The Property Management Shop

Avoid Undue Suffering: Include Even the Kitchen Sink in Rental Agreements

by Marc Wilson

Q. My wife and I recently purchased a seven-unit apart-ment building in the Mission District. The tenant files and written rental agreements that were maintained by the seller and transferred to me at the close of escrow are far from perfect. Two units, for whatever reason, have no written rental agreements, and two other units each have a 20-year-old, short-form, written agreement that stipulates little more than the original monthly rent. What am I supposed to do about subletting, late rent payments and late fees, pets and every other obnoxious tenant behavior that is not expressly prohibited in the written rental agreement? How am I supposed to manage this property?

A. I feel your pain. This is a particularly brutal town for those property owners with inadequate or nonexistent written rental agreements. I've always said that unless “it” (pets, smoking, subletting, storing property in the garage, and more) is specifically disallowed within your written rental agreement, the tenant community will assume that “it” is allowed. If you want confirmation of this fact, just go to the Housing Rights Committee's Web site, which clearly states: “Section 12.20(a) of the Rent Board Rules and Regulations says that you cannot be evicted for breaking a lease clause that was unilaterally imposed after you signed your original lease. In other words, if you didn't sign it, you don't have to abide by it.” This is exactly why my rental agreement is 20 pages long. I literally have to mail or fax my rental agreement to new tenants days before we meet in order to avoid spending one hour in my office watching the tenant read the agreement. Tenants commonly ask, “Why is this agreement so long?” or “Am I renting this property or buying it?” I just respond by saying, “Hey, that's rent control for you.”

The good news is that your average prospective tenant will sign absolutely anything before she/he gets the keys to the apartment. I honestly believe I could insert a sentence into my rental agreement that clearly states, “The tenant agrees not to read the San Francisco Bay Guardian,” and many tenants would sign it. The bad news is that, in all likelihood, the tenant will not sign anything after he/she gets the keys to the apartment.

What does this mean? It means that you have one opportunity, and one opportunity only, to get anything and everything signed by the new tenant. You have one opportunity to ensure that the tenant is absolutely obligated to each of the following: not sublet, not have pets, pay a late fee, pay rent on time and so forth. Don't squander this opportunity. You should routinely customize your PPMA Residential Tenancy Agreement with those addendums that articulate your personal prohibitions and limitations on obnoxious tenant behavior. For example, I often include exhaustive declarations relative to the costs of early-lease termination, and I stipulate such items as no owner duty for lock outs, mandated written repair requests, no dogs, an anti-attorneys' fees clause, what is and what is not a reasonable response time for nonemergency repair requests, nonacceptance of any third-party rent payments, the right to change the tenant's parking space without reduction-in-services complaints, and any other pertinent items.

Similarly, you should throw everything—including but not limited to the kitchen sink—at the new tenant when it comes to standard rental-agreement addendums. You should always include separate addendums for mold, lead-based paint, drug-free housing, house rules, insurance facts for residents, smoke-detector agreements, move-in/move-out itemized statements, guarantee of rental agreement (when appropriate), Proposition 65 and any other relevant addendums. Are you getting the picture? If your rental agreement, including all customized sections and standard addendums, is not at least 15-pages long, you are in all probability omitting something that you will live to regret. Please revisit SFAA's and the California Apartment Association's vast arsenal of forms and rental-agreement addendums on a yearly basis. Please be sure that you use and understand all available forms. Your use of all appropriate forms will make your life easier as a property manager and will increase the value of your property when the time comes to sell.

Unfortunately in your case, the aforementioned suggestions amount to little more than the proverbial closing of the barn door after the horse has bolted. But all is not lost. You can and should minimize the problems inherent in poorly worded or nonexistent written rental agreements. California Civil Code Section 827 provides that a landlord in a month-to-month tenancy may change the terms of tenancy with a 60-day written notice. With an attorney's help, I suggest that you prepare and serve the tenant with a 60-Day Notice of Change of Terms of Tenancy. This change-of-terms notice should include the completed PPMA Lease and absolutely all desired custom clauses and standard addendums as discussed above. You should even ask the tenant to sign these newly promulgated documents—although the probability of tenant compliance is close to zero.

Some attorneys will argue that promulgating unilateral changes in terms of tenancy is close to worthless. You see, your rights relative to California Civil Code Section 827, along with many, many of your other rights, have been gutted by the San Francisco Rent Board. Section 12.20 of the Rent Board's Rules and Regulations severely restricts landlords' right to evict for a unilaterally imposed obligation or covenant. What does this mean? It means that you can't evict a tenant if she/he fails to abide by any of the terms set forth in your change in terms of tenancy. It means that, in the immortal words of the Housing Rights Committee, “If [the tenant] didn't sign it, [the tenant] doesn't have to abide by it.”

My position is—big deal. I'm not looking for possession. I'm looking for the tenant to have a basic understanding of my expectations and, most important, an understanding of what is generally considered to be reasonable tenant behavior. I honestly believe that most tenants don't want landlord/tenant hassles. Most tenants who misbehave just don't know better. Your job is to make sure that your tenant understands your expectations. Make your expectations known by serving this notice of change of terms of tenancy. In this way, you will at least have some document to reference, some document to enforce, when you deal with your tenants. Besides, 99.99% of all tenants know nothing about Rent Board Regulation 12.20. Your average tenant does not know and will probably never know that you, as the manager, do not have eviction rights in your enforcement arsenal. Your actions are admittedly a bluff but a good bluff nonetheless. And a good bluff is a lot better than nothing. Do yourself a favor—call an attorney today and prepare and serve a comprehensive 60-Day Notice of Change in Terms of Tenancy on all tenants with a poor or nonexistent rental agreement. Besides, you can always resort to small-claims court or injunctive relief to enforce your new terms.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Marc Wilson is the president of SFAA. He has been managing and selling San Francisco apartment buildings for 20 years. He can be reached at 415-229-1275. Copyright © 2005 by the San Francisco Apartment Magazine. All rights reserved.