Legal Corner Q & A
by Various Authors
Q. I have a long-term tenant that is a company, not a person. The company houses a different employee in the unit every year. Can I raise the rent to market rate when they next bring in a new employee?
A. Yes. It is not uncommon for a landlord to enter into a lease agreement with a corporation that wishes to use the residential apartment to house corporate occupants. In such a situation, it is also not uncommon for the occupants of the corporate unit to change from year to year. Despite the fact that the unit remains subject to eviction control, the landlord may raise the rent when the prior occupant vacates the unit and a new occupant takes possession.
The Costa-Hawkins Rental Housing Act (California Civil Code Section 1954.53(d)), and its local counterpart, San Francisco Rent Ordinance Section 37.3 (d), authorize an unlimited rent increase in some circumstances where the original occupant no longer permanently resides in the unit and the remaining subtenant(s) or assignee(s) did not reside in the unit prior to January 1, 1996. Specifically, pursuant to Section 6.14(c) of the San Francisco Rent Board’s Rules and Regulations:
When all original occupant(s) no longer permanently reside in a rental unit, and the last of the original occupants vacated on or after April 25, 2000, the landlord may establish a new base rent of any subsequent occupant(s) who is not a co-occupant and who commenced occupancy of the unit on or after January 1, 1996, without regard to the limitations set forth in Section 37.3(a) of the Rent Ordinance unless the subsequent occupant proves that the landlord waived his or her right to increase the rent by:
(1) Affirmatively representing to the subsequent occupant that he/she may remain in possession of the unit at the same rental rate charged to the original occupant(s); or
(2) Failing, within 90 days of receipt of written notice that the last original occupant is going to vacate the rental unit or actual knowledge that the last original occupant no longer permanently resides at the unit, whichever is later, to serve written notice of a rent increase or a reservation of the right to increase the rent at a later date; or
(3) Receiving written notice from an original occupant of the subsequent occupant’s occupancy and thereafter accepting rent unless, within 90 days of said acceptance of rent, the landlord reserved the right to increase the rent at a later date.
If the above requirements are present, a landlord may raise the rent of the corporate unit to fair market value. However, the landlord has two options as to how to go about raising the rent to ensure that it is not considered an unlawful rent increase in the eyes of the San Francisco Rent Board.
One option is to petition the Rent Board for a determination that the landlord may raise the rent pursuant to the Costa-Hawkins Rental Housing Act. The first step in obtaining such a ruling from the Rent Board is to fill out a petition seeking such a determination and file it with the Rent Board. The petition seeking a determination under Section 37.3(d) is available online at the San Francisco Rent Board’s website (www.sfgov.org/rentboard) and must be accompanied by a written statement as to the basis of the petition and any evidence or documentation supporting the requested determination. Specifically, the landlord must answer: “Why the Landlord believes no original occupants permanently reside in the unit and that any remaining subtenant or assignee took possession on or after January 1, 1996.”
Where the landlord seeks such a determination, the burden of proof is on the landlord. Such a burden is difficult to meet, and because the landlord is not required to file such a petition prior to imposing any rent increase under Section 37.3(d), it is not to the landlord’s advantage to do so.
The second and preferable option is to unilaterally serve a notice of rent increase under the Costa-Hawkins Rental Housing Act, alleging that all original occupants have permanently vacated the unit and any remaining subtenants took possession after January 1, 1996. The landlord must serve a 30-day notice to raise the rent 10% or less from the current base rent, and a 60-day notice to raise the rent more than 10% over the current base rent. The effect of bypassing the Rent Board’s determination regarding the rent increase shifts the burden of proof onto the tenant to prove that he or she is not subject to the rent increase.
There are, however, risks in unilaterally imposing a rent increase pursuant to Section 37.3(d). One such risk is that the tenant can refuse to pay the rent increase, forcing the landlord to serve a Three-Day Notice to Pay Rent or Quit and file a costly and perhaps risky unlawful detainer action should the tenant fail to pay the increased amount. A savvy tenant who may have some documentation/evidence to prove that such a rent increase cannot be imposed will use this documentation/evidence to successfully defend against the unlawful detainer action, thus forming the basis for a possible wrongful eviction action against the landlord. One way to ensure that you avoid such a risk is to clearly specify on the lease agreement who will be occupying the rental unit. The SFAA Lease Agreement gives the landlord the ability to specify the name or names of all persons who will be occupying the unit, thus avoiding any argument that a person not named on the lease agreement is an original occupant or that all original occupants have not vacated the unit.
Despite the risk involved in unilaterally serving a rent increase notice under Costa-Hawkins and Section 37.3(d), a landlord who has solid documentation regarding the history of all original and subsequent occupants, and who has been put on notice that the last original occupant has vacated, can safely serve a rent increase notice even if the same corporate tenant remains. Under the proper circumstances, Costa-Hawkins and Section 37.39(d) are one of very few methods by which a landlord can decontrol a previously rent-controlled unit, allowing a unit that may be substantially below market rent to be raised to market rent. In cases where the unit is rented to a corporation and the occupants change from year to year, the use of the Costa Hawkins rent increase can be particularly effective in ensuring the unit’s rent is always at market rate.
–Daniel R. Stern
Q. One of my tenants has started parking in an empty spot that is not a part of his lease. Does he have any rights to this spot after a certain amount of time has passed? Do any “squatter” rules apply?
A. There are no so-called “squatter” rules that apply. However, if you do not take action to enforce and preserve your rights as soon a possible, you may be unable to legally force your tenant to stop using the unauthorized space. If you do not move quickly, and you continue to allow the tenant to use the space, he can claim that you have intentionally waived or given up your right to enforce the lease provisions through your continued acquiescence of the use of the space, or that you are estopped or equitably prevented from enforcing the lease terms because your conduct (expressed or implied) of knowingly allowing the tenant to use the space in the past caused the tenant to rely on using that space in the future. If the tenant can prove either waiver or estoppel, then you will not be able to enforce your lease term regarding the parking space.
Also, if you are legally prevented from enforcing the lease parking terms, and if, in the future, you want to take away the parking spot use, you must have one of the 14 “just-cause” grounds for eviction listed in the San Francisco Rent Ordinance. A recent amendment to the Rent Ordinance requires just cause for removal of housing services, including parking spots. The San Francisco Rent Board is currently drafting regulations interpreting and enforcing this amendment. In effect, if you allow your tenant’s use of the parking space for a period of time, you may be stuck with it for the rest of his tenancy.
As a rule, once you find that your tenant is violating a term of the lease, you should write a letter warning the tenant to cease and desist from violating that lease term (i.e. an unauthorized parking space) immediately, and that you are reserving all of your rights. The letter should also state that you will be forced to serve him with a Three-Day Notice to Perform Covenant or Quit, unless he complies with your letter immediately. If he does not comply with the letter, then you can follow up with the three-day notice, after retaining experienced counsel to assist you.
–Lawrence M. Scancarelli & Jerod Hendrickson
Q. A tenant in my building placed some flyers on a lobby table inside the front door to the building. The flyers are advertising a product that promotes rapid weight loss. I object to this sales material being placed in my lobby. What can I do about it?
A. Purely commercial literature not directly relating to the building tenancies may be prohibited in the common areas of your building. Because the flyers relate to the sale of a product that has nothing to do with issues relating to tenancies in the building, you may remove the offensive material.
However, you may not prohibit your tenants from distributing literature to your other tenants, including material relating to a tenants’ association or other tenant organization, where the literature relates to issues of common interest or concern to the buildings’ tenancies. San Francisco Administrative Code Section 49A is the ordinance regulating residential tenant communications.
An argument can be made that “issues of common interest” include rapid weight loss. However, the preamble to San Francisco’s ordinance regulating residential tenant communications makes it clear that the law only protects communications about tenancies. Communications about overweight tenants would be stretching the law.
Literature relating to building tenancies may be placed in common areas, hung or placed on the door of tenant units, or placed on the floor in front of units. Literature placed on or in front of the door must plainly include the name, phone number and address of the distributor so that tenants may request to be excluded from future distributions.
Landlords may establish reasonable requirements as to the time, place, manner, and volume of literature relating to building tenancies, including a limitation of distribution to no more than once per calendar quarter.
–Clifford E. Fried
Q. I own a duplex and the upstairs renter informed me that the downstairs renters have been moving their stuff out over the past week, and are now moved out. They did not contact us in any way to inform us of this. I tried to call them with all of the phone numbers I had, but they are not in service. I haven’t yet seen the inside, but without any way to contact them or a 30-day notice of an intent to vacate, can I enter the unit? Also, while I doubt they would receive any security deposit back, if they would, how would I send my accounting to them without any idea of where they are?
A. The justifications for landlord entry to a residential unit are found in California Civil Code Section 1954. One of them authorizes entry when the tenant has abandoned the unit. If the information you’ve received indicates the tenant has vacated without contacting you, and the telephone number you have is disconnected, it would seem that the unit has been abandoned. I would suggest that you post a 24-hour notice of entry for abandonment on the unit, perhaps even slip a second copy under the door, and then 24 hours later enter the unit to see if it has in fact been abandoned. If you find the unit vacant, furniture and clothing gone, nothing but garbage and stale food left in the refrigerator, abandonment would be the reasonable conclusion. To be extra safe, however, before taking possession of the unit, you may want to wait until the rent has been due and unpaid for 14 consecutive days (which is the period legally presumed to establish abandonment where the circumstances are otherwise consistent with it), and then give a notice to the tenants pursuant to Civil Code Section 1951.3. The notice should inform the tenants that rent has been due and unpaid for 14 consecutive days and that the landlord believes the tenant has abandoned the property. It should also tell the tenants what to do if the property has not been abandoned. If the tenants fail to notify the owner within 18 days after the notice has been mailed, or 15 days after it has been personally delivered to the tenants, that it is the tenants’ intent not to abandon the property, and advise the landlord of an address at which the tenants may be served by certified mail in any action for unlawful detainer of the real property, the landlord may recover possession of the property without fear of repercussions from the tenants.
In addition, in a month-to-month tenancy you are entitled to 30 days’ notice prior to the tenant vacating. If not received, you have a claim to at least one month’s rent deduction from the security deposit. Since you have no other address at which the accounting for the security deposit can be mailed, you should mail a copy to the tenant at the last known address, which is your rental unit. The tenant may have put in a forwarding address request with the post office. Even if the tenant has not, you have still met your responsibility. Remember to mail your accounting within 21 days after you recover possession of the unit.
–Saul M. Ferster
The opinions expressed in this article are those of the authors and do not necessarily reflect the viewpoint of SFAA or SF Apartment Magazine. The information contained in this article is general in nature. Consult the advice of an attorney for any specific problem. Daniel R. Stern is with Wasserman-Stern and can be reached at 415-567-9600. Lawrence M. Scancarelli and Jerod Hendrickson can be reached 415-398-1644. Clifford E. Fried is with Wiegel & Fried, LLP, and can be reached at 415-552-8230. Saul M. Ferster can be reached at 415-863-2678. Copyright © 2007 by SF Apartment Magazine. All rights reserved.