Court Talk
by Clifford E. Fried
Action Apartment Association
v.City of Santa Monica
(May 25, 2004)
Can a landlord be sued for merely serving an eviction notice? The answer is no, according to a recent Santa Monica case.
The Santa Monica City Council passed a law that stated a landlord cannot maliciously take any action to terminate a tenancy, including the service of an eviction notice, based on facts that the landlord has no reasonable basis for believing. Severe penalties were imposed for violating Santa Monica’s rent ordinance. The ordinance also prohibited landlords from abusing a tenant with offensive words, threatening a tenant with physical harm or interfering with a tenant’s right to the quiet use and enjoyment of the rental unit.
Santa Monica’s Action Apartment Association challenged the ordinance on several grounds. One theory was that state law preempted the Santa Monica law. The court agreed and held that the ordinance prohibits and punishes what the litigation privilege of Civil Code Sec. 47(b) protects. When a state law preempts the local law, the local law is invalid. The court explained that the litigation privilege is intended to encourage parties to exercise their fundamental right of resort to the courts for resolving their disputes without fear of being sued in another lawsuit arising out of something said or done in the context of the litigation.
The litigation privilege applies to any communication made in judicial proceedings by litigants to achieve the objective of the litigation, as long as the communication has some logical connection to the litigation. The privilege is absolute, which means it applies regardless of malice or intent to harm. The privilege applies to statements made during litigation as well as pre-litigation communications, as long as they have a connection with anticipated litigation. The court stated that statutory eviction notices are covered by the litigation privilege.
This decision seems to say that threatening to evict a tenant is a protected communication. The San Francisco Board of Supervisors passed an ordinance similar to the Santa Monica law. San Francisco’s law was also declared improper by the trial court, and the matter is now on appeal (Baba v. Superior Court). Although the published Santa Monica decision may have some precedent-making value in the San Francisco case, tenant advocates convinced the court to rehear the Santa Monica case later this year. The Baba case was heard last month before the Court of Appeal and a decision is expected shortly.
Orozco v. Casimiro
(June 24, 2004)
Many landlords would like to know how much they can charge as a late fee—like $35 or even $100. How about 5 percent of the late rent? We finally have a published decision relating to late fees. Although there are no surprises here, there is now some legal clarity on which landlords can rely.
In Orozco v. Casimiro, the residential rental agreement provided that the rent was due on the 10th of the month and also charged a late fee of $50. The landlord served the tenant with a Three Day Notice to Perform Conditions or Quit, based on the tenant’s refusal to pay the late rent charge. The tenant then failed to pay the late fee within three days, forcing the landlord to file an unlawful detainer action.
At trial, the tenant argued that the late fee was punitive in nature (the law does not favor penalties) and not a good faith estimate of the actual damages suffered by the landlord and, therefore, void and unenforceable. The trial judge found in favor of the landlord.
The Appellate Division of the Los Angeles Superior Court reversed this trial court ruling, based on the particular evidence of the case and the law of liquidated damages. Liquidated damages are an amount of money agreed upon by the parties to a contract, representing a presumed amount of damages sustained by one party as the result of a breach by the other. A liquidated damages provision in a residential lease is normally void, except where the parties specifically agree and when, from the nature of the case, fixing the actual damage would prove impracticable or extremely difficult.
The Orozco court said that once the landlord shows that it was impracticable or extremely difficult to fix actual damages, the amount agreed upon is presumed to represent the amount of damage suffered by the breach. The problem was that landlord Orozco’s complaint did not allege, nor was it proven at trial, that the late fee was impracticable or extremely difficult to fix.
Since the Orozco case
was decided in the Appellate Division of the Los Angeles
Superior Court, the decision is not binding in other
jurisdictions. However, the decision appears to be
correct, and landlords should heed its lesson because
the decision will probably be applied by other courts.
Here is the lesson you must note: your rental agreement
should contain a late fee provision that states (1)
a dollar amount, (2) a late fee is impracticable or
extremely difficult to fix and (3) that the amount
is a liquidated damage, representing the result of
a reasonable endeavor by the parties to estimate a
fair average compensation for any loss that may be
sustained. If there is a dispute that ends up in court,
be sure to allege in the complaint that the late fee
was impracticable or extremely difficult to fix and
then prove it with evidence.
Tom v. City & County of San
Francisco
(June 22, 2004)
In recent years, a popular trend has been for home buyers—mostly tenants and first-time homeowners looking for the American dream—to buy multiunit buildings, hold title as tenants in common and then owner occupy the units. Many times the Ellis Act is used to recover possession from tenants who might reside in these buildings.
In another misguided effort to stop landlords from invoking the Ellis Act and going out of the rental business, the San Francisco Board of Supervisors passed an ordinance that discouraged the use of tenancy in common (TIC) agreements to convert rental housing to owner-occupied housing. The ordinance did this by prohibiting TIC agreements from giving owners an exclusive right to occupy particular units, without first going through a condominium conversion. Unfortunately, there are strict limitations on condominium conversions.
The law was recently reviewed by the Court of Appeal, which said the effects of the ordinance are that (1) unrelated people who reside in multiunit buildings would be required to share occupancy of their dwelling units with each other or (2) nothing could prevent other cotenants from entering their private living space. The court also noted that there is a privacy interest in choosing the persons with whom a person will reside and in excluding others from one’s private residence. The ordinance was in conflict with a person’s right of privacy.
The court held that the homeowners, tenants and landlords who challenged the ordinance had proven a constitutional privacy violation and that the law was invalid. In so ruling, the court stressed that it is reasonable to expect privacy in one’s home and emphasized that when dealing with the home, the law must give the highest protection against intrusions.
Since the Tom decision was handed down, there have been new legislative proposals aimed at thwarting home ownership opportunities in San Francisco. Although the Tom decision was not published (and therefore cannot be cited in court as binding precedent), we can expect landlord attorneys to use the constitutional right of privacy as an argument against any legislation that impacts on home ownership under the guise of protecting rental housing.
For now, home buyers who purchase as tenants in common are safe. TICs remain an economical and legal way to own your own home.
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. The information within this article is general in nature. Consult an attorney for any specific problem. Clifford E. Fried, Esq. is with Wiegel & Fried, LLP, 415-552-8230. Copyright © 2004 by Wiegel & Fried, LLP. All rights reserved.