Court Talk

by Clifford E. Fried

Cashman v. Cotati (July 15, 2004)
A rent-control ordinance is considered an unconstitutional taking if it fails to substantially advance a legitimate state interest. This is what constitutional lawyers call a heightened-scrutiny test. In other words, a rent-control ordinance must actually be effective and exist for a very important public reason.

The city of Cotati adopted an ordinance designed to stabilize the rents for spaces in mobile-home parks. The ordinance provided that when a tenant vacates a rental unit or space, the successor tenant is entitled to the same rent previously charged to the vacating tenant.

The Cotati ordinance provided an opportunity for mobile-home owners to sell their homes subject to the controlled rent. Two mobile-home park owners challenged this ordinance as an unconstitutional regulatory taking (Cashman v. City of Cotati).
The Ninth Circuit Court of Appeals, a federal court, was asked to review the ordinance and rule on whether or not the law effectuated a taking in violation of the United States Constitution.

This court ruled that allowing an owner-occupant to indirectly benefit from the present value of the reduced rent undermines a city’s interest in creating or maintaining affordable housing. As a result, the court in Cashman found the ordinance was indeed a violation of the Fifth Amendment’s Takings Clause.

Some landlord attorneys believe that the Cashman case and cases like it are novel decisions that could spell the end of residential rent control. These property-rights advocates say that many eviction and rent-control laws will be held unconstitutional under the heightened scrutiny test used in Cashman.

The Supreme Court of the United States is reviewing the application of the heightened scrutiny test in another Ninth Circuit decision that struck down rent control on Hawaiian gas stations. The holding in Cashman was consistent with the Ninth Circuit’s decision to hold Hawaii’s rent-control ordinance unconstitutional.

The Cashman case is not yet final because the Ninth Circuit is reconsidering its ruling. And the Hawaii case is also not final until the Supreme Court issues its decision. In the meantime, we all hold our collective breaths. Will landlords again get to set rents free from rent-board regulations? Will this issue be covered by another Court Talk column? The Supreme Court will decide these questions.

For now, all landlords should defend claims of unlawful rent increases and evictions by claiming the ordinances they are being sued under are unconstitutional regulatory and physical takings in violation of the Fifth Amendment’s Takings Clause.

Andrews v. Mobile Aire Estates (January 4, 2005)
Mobile-home parks provide fertile ground for landlord-tenant disputes. As shown in the Cashman case above, complex constitutional property issues arise from mobile-home parks. But simple issues such as a landlord’s duty to protect one tenant against the other are also resolved in these cases.

In Andrews v. Mobile Aire Estates, a state court of appeal was asked to decide the bounds of a landlord’s duty to control a troublesome neighbor from disturbing a tenant in an adjacent space at a mobile-home park. The courts had previously ruled that a landlord has a duty to provide tenants with the quiet enjoyment of the premises. But what if another tenant in the same complex of units is causing the problem?

In this case, a tenant sued the landlord because another tenant in the complex repeatedly splashed mud on newly washed cars, aimed a video camera into living rooms, yelled racial epithets, and had driven down the middle of the street forcing the plaintiff to swerve his vehicle. There was also a claim of battery. You know, typical stuff that landlords have to deal with.

In accordance with the policy of the owner of this mobile-home park, onsite property managers did not get involved with these types of disputes but instead directed the warring tenants to call the police.

The supposedly victimized tenant filed suit against the bully tenant next door (who has no money) and the landlord and property manager (who have money and insurance). In a ruling favorable to the victimized tenant, the court said in this situation the covenant of quiet enjoyment requires a reasonable response by the landlord, including an investigation and appropriate action such as issuing warnings, obtaining restraining orders and, if necessary, evicting the offending tenant.

The court’s ruling was based on both common law and statutory law in California that states—in the absence of language to the contrary—every lease
contains a promise whereby the landlord impliedly covenants quiet enjoyment and possession of the premises. The rationale for this implied promise is the notion that neither the landlord nor the tenant will do anything that will injure the right of the other to receive the benefits of the lease.

For a breach of this implied covenant to be actionable, the landlord’s conduct or failure to act must substantially interfere with the tenant’s right to use and enjoy the premises for the use intended. A tenant cannot sue for minor inconveniences or annoyances. Here, the court ruled that a landlord is responsible for interference caused by another tenant of the landlord and need not be the landlord personally.

What if the interference is caused by a nuisance on a neighboring property not owned by the aggrieved tenant’s landlord? In a footnote, the court stated that since the implied covenant runs between the landlord and tenant, the landlord is not responsible for controlling someone who is not his tenant.

This decision is also important because it outlines the remedies that are available to a tenant where the covenant of quiet enjoyment has been breached. First, a breach is considered a constructive eviction, and the tenant will not be liable for paying rent for the duration of the lease term if the tenant vacates. Upon vacating, the tenant may sue for damages or claim damages by way of offset should the landlord sue for unpaid rent. Alternatively, the tenant may stand on the contract, remain in possession and sue for breach of contract and seek damages and injunctive relief.

The measure of damages is an amount that will compensate the tenant for all detriment caused by a breach of the covenant, which in the ordinary course would be a likely result. Damages could include lost profits, lost business goodwill and moving expenses.

Cook v. City of Buena Park (January 28, 2005)
In an effort to curb drug-related crimes while at the same time attempting to make up for budget shortfalls, cities are increasingly placing the burden of public law enforcement on private property owners. After all, why should a city pay for more cops if a landlord can be forced to pay for the crimes of their tenants and third parties who come on or near their property?

There are plenty of state and local laws that enable a city to prosecute property owners for allowing nuisances to exist on their properties. But there are also laws scattered throughout the state that allow a city to force a landlord to evict a tenant who is merely suspected of engaging in criminal activity. These laws allow the local city attorney to undertake the eviction where the landlord fails to act. And, of course, these laws impose substantial penalties upon unfortunate landlords who have drug dealers and users on or near their properties.

On January 1, 2005, state law was amended to allow the city of Oakland, through its city attorney, to evict tenants believed to be criminals and arguably creating nuisances. Oakland’s law, called the Nuisance Eviction Ordinance, drew criticism from tenant groups (claiming civil-rights violations) and landlord advocates (claiming unfair burdens placed on property owners). Are these laws valid?

Earlier this year, the Nuisance Eviction Ordinance in the city of Buena Park was declared invalid. The court in Cook v. City of Buena Park ruled that a nuisance eviction ordinance violates procedural due process when it imposes on landlords a substantial risk of erroneous deprivation of property rights through compelled eviction litigation, unwarranted penalties and wrongful eviction lawsuits by tenants. These are the same arguments that have been asserted against Oakland’s Nuisance Eviction Ordinance. First, the court said that the information required to be provided by the Buena Park police is insufficient to assure a reasonable chance of success in an unlawful detainer action, thus exposing the landlord to unwarranted litigation costs and claims of wrongful eviction.

Second, the court found that the Buena Park Ordinance imposed an onerous 10 days upon the landlord to commence eviction proceedings after being notified by police of a problem tenant. This is simply not enough time for a landlord to investigate and build a case for an unlawful detainer action.

Third, the court said the ordinance violated due process because it required the landlord to prevail in the unlawful detainer action or else face fines of up to $500, punishment for committing a misdemeanor (wait, the tenant is the criminal!) and having a lien placed upon the property. This really put an unfair burden to win on the landlord and his eviction lawyer.

The city of Oakland does not appear to be actually using its Nuisance Eviction Ordinance. However, before it does so, it should review Cook v. City of Buena Park carefully. There is plenty of language in the decision to support a successful attack on Oakland’s ordinance. In fact, the decision implies that the state law authorizing Oakland’s ordinance itself might suffer from due-process infirmities.

The California Apartment Association, the umbrella organization for the San Francisco Apartment Association, wrote an important amicus brief in support of the landlord who guided the court in its decision. Thank you for this fine work!