cost and liability associated with this result outweigh the benefits. Therefore, I suggest the following: hire a professional property management company to manage the building while you are away. Provide all tenants with the contact information of the management firm when they are unable to contact you. The management company is usually an independent contractor and not an employee, so you will not be faced with an employer-employee situation.
You also will not have to worry about problems arising
if (and when) this tenant makes claims against you for
failing to provide compensation or proper insurance.
In summary, do not create a gray-area situation where
someone may or may not be an employee. If a problem
arises, the law undoubtedly will consider the individual
an employee and subject the owner-employer to all the
wage, insurance, tax and liability rules that govern
an employee-employer relationship.
– David Wasserman
Q. I have a long-term tenant who pays below-market rent. Three or four times a year she changes her roommate, charging her/him about 75 percent of the rent. She selects her roommates at will, kicking them out when she feels like it, or losing them when they leave disgruntled, which often happens. I end up with the former roommates calling me to complain. Is there anything I can do?
A. Residential tenants who sublet can cause various problems for an owner, especially when the master tenant engages in suspect or illegal behavior toward the subtenants. An owner may be able to control a sublet if the written lease agreement provides restrictions on the right to sublet, and such rights have not been waived by prior conduct on the owner’s part. Common lease restrictions on subletting include the right to prior written consent by the owner as well as the opportunity to vet the prospective subtenant for credit worthiness. If your lease agreement allows you to control the subletting behavior, then breach of such restrictions by your tenant may give rise to a cause for eviction under Section 37.9(a)(2) of the Rent Ordinance, which covers violations of a lawful covenant of the rental agreement.
If you do not have such limitations in a written lease agreement, then your tenant is generally allowed to sublet at will. Further, interference with the tenant’s subletting rights may result in the filing of a Rent Board petition for a decrease in services for loss of the right to sublet. Loss of subletting rights could also form the basis of a defense to a nonpayment of rent unlawful detainer action. Even if your written lease agreement provides restrictions on subletting, the Rent Ordinance and the Rules and Regulations provide tenants the right to replace roommates on a one-for-one basis, subject to certain rights of the owner to prior notice and the right to screen such new occupants (see Section 6.15A and B). Failure to allow one-for-one replacement of departing roommates when required may expose the owner to liability from the thwarted master tenant, either in the eyes of the Rent Board or by civil action.
Section 6.15C of the Rules and Regulations provides certain restrictions on the rights of master tenants in subletting situations. Section 6.15C(1) provides that, for tenancies created after May 25, 1998, the master tenant may only evict without just cause normally required under the Rent Ordinance if such a no-cause eviction right was disclosed in writing to the subtenant prior to the commencement of the subtenancy. Under Section 6.15C(2), a master tenant must disclose in writing to the prospective subtenant the total rental amount paid by the master tenant to the owner prior to commencement of the sub-tenancy. Apparently the master tenant is violating this subsection by not disclosing the total amount of rent she pays to the owner.
The master tenant is in violation of Section 6.15C(3) if she charges more than a share of the total rent that corresponds to the house space and services actually provided to her subtenant. For example, a violation occurs if the master tenant actually provides only one bedroom for the subtenant’s exclusive use plus shared use of the common areas, yet charges the subtenant 75 percent of the total amount of rent paid to the owner.
Unfortunately, the owner may not be able to seek eviction
of the master tenant for violating the various provisions
of Section 6.15C. Although an owner may seek eviction
of a tenant for “use of premises for an unlawful
purpose”—gambling, prostitution or illicit
drug activity—under both state law (Civil Code
of Civil Procedure §1161[4]) and the eviction control
section of the Rent Ordinance (S.F. Admin. Code §37.9(a)[4]),
Section 6.15 C provides that a violation of that subsection
shall not constitute grounds for eviction. In other
words, the Rent Board regulation does not permit the
owner to seek eviction of the master tenant, even if
the master tenant is violating the express subletting
restrictions of Section 6.15C. The various restrictions
on subletting contained within Section 6.15C only benefit
prospective and actual subtenants and do not provide
a basis for the owner to seek eviction, even if the
subletting activity of the master tenant causes inconvenience
to the owner, who may be faced with disgruntled subtenants
and former subtenants.
– Jak Marquez
Q. What if a tenant won’t give me keys to a unit?
A. Your available options depend on the language of your lease agreement, the urgency and purpose for which you need the keys, and whether you are willing to evict the tenant upon a refusal to provide keys to the unit. Our form lease agreement has specific language creating an obligation on the part of the tenant to provide the landlord with all keys to the unit and to allow the landlord access to the premises for specifically stated reasons. Obviously, if the lease requires the tenant’s provision of all keys to the rental unit, the landlord may issue a three-day notice to perform the covenant requiring the provision of keys. If the tenant fails to comply with the three-day notice, you are entitled to recover possession of the rental unit based on the breach of the covenant in an unlawful detainer action.
Moreover, even if the lease is silent on any obligation to provide keys, a landlord is far from powerless. First, you do not need the tenant to provide keys in order to gain access to the rental unit or, indeed, to obtain keys to it. Under Civil Code § 1954, a landlord is entitled to gain access to a rental unit for certain specified reasons, including the making of repairs, decorations, alterations or improvements, to supply necessary or agreed-upon services, or to show the unit to prospective or actual purchasers, tenants, contractors, or mortgagees upon reasonable written notice. If your tenant will not provide a key, you are still entitled to gain access through a locksmith. You may also change the locks, but you will need to provide your tenant with a key to any new locks installed. However, with any of these more aggressive steps, legal counsel is advisable to ensure that your actions are not construed as an illegal lockout or as an attempt to recover possession of the rental unit.
Of course, a landlord may not wish to incur the costs or potential liabilities associated with changing locks, especially if it’s likely that the tenant will physically prevent the installation or would simply reinstall new locks thereafter. (Hopefully, the lease agreement prohibits alteration of the premises and/or the changing of locks making any new installation of locks a new ground for eviction.) In such cases and if the landlord has no urgent need to obtain access and the tenancy is on a month-to-month basis, the landlord may unilaterally change the terms of the tenancy on thirty-days notice pursuant to Civil Code Section 827 to require the tenant to provide the landlord with all keys to the rental unit. The change in terms should specifically note that the landlord will compensate the tenant for all costs incurred in providing duplicate keys. If the tenant fails to provide the desired keys by the end of the thirty-day notice period, the landlord may serve a three-day notice to perform the newly established covenant. Should the tenant fail to comply with the three-day notice, an eviction action may be prosecuted for the noncompliance.
Although it’s true that Rent Board Regulation 12.20 prohibits evictions based upon violation of provisions not contained in the original lease, it also specifically states that it does not apply to new terms involving health or safety. My office also believes that a lease covenant requiring the provision of keys does indeed involve health and safety issues because it is needed to ensure emergency access and to properly maintain the rental unit. Moreover, my office believes that Regulation 12.20 is unenforceable due to its conflict with both state law and the Rent Ordinance itself.
In short, a landlord has a range of options available
if a tenant refuses to provide keys to a rental unit.
Such behavior should not be tolerated. We have successfully
litigated evictions based on tenants’ refusal to
provide keys, have never lost such an action, and believe
that they remain viable.
– Steven S. Rosenthal
Q. Can I require a future tenant to carry renter’s insurance? Is is possible to require this after a lease is signed?
A. The answer to the first question is, “Yes.” You may require anything in a lease that is not prohibited by law or that does not violate public policy. Renter’s insurance does not fall into either category, so there is no reason legally why it cannot be required.
Once the lease has been “signed,” i.e., executed by the parties, however, an entirely new situation occurs. The terms of the lease have been set, and the landlord cannot change those terms, without the consent of the tenant, until the lease expires and the tenancy rolls over to a month-to-month basis. At that point, at least theoretically, you could require the renter to acquire renter’s insurance by serving a Thirty-Day Notice of Change of Terms of Tenancy, permitted under California Civil Code section 827. In a rent-controlled tenancy, unfortunately, there is a limitation. Rules and Regulations Section 12.20 prohibits evicting a tenant for breach of a unilaterally imposed condition of tenancy. You are left with little power, therefore, to enforce your “right” to require the renter’s insurance. Of course, in the event the tenant made a claim against you for something that would have been covered by the typical renter’s policy, the tenant’s failure to have obtained it will assist you in deflecting liability.
It is noteworthy that the PPMA Lease form recommends,
but does not require, that the tenant obtain renter’s
insurance. This may be a better approach, since the
realities of today’s rental market may dictate
that such a requirement, as unusual as it is, may turn
otherwise good tenants away. The benefit is for the
landlord to determine, and it is within the landlord’s
realm to make a business decision based upon his or
her best informed judgment.
– Saul M. Ferster
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. Theinformation contained in this article is general in nature.Consult the adviceofanattorneyforanyspecificproblem. David Wasserman is with Wasserman & Taxman, 415.567.9600. Jak Marquez is with Beckman Marquez, LLP, 495.8500. Steven Rosenthal can be reached at 928-7300. Saul M. Ferster can be reached at 415.863.2678. Copyright © 2003.