From time to time, servicemembers and housing law intersect and with newfound protections afforded to the men and women in uniform, Bornstein Law wanted to revisit this topic.
We noted earlier that while tenants ordinarily have no right to terminate their lease early because of a new job or job relocation, military personnel have been carved out as an exception if they receive permanent change of station orders, or if their expected deployment will be 90 days or more. If either of these criterion is met, tenants on active duty can terminate the lease with 30 days’ written notice, without penalty.
That is courtesy, in part, of the Servicemembers Civil Relief Act, a 2003 law that restricts or limits actions against military personnel who are inherently transient. The Act was designed to relieve the stress of active duty service members and their families and allow military members to “devote their entire energy to the defense needs of the Nation.”
There are numerous obligations of both the landlord and departing service member under federal and California law, but we won’t get lost in the weeds now – suffice it to say that military personnel are given deference when being reassigned.
If amnesty is given to military members who are tenants, will they also be given favoritism if they are landlords?
That’s an interesting question we posed when we observed the case of Ballinger v. City of Oakland. When duty called for the Oakland couple, they left for Maryland for a short time but before doing so, rented out their home on a month-to-month basis. When it was time to come back home after their assignment was complete, however, the service members with two small children in tow had to fork over nearly $7,000 in relocation payments to their tenants.
The Air Force couple challenged the relocation scheme on constitutional grounds, but the court ruled they failed to “plead a cognizable legal theory” and that paying money to outgoing tenants is not an illegal seizure of property.
Military members get added recognition under new state law
The Governor recently signed a flurry of housing-related bills, two of them directly related to veterans, though not every landlord is a fan. In today’s polarized political climate, though, expressing concerns over added protections for veterans can be viewed as being against the troops.
SB 644 lowers limits on security deposits for active military – service members need only pay one month’s rent for unfurnished units and two months’ rent for furnished units.
If, however, the applicant has a poor credit history or track record of damaging rental property, these more relaxed security deposit rules would not apply. The lower security deposit requirement will not apply if the unit is rented to several individuals outside the service member’s close-knit family.
Although the bill has received widespread support and has been heralded by housing advocates, anti-poverty groups and veterans’ organizations, a high security deposit is sacrosanct to some landlords who fear that they will not have enough money on hand to pay for repairs and make no distinction that the tenant is in uniform.
At Bornstein Law, we say lighten up and give them a break. There’s plenty of more pressing concerns operating a rental business than shaving a security deposit for those who risk their lives to defend a person’s right to own a property.
Anti-discrimination laws extend to military members and veterans
We have stated in many venues that California has an ever-expanding pool of “protected” classes that cannot be discriminated against, and SB 222 adds veterans to a list of tenants who cannot be given the cold shoulder because of veteran or military status. Declaring that such bias is against public policy, the bill prohibits rental property owners from refusing to accept Veterans Affairs Supportive Housing Vouchers.
General Douglas MacArthur once said, “Whoever said the pen is mightier than the sword obviously never encountered automatic weapons.” We agree and pay homage to our brave heroes, but in landlord-tenant matters, we are reduced to the pen and legislation to ease the burden.
AB 1482 would impose statewide rent control and “just cause” eviction policies. To the elatement of tenants’ advocates, the measure has cleared many legislative hurdles to date.
As the chief architect of AB 1482, our own Assemblymember David Chiu, a Democratic from San Francisco, got some timely juice from Governor Newsom, who was recently quoted saying that statewide controls are “long overdue in the state of California.”
The venue in which Governor Newsom chose to make his remarks is not accidental and may be a double-whammy for rental housing providers. The occasion?
Mortgage servicers whose lending practices allegedly contributed to the 2018 financial crisis added $331 million dollars to the state coffers as part of a settlement. The Governor announced his support for AB1482 at an event promoting the allocation of $20 million dollars from this pot to provide free legal assistance to renters facing eviction. You can get the official scoop here, or for more on the controversial use of funds and concerns of misuse, there’s an interesting side story in this article.
What, exactly, would statewide controls look like?
Loosely modeled after Oregon’s calculus, AB 1482 would cap annual rent increases at 7% plus the Consumer Price Index, so let’s use a ballpark figure of around 10%. Nearly all of California’s rental housing stock, including apartments and some single-family homes, would be enveloped by the new law. With the state as the emperor, AB 1482 would apply in local jurisdictions where voters and elected leaders have rejected rent control policies.
Immune from the law would be new constructs less than ten years old, as well as detached single-family homes when the owner does not own more than 10 units in their name.
What says the rental property industry?
The debate has been well represented by hundreds of rental housing providers who flocked to the Capitol in opposition, and also in attendance in the latest hearing was Debra Carlton, the California Senior Vice President of Public Affairs.
“We don’t want to scare off development… We don’t want builders to go to other states. Unfortunately, we are seeing this now.”
~ Debra Carlton
She also reminded lawmakers that while new housing construction is sorely needed, developers have bowed out of many large residential projects originally slated for Southern California and have chosen to take the path of least resistance by going to Texas, Utah, Colorado and Nevada instead.
If AB 1482 becomes law, Oregon offers a premonition. As a pioneer in statewide rent control law, the state’s investment in multifamily housing has free fallen 38%.
“Just cause” eviction amendments
Bornstein Law has said in many venues that what can be asserted without evidence can also be dismissed without evidence. While photos, logs of correspondence, testimony of neighboring residents and the like go a long way for landlords to win an unlawful detainer action under the theory of a nuisance, AB 1482 would make this non-optional.
If the law comes to fruition, landlords need more than a good reason to evict – the eviction must be supported by the testimony of third-party witnesses. This tall burden of proof will make it difficult, if not impossible, to sever tenancies with problematic tenants.
What is the status of the law now?
After sailing through several processes, AB 1482 now falls into the lap of the Appropriations Committee, a body that is known as a graveyard where difficult legislation can be quietly put to rest without forcing lawmakers to vote up or down on the bill, and we hope that this committee lives up to its grim reputation on this bill.
Here’s an infographic courtesy of the California Apartment Association illustrating where the bill is at now, and serves as a civics lesson for the rest of us.
Our final takes
It seems that the push for statewide rent control has come full circle. After voters resoundingly rejected Proposition 10 at the ballot box, we predicted that unrelenting tenant advocates would take the fight to local municipalities and they did, with varied success.
With still more upward pressure on rent, the case for expanded tenant protections reaches the domes of the Capitol again, but this time with more open ears and the sympathy of the Governor. While we hope that cooler heads prevail in the Senate, it is now time for rental property owners to think in terms of statewide rent and eviction controls.
Of course, you can count on Bornstein Law to keep you updated in the weeks to come and advise a course of action in the eventuality of new laws that impact your real estate business.
COPA will give “qualified nonprofits” a right of first offer and the right of first refusal when an owner decides to sell a multifamily property.
After a cantankerous and litigated battle to regulate tenant buyouts, the San Francisco Board of Supervisors has upped the ante in tinkering with buyers’ and sellers’ rights and obligations by ushering in the Community Opportunity to Purchase Act (COPA).
When a multifamily property is put up for sale, “qualified nonprofits” will be first in line to scoop them up. Landlords who are subject to the ordinance must let nonprofit organizations know they intend to sell and give these providers of affordable housing the first crack at a purchase offer, but it doesn’t end there.
If a nonprofit comes to the trough, they will be able to match the offer of a private buyer. The seller is not obligated to sell to a nonprofit, but they must give the organization preferential treatment.
How to alert nonprofits of an impending sale?
To give first dibs to nonprofits, multifamily property owners intending to sell will have to notify the Mayor’s Office of Housing and Community Development (MOHCD), a conduit between owners and a cherry-picked group of organizations dedicated to creating permanent affordable housing for low and moderate income residents.
These pre-selected nonprofits need more than the wherewithal to purchase the property; they must also demonstrate the ability to manage it. The legislation will apply to any residential building with at least three rental units or a vacant lot zoned for at least three units, though there are exceptions to every rule.
Get strapped in
COPA raises a number of weighty questions and our friends at the San Francisco Apartment Association have stated the legislation is illegal and unconstitutional. The law is patterned in some ways after Washington DC’s Tenant Opportunity to Purchase Act and the District Opportunity to Purchase Act. Both laws have been the subject of much controversy and numerous lawsuits. Rest assured, San Francisco’s new legislation will similarly be contested.
Sellers and buyers of multifamily properties are ordinarily urged to consider the legal aspects of a transaction, but it is even more imperative to seek the proper counsel of Bornstein Law as COPA begins to take shape.
Wholesale expansion to rent control was rejected at the ballot box in November 2018 as Proposition 10 went down in flames, but we urged the rental property industry not to celebrate for too long – our fraternity won the battle for the time being, but the campaign for a new regulatory regime steams forward as resilient tenant advocates are taking the battle to local municipalities.
Oakland is perhaps the most vivid example. Just as the cypress trees do not grow in each other’s shadow, Oakland no longer plays second fiddle to its sibling of San Francisco and is now a force in its own right. Yet history has shown that growth begets calls for increased tenant protections. If the agenda for statewide eviction and rent increase regulations had been too ambitious, tenant advocates still are chipping away at owners’ rights in piecemeal fashion on the local level, and Oakland has become one of most successful sandboxes in tinkering with owner rights. Even as the city carved its own destiny, it remains in the shadow of San Francisco’s onerous rent control rules.
Although cities have been ground zero for tenant advocates, the chorus has sounded once again to the Statehouse. The California Legislature has rolled out hundreds of bills impacting the rental housing industry, and we look here at some of the worst offenders here.
This proposal floated by Sen. Holly Mitchell, a Democrat from Los Angeles, would make it illegal to deny a tenancy based on the applicant’s participation in the federal Housing Choice voucher program. Under current law, it is illegal to discriminate against a prospective tenant based on the applicant’s source of income. At present, however, Section 8 housing vouchers do not legally meet the source-of-income standard. SB 329 would change the status quo by expanding the definition of source of income to include housing subsidies paid by the government directly to landlords.
We hasten to say that while state law has lacked consistent standards in this regard, some municipalities have enacted their own protections for Section 8 tenants and so even if state law is mute on a landlord’s discretion to deny Section 8 applicants, some cities have resolved the quandary by enacting their own ordinances.
Section 8 has always been a trade-off between inspections, red tape and other less endearing aspects of the program and counting on Uncle Sam to pay its share of the rent on time. Yet the government shutdown has taught us that housing authorities might run out of money, forcing landlords to tap into reserves and casting doubt on guaranteed rent. The San Francisco Housing Authority is particularly broke.
Although the envelope of protected classes is constantly being pushed, landlords do not have to accept Section 8 tenants. Any other valid reason that can be used to turn down an applicant can also be cited to deny tenancy to a housing voucher recipient – a blemished rental history, for example. More suitable candidates can be found, but where landlords and property managers get in trouble is when they make emphatic statements about who their ideal tenant is, or paint an exclusionary picture of groups who are not welcome in the rental unit. When it comes to this type of communication, less is more. For more background, visit our earlier article on Section 8.
We have chimed in many times on San Francisco’s ordinance dubbed “The No Eviction Without Representation Act,” but for Senator Nancy Skinner, a Democratic from Berkeley, the right to free legal counsel to evictees should be extended beyond 49 square miles. The Homelessness Prevention and Legal Aid Fund would be established to provide legal aid to tenants facing eviction or displacement, using competitive grants.
Bornstein Law can’t help but draw a parallel in the language of this bill with Oakland’s vacant property tax. In an earlier post on the punitive tax aimed to repopulate land deemed to be underutilized by the city, we said that property owners were assigned inordinate blame for the intractable homeless problem. SB 18 likewise gives owners a black eye for a difficult situation they did not create.
However ill-coined, this bill would ratchet up the legal costs for rental housing providers and be especially detrimental to mom and pop landlords who would be forced to defend against numerous gambits attorneys use to delay an unlawful detainer action and coerce owners to settle the case. If we didn’t steadily rail against free legal representation afforded to tenants, you might say we are opportunistic in predicting this bill will only be a boon to attorneys.
In an earlier article, we submitted that the law and a culture of amnesty stand to conceal rental risks. Bornstein Law is all about second chances and forgiveness. We are also about transparency and equipping rental housing providers to connect the dots and mitigate risk. If Assemblyman Reginald Jones-Sawyer, a Democrat from Los Angeles, has his way, however, landlords would be banned from inquiring about criminal records during an “initial application phase.”
Our friends at the California Apartment Association were instrumental in defeating a similar bill floated by Jones-Sawyer and we are optimistic that AB 53 will share the same fate.
Regardless of the outcome, we note that while turning down a tenant because of a criminal record can be legally justified, blanket bans on ex-offenders can run afoul of fair housing laws and if criminal records are used as a consideration in approving or denying a tenancy, the policy must be narrowly tailored. Evaluating criminal history is a subject we took on here.
Sen. Maria Elena Durazo, a Democrat from Los Angeles, wants to allow members of a tenant association, by a majority vote, to withhold rent payments for up to 30 days in response to grievances with the landlord.
The withholding of rent is something most commonly seen as part of an affirmative defense to an unlawful detainer (eviction) action whereby the tenant or the tenant’s attorney argues conditions are not livable, a topic we chimed in on here. Regardless of the merits of the underlying reason for the grievance, SB 539 would legalize a mob mentality, permitting tenants to hold rent payments hostage so long as they band together in a team effort.
Rent increases are already highly regulated, especially so in rent-controlled jurisdictions but for Assemblywoman Laura Friedman, a Democrat from Glendale, regulations don’t go far enough. This bill would increase the length of notice required for rent increases during month-to-month tenancies. 90 days’ notice for rent increases of more than 10 percent would be sufficient under the proposal and 120 days’ notice would be required for rent increases exceeding 15 percent.
More on the horizon
We are also following AB 36, a bill that lacks details, but is aimed at stabilizing rental prices and increasing affordable housing stock. In his State of the State speech, Gov. Newsom renewed his commitment to enacting some kind of tenant protections this year. “I want the best ideas,” the Governor said. To lawmakers: “Here is my promise to you: Get me a good package on rent stability this year and I will sign it.”
What the proposed law will look like is yet to be seen, but suffice it to say it will be consequential to rental housing providers. A recent LA Times editorial offers a premonition on what shape AB 36 will morph into.
Whether under the dome of the Capitol or in city halls, Bornstein Law is committed to keeping you abreast of changing laws and regulations.
Third-party rent payments can come in many forms, such as individuals like family members or caretakers, social services agencies, or programs spawned by local municipalities or nonprofits. Many landlords have been reluctant to accept payments made on behalf of others, for concerns that a third party would claim a right to possession of the unit.
AB 2219 has assuaged landlord concerns by providing that a landlord can require a third party to sign a document acknowledging that the transaction does not make the payor a tenant. The law amends Civil Code §1947.3. Although this law permits under certain circumstances a tenant to pay through a party, the landlord or his or agent is not required to accept the rent payment tendered by a third party unless an acknowledgment is inked to the effect that no new tenancy is created.
Don’t worry, we have the acknowledgment prepared and as a professional courtesy to our clients, have uploaded it to our website, along with other helpful resources.
Can a landlord demand cash payments?
Although the law allows the tenant to pay rent and deposit of security by at least one form of payment that is neither cash nor electronic funds transfer, an exception is carved out for bounced checks in Civil Code §1947.3 (2), which reads:
A landlord or a landlord’s agent may demand or require cash as the exclusive form of payment of rent or deposit of security if the tenant has previously attempted to pay the landlord or landlord’s agent with a check drawn on insufficient funds or the tenant has instructed the drawee to stop payment on a check, draft, or order for the payment of money. The landlord may demand or require cash as the exclusive form of payment only for a period not exceeding three months following an attempt to pay with a check on insufficient funds or following a tenant’s instruction to stop payment. If the landlord chooses to demand or require cash payment under these circumstances, the landlord shall give the tenant a written notice stating that the payment instrument was dishonored and informing the tenant that the tenant shall pay in cash for a period determined by the landlord, not to exceed three months, and attach a copy of the dishonored instrument to the notice. The notice shall comply with Section 827 if demanding or requiring payment in cash constitutes a change in the terms of the lease.
If you have any questions surrounding this law or other terms and conditions of your tenancy, contact our office for informed advice.
Redwood City’s newly minted minimum lease requirements and relocation payment assistance ordinances read a little like a prenuptial agreement, depending on how long the landlord and tenant remain in the rental relationship.
Redwood City may have its most memorable slogan as the “Climate Best by Government Test,” but its latest test is for landlords who must now contend with added tenant protections imposed by the government. With over half of Redwood City’s residents renting their home, the seminal Managing Growth Study put tenant protections in the spotlight as part of the city’s brainstorming session on growth and addressing community concerns.
Unlike many other rent-controlled jurisdictions in the Bay Area that have implemented “just cause” eviction measures along with prescribed amounts the rent can be raised, the entertainment hub of the San Francisco Penninsula has taken an inventive approach to support housing security for renters by focusing on the longevity of the tenancy. It provides carrots and sticks to prolong the rental relationship.
Redwood City’s ordinances require longer-term leases at the inception of the rental relationship and it creates a disincentive for a landlord to evict the tenant before the lease expires by mandating relocation payment assistance in certain circumstances, to cushion the displacement of low-income tenants.
Although the owner must offer a written lease which has a minimum of one year, there is wiggle room at the discretion of the tenant – there is flexibility for the incoming tenant and landlord to negotiate the term of the lease. If the tenant turns down the 12-month rental agreement and enters into another arrangement, though, they must state so in writing to make absolutely sure they know what they are agreeing to and are not bamboozled.
Several exceptions and nuances apply, and you can read the entirety of the law here.
We won’t get lost in the weeds of the ordinances, but instead, pivot to our takes for rental property owners.
Making smart rental decisions
Given that landlord-tenant relationships in Redwood City will often last a full year under the provisions of the new ordinances, we emphasize a heightened need for tenant screening. In an earlier post, we noted that while vetting tenants are a crucially important aspect of landlording, the law and a culture of forgiveness stand to conceal risks. This makes it imperative for all landlords to leave no stone unturned in the tenant screening process and especially Redwood City, where investment property owners may have little choice but to honor a long-term lease. Daniel touched on the subject of tenant screening here.
A heart to heart conversation about rent amounts?
A fair and balanced article in Mercury News reported some landlords were raising rents with the contingency of Proposition 10 passing, and we were asked to chime in. There, we said that being proactive is good legal counseling and perhaps, raising rents of below-market rates may be prudent in order to anticipate future regulation of rent increases.
In the same spirit, Redwood City landlords should have the same exercise of examing whether current rent amounts are sustainable with fresh tenancies commenced after January 1st, as there will be a scarce opportunity to raise rents once the tenancy starts.
At any rate, rent ordinances, rent increases and relocation payments in any jurisdiction are murky subjects that are best approached with the informed guidance of an attorney. Contact our office for informed advice.
There’s a lot to fall in love with the New Year. A clean slate and a fresh start, the feeling that everything is possible, and of course, the best parties.
For the rental housing industry, however, the exuberance over new beginnings should be tempered with the reality there are a new set of laws to obey.
As we look into the back mirror of an eventful year, one of the highlights has been the defeat of efforts to repeal the Costa Hawkins Rental Housing Act. Our fraternity’s successful outcome in the epic battle against Proposition 10, however, has obscured less prominent initiatives that were successfully passed and we summarize some of them here.
Senate Bill 407 – Retiring water-wasting plumbing fixtures
The water-conservation requirements of Senate Bill 407 have been rolled out in stages and the last hurrah goes into effect January 1, 2009. Effective this New Year, owners of pre-1994 multifamily properties must bring any water-wasting toilets, showerheads or faucets up to specs. To avoid getting a knock on the door from the toilet police, consult our earlier article.
Assembly Bill 1919 – Price gouging bans
In the wake of the tragic fires, now is a time for Californians to come together and help those in need, not for opportunistic landlords and merchants to exploit people in desperate need of goods and housing. That is why the Governor used executive powers to prohibit price gouging and extend the bans when further disasters ensued.
There was a great deal of confusion, however, on how and when California’s price gouging protections would be applied. Although we noted in an earlier article that the attorney general attempted to provide guidance, it was the onus of the legislative branch to codify the disfavor of price gouging into law. AB 1919 criminalizes rent increases north of 10% after a state emergency is declared and also makes it illegal for landlords to evict a tenant after the proclamation of a state emergency and then rent the newly vacant unit at a higher rental price than the tenant could be charged.
Revisions to Bill 2164 – Landlord culpability in cannabis growing
We have long predicted that after the people have spoken by legalizing the recreational use of cannabis, there would be a lot of wrinkles to be ironed out in city halls and in the courts, and we are encouraged that the voice of landlords was not left out. This bill would add protections to unsuspecting landlords who have tenants engaged in the illegal cultivation of cannabis in the property.
This legislation affords owners the right to correct the underlying violation without being automatically slapped with a hefty fine by a municipality when a rogue tenant turns the rental unit into a greenhouse and the landlord had no knowledge. For more background, visit our earlier post on this subject.
Assembly Bill 2343 – Tenants given more time to respond to resolve evictions
Beginning in September, tenants staring at eviction will be afforded additional time to pay past due rent or defend against an unlawful detainer action – weekends and holidays will no longer count towards the previously set statutory limits for tenants to respond to answer eviction proceedings, a subject we dive deeper into this article.
Proposition F – San Francisco Evictees entitled to the right to counsel
San Francisco’s Proposition F guaranteed city-funded legal representation for tenants facing eviction. One of our main takeaways in an earlier article was that tenant attorneys will create logjams and delays in what would otherwise be swift and perfunctory evictions. It was unclear exactly how this newly minted law would be implemented, but the program is gaining steam as Mayor Breed’s office is starting to get their hands on the funds necessary to pay for the free legal counsel. Expect all of the machinery to come together in 2019.
Senate Bill 721 – ensuring balconies are not a death trap
Do you have a deck, balcony, or elevated walkway of more than 6 feet above ground level in a property with 3 or more multifamily units? If the answer is in the affirmative, SB 721 mandates that a licensed inspector stop by to ensure the structures are up to par so that these valuable open spaces do not create injury or death when a tenant enjoys a respite from cramped apartment life.
The above changes in the lay of the land are not exhaustive, and surely more changes will be forthcoming – it’s a little like taking a drink out of a fire hose. You don’t have to make sense of it all – that’s our job at Bornstein Law.
Owners of pre-1994 multifamily properties have a short window of opportunity to comply with the water-conservation requirements of Senate Bill 407 or risk getting a knock on the door from the toilet police this New Year.
If your rental property still has the original toilets, showerheads, or faucets, it’s time to get off the pot and replace these water-wasting fixtures. The law was passed in 2009 but has been rolled out in stages. The mandate for water-efficient plumbing fixtures is the last piece of the legislation to be enforced, with a January 1, 2019 deadline.
Compliance flows for plumbing fixtures are as follows:
Showerheads: The flow rate must be 2.5 gallons per minute or less. Aerators: 2 gallons per minute or less. Toilets: They must use 1.6 gallons or less.
How, exactly, does a landlord ascertain if his or her devices are compliant?
The flow rate is sometimes listed on showerheads and aerators, but the numbers may have faded like an Egyptian scroll depending on their age.
According to our friends at the California Apartment Association, a low-tech solution is to use a flow bag. That is, you can hold the bag under the aerator or showerhead, turn on the water and wait five seconds. After running for five seconds, it will reveal the gallons flowed. Local water utilities often provide the bags or they can be found online.
Toilets can be a little trickier. If you can stomach the ickiness, they typically have a date stamped inside the tank that can be found to discover whether it is an uncompliant 3.5 or 5-gallon toilet or if uses 1.6 gallons or less. Another creative way to flush out whether the toilet passes the new standards is to open the tank lid is to measure from the bottom of the water line and the full flush water line. The difference between the pre-flush water line and the full flush water line will be a number of inches. If the drop is four inches or more, you have an older 3.5 or 5-gallon toilet. If its 3 inches or less, then you have 1.6 gallon or less toilet.
The CAA’s trusted vendors contained in its Industry Directory can assist landlords in this thankless process.
Is there really toilet police?
No actual police force, but if there were, the officer might look like this guy, who you’ve likely seen in your bathroom before.
In all seriousness, heavy fines can be levied on owners when upon inspection, plumbing fixtures are not up to specs, and so we admonish all landlords to take the law seriously. California lawmakers have declared adequate water supply reliability is critical to the state and is committed to protecting aquatic resources, and so the Senate Bill is not a water-saving tip – it’s the law, with consequences for not following it.
As always, you are always welcome to contact our offices with any questions on this law and any other landlord-tenant concerns.
In California, the citizen is the legislator if they pay $200 and manage to get a few hundred thousand signatures with a clipboard to qualify their idea for the ballot. There have been some crackpot initiatives – the state will not secede from the United States, and eating shellfish will not earn you a $666,000 fine per consumption or an imprisonment of up to six years – yet there are measures that usher in far-reaching changes.
One of the winners of last night’s election are hens, who will now enjoy more room to peck as voters said yes to the Proposition 12 chicken cage ban, but what about landlord rights? We are still digesting the election results, but here are some early observations that have jumped off the page.
Proposition 10 is rejected
In a blow to tenant activists and a win for landlords, Proposition 10 has failed at the ballot box, leaving California’s limits on rent control intact. There is no indication that tenant advocates have been deflated, as they look for the next fight and take their calls for expanded rent control in cities throughout the state. For the time being, rental property owners have dodged a bullet after voters overwhelmingly agreed that repealing Costa Hawkins would only exacerbate the dearth of affordable housing.
Proposition 5 shot down
Championed by the California Association of Realtors, this initiative would allow homeowners age 55 or older and those with a severe disability to take their property tax savings with them when buying a new residence, no matter the value of the new home, its location or how many times the buyer has moved. The argument that seniors can move to a home better suited to their needs without facing higher property taxes was rejected at the polls.
The current law remains on the books, and so eligible buyers can transfer a tax assessment if their new home is of equal or lesser value of their old home and only once per lifetime.
Oakland continues its trek down a slippery slope
As proud East Bay residents, we have been elated to witness Oakland’s growth but alarmed that it has become the latest bastion of tenant protections. Election night did little to reverse this trend and made further dents into owner rights.
The biggest newsflash for Oakland landlords is the passage of Measure Y, which removes the owner-occupied exemption from just cause evictions and allows the addition of eviction defenses. We have strongly opposed the measure to peel back landlord protections of an eviction ordinance passed 15 years ago, but the voters have now ushered in additional regulations for small owners who rely on rental income for their subsistence.
If you own a vacant property in Oakland, you will now get a hefty tax under Measure W, an initiative that aims to incentivize owners to put land and housing into use. Empty lots or buildings and condos that are used less than 50 days out of the year will be levied with a $3,000 to $6,000 parcel tax. There are exemptions for low-income seniors but for the rest of owners sitting on empty properties, they will be funding homeless services and illegal dumping cleanup.
The voters have also infused an estimated $9 million a year in new revenue for the city by passing Measure X, a progressive real estate transfer tax that is similar to the one San Francisco has. Most Oaklanders will won’t be affected because the transfer tax rate will remain at 1.5 percent, but land and buildings that sell for between $2 million and $5 million, the tax rate will bump up to 1.75 percent. More expensive properties that sell north of $5 million will be taxed 2.5 percent.
By saying no to Measure AA, Oaklanders stopped short of amending the city charter to establish a parcel tax – a kind of property tax based on units of property rather than assessed value – at the rate of $198 per parcel for 30 years to fund education services for pre-K through college students and career readiness.
San Francisco’s Proposition A sails through
Voters approved Proposition A by a comfortable margin, authorizing the city and county of San Francisco to issue up to $425 million in bonds at an estimated tax rate of $0.013 per $100 of assessed value to fund repairs and improvements the Embarcadero Seawall and Embarcadero infrastructure and utilities for earthquake and flood safety.
Landlords are authorized to pass-through 50% of the property tax increase to residential tenants, in accordance with Administrative Code, Chapter 37.
Pivoting to Berkeley
We noted in an earlier post that forward-thinking municipalities were taking a hard look at their rent control ordinances and how to modify them in the event that Proposition 10 passed. In Berkeley, Measure Q was mostly designed to position the city for a post-Costa-Hawkins world. Although Proposition 10 was scuttled, a provision of Measure Q exempting accessory dwelling units from rent control will become the law of the land.
The exemption does not apply for tenancies created before November 7, 2018 and portions contingent on the passage of Proposition 10 are preempted.
While we applaud Measure Q, we regret to inform owners that by passing Measure P, the voters have increased the tax on the transfer of real property from 1.5 percent to 2.5 percent for property sales and transfers over $1.5 million to fund general city purposes and the establishment of a homeless services panel.
Santa Cruz landlords score a major victory
Santa Cruz rent control advocates couldn’t sell Measure M to voters. With a total of $850,000 raised, the campaign was one of the most expensive in the city’s history but in the end, voters rejected the measure, which would restrict evictions, limit rent increases and create a board to enforce the rules.
When Senator Bill Dodd was forced to evacuate his NAPA home around midnight on the first night of the October fires, he couldn’t open his heavy wooden garage doors to use as an escape route. With widespread power outages, the garage door motor wasn’t working, but thankfully, a good neighbor came to his aide. One trapped neighbor encountering the same problem was actually forced to drive through his garage door.
“This isn’t a problem most people have thought of,” the Senator says in a news release, but he brought it to the forefront by introducing SB 969, co-authored by Assemblywoman Cecilia Aguiar-Curry, D-Winters and supported by the Consumer Federation of California.
Under the new law, landlords and other property owners will no longer be able to install automatic garage doors unless they have a battery backup function designed to operate during an electoral outage. The bill’s requirements will be enforceable next summer.
For Dodd, the fire season exposed several vulnerabilities and underscored the need to be proactive in adopting policies that make communities safer in the wake of a disaster. Ensuring battery backups for garage doors is “a small step that can literally save lives,” he goes onto say.
At least five of the 40 people who died in the North Bay during the fires did not or could manually open their garages, The Press Democrat reported in December. Seniors and those with heavy wooden doors are especially at risk.
What the law means for rental property owners
Landlords are not required to proactively install new automatic garage doors, but any replacement door installed on or after July 1, 2019, must have the battery backup feature. Owners face a $1,000 civil penalty for failure to comply.
We applaud the bill and have always maintained that owners should develop an emergency preparedness plan before a disaster strikes, to protect, life, limb, and property.
A perennial issue we’ve had at Bornstein Law has been communicating the law when it sometimes has the shelf life of a banana peel. When it comes to police presence at a rental unit, our earlier articlestands to be upended.
In that venue on domestic violence, we noted among other things that when discord spills into other units and interferes with other tenants’ quiet enjoyment of the premises, a landlord should give deference to a tenant when they are victims of “domestic violence, sexual assault, stalking, human trafficking, or elder or dependent adult abuse.”
California Code of Civil Procedure §§ 1161 & 1161.3, prohibits a landlord from terminating a tenancy or refusing to renew the tenancy based solely upon acts of aggression, and so the law attempts to ensure that those preyed upon are not victimized twice by being evicted.
In other words, landlords cannot penalize residents if they call law enforcement to report domestic abuse or other crimes or emergency situations at the rental property. By merely calling for help, a tenant cannot be labeled a “nuisance.”
This sentiment remains, but under a bill which has been passed by the legislature and has now landed on the Governor’s desk, it will be easier for tenants to assert their victim status and thus, be entitled to legal protections.
People should be able to call for help without fear of losing their home
~ Assemblyman David Chiu
AB 2413 would loosen documentation requirements, which previously required that abusive acts be documented by protection orders or police reports. It also extends protections to tenants who are victims of other crimes, not necessarily domestic violence.
The measure received nary opposition and was endorsed by the California Apartment Association. We applaud the legislation and wholeheartedly believe that tenants should not be punished for calling the police when they are a victim of a crime.
Not a blank check
We would be remiss not to point out that the law does not preclude an unlawful detainer action when repeated 911 calls are part and parcel of illegal activities or a larger pattern of behavior which indeed, creates a nuisance. To qualify that statement, it’s instructive to examine how the law defines this term. Under California Civil Code Section 3479, a nuisance is:
“Anything which is injurious to health, including, but not limited to, the illegal sale of controlled substances, or is indecent or offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property, or unlawfully obstructs the free passage or use, in the customary manner, of any navigable lake, or river, bay, stream, canal, or basin, or any public park, square, street, or highway, is a nuisance.”
Of course, disruptive behavior and 911calls often go hand and hand.
While tenants cannot (and should not) be evicted for seeking police assistance, perhaps these calls are indicative of underlying conduct that is, in fact, injurious or interfering with the quiet enjoyment of other tenants. Put differently, a 911 call in itself is no reason to evict, but the activities that precipitated the emergency call can rise to the level of a nuisance.
When there are recurring disruptions in a rental unit, the tenants should be afforded the opportunity to correct the behavior. We noted in an earlier article, however, that illegal activity is not “curable,” and with our assistance, an unlawful detainer action may be accelerated.
Tenants in a position to bow out of the lease
Although most of the chatter about this law relates to a landlord’s inability to transition a tenant out of the rental unit, an overlooked fact is that a tenant may prematurely break the lease. In an era where political rhetoric often falls squarely on the side of tenant advocates, much of the discussion is about removing tenants when in fact, a landlord may want to maintain the status quo and desire that the survivor of domestic violence stays in the rental unit. The law, however, affords the victim the ability to exit the unit without penalty if certain conditions are met.
Contrary to popularized belief, then, a vacancy is not the goal of a landlord, but to the detriment of him or her in most cases.
In conclusion, the law is sure to be signed by the Governor and is good in theory, but like most other matters that cross our desk, the law is cleaner on the page than it is in real life. You can rely on Bornstein Law to translate how it impacts your rental business.
Tuesday, July 24th is a consequential day for property owners in both Oakland and Berkeley. With November marching closer, these two cities will be convening special council meetings to decide what ballot measures will be headed to the voters in the November 2018 election, and the stakes are particularly high for East Bay landlords who are already saddled with some of the Bay Area’s most stringent and complex rent control rules.
Among some ominous proposals, we’ve picked up the most chatter about Oakland’s ill-conceived idea to peel back a 2002 ballot measure passed into law which exempts small landlords from Oakland’s “just cause” eviction protections, a subject we chimed in on here. For still more context, watch this video – the initial July 17th hearing has obviously passed, but the threat to owner-occupied duplexes and triplexes are still a concern and even more so now.
What you can do
We urge our fraternity not to be apathetic and kick the can down the road by waiting for the November election – please weigh in on critical measures coming before Oakland and Berkeley lawmakers and ultimately before the voters at the ballot box. The Oakland Berkeley Association of Realtors urges you to show up, call or write your elected officials.
We’ve noted that all politics are local, but some are more local than others. Although the statewide repeal of the Costa Hawkins Rental Housing Act will make for one of the most contentious debates about housing in California in decades, we should not let this main event eclipse local ordinances that can have more impact on the day-to-day activities of rental property owners. Notably and at hand in Tuesday’s agenda, Berkeley Item 64 is designed to put a plan in place for the eventuality that Costa Hawkins is repealed.
Our friends at OBAR have the best handle on all of the initiatives being discussed and articulate arguments for and against them more eloquently than us, so we include their analysis below.
**City of Oakland**
Item 16 Repeal of Duplex/Triplex Just- Cause Exemption
City Council will move this to the November election unless you act.
The amendment would force many homeowners in duplexes/triplexes to live with their tenants for life.
We would like to thank all of the REALTORS who showed up to city council on 7/17! Unfortunately, Council may still decide to put this on for the November election. However, we still may have a chance in this.
Other Major Concerns:
– Amendments to the ordinance will ensure that homeowners do not build Accessory Dwelling Units, secondary units or otherwise add more rental housing on their properties.
– Tenants are already protected. Laws and mechanisms currently in place ensure that rents cannot be raised in newly owner-occupied duplexes/triplexes for at least a year regardless of whether a new tenant is moved into a unit.
– Amending the just-cause ordinance will irreparably harm homeowners, their families and the tenants that currently live in the approximately 4,000 or more owner-occupied duplexes and triplexes by hand-cuffing homeowners from removing tenants that pose a health or safety risk to the homeowner or the other tenants living on the property.
– Adding more risk for homeowners that live with their tenants will ensure that homeowners are more stringent when deciding who to rent to when a unit becomes available or may force a decision not to rent the unit at all. The long-term effects of this will be gentrification as has been seen in San Francisco and Berkeley. This law works against its intended purpose.
Please show up at City Council meeting to tell your story or email/call your Councilmembers and the Mayor and oppose this measure by clicking HERE
Item 11: Transfer Tax
This proposal from Dan Kalb will make the transfer tax on homes the highest in the State of California. The tax is a money grab designed to alleviate the City’s inability to balance its own budget.
There has been no independent economic analysis done of this tax. This could prove hazardous because of the volatile nature of the market. The City of Oakland had to lay off half of it’s workforce the last time the market took a tumble. For that reason, We believe that it is of utmost importance that a thorough economic analysis is done regarding the possible effects such a tax would have on Oakland’s economy before moving forward on such a proposal. We are informed and believe that that is what SF did before moving on their graduated RETT. We would also like to point out that SF’s RETT graduates up at 5 million dollars and that RETT for properties below 5 million is half of our current rate (0.75% as opposed to 1.5%).
Please show up at City Council meeting to tell your story or email/call your Councilmembers and the Mayor and oppose this measure by clicking HERE
Item S9.6: Vacant Land Property Tax
Introduced by Councilmember Kaplan, this ballot measure proposes to tax vacant properties $6000 per parcel to fund homeless programs and illegal dumping remediation. This measure has not been properly vetted or analyzed. There are major concerns about equity in enforcement, fairness in the levy, and the financial projections for the stated purpose. Poor property owners that do not have money to develop their property will be forced to sell to corporations.
Voters are being misled. This tax will not provide a sustained revenue source for homelessness. If the tax works to force development, there will be no new revenues for homelessness and blight. If the real purpose of this measure is to force property owners to put their land to use, then incentives should be offered in lieu of this punitive scheme. The tax will unfairly target homeowners that are leaving properties vacant for family members or caregivers to occupy at a future date.
Please show up at City Council meeting to tell your story or email/call your Councilmembers and the Mayor by clicking HERE
**City of Berkeley**
Item 63: Transfer Tax
This Tax will NOT fund Homelessness Services. You are being misled. This tax was proposed by the Mayor, and sold to the public for months, as a special tax. That would mean it would be dedicated to homelessness services. The city has since quietly changed, without discussion or explanation, the language to make it a general fund tax. That means the money can be used for anything, and we know that the city does not know how to spend your hard-earned tax dollars.
The Association stands in complete opposition to this tax. Raising the tax by one percent for properties sold over $1 million will effectively make Berkeley’s transfer tax the highest in the state of California. The median and average price of a home in Berkeley is approximately $1.2 million. The tax would affect every residential transaction in the city and push the overall cost of housing even higher than it already is.
Because of inflation and the appreciation levels of property in the city of Berkeley, many long term property owners in Berkeley may face significant tax implications if they decide to transfer title to their grandchildren or other third parties. Generational wealth can be sharply impacted if heirs of homeowners are faced with large tax bills that they cannot pay. The city of Berkeley has been recording large numbers of transfer tax liens on properties that used to belong to families with long standing ties to South Berkeley. Those people have since been displaced or forced to sell their property under duress because of the increasingly high burden of owning property in Berkeley.
We believe that it is of utmost importance that a thorough economic analysis is done regarding the possible effects such a tax would have on Berkeley’s economy before moving forward on such a proposal. We are informed and believe that that is what SF did before moving on their graduated RETT. We would also like to point out that SF’s RETT graduates up at 5 million dollars and that RETT for properties below 5 million is half of our current rate (0.75% as opposed to 1.5%).
Please show up at City Council meeting to tell your story or email/call your Councilmembers and the Mayor by clicking HERE
Item 64: Amending Rent Ordinance
OPPOSE in Part
In the event that Costa Hawkins is repealed, this measure will cap rents on rent controlled units at their current rate and impose rent control on new construction after a timeframe between 12 and 15 years. It will also guarantee exemptions for ADUs from Rent Control and Just-Cause.
Though some exemptions have been written into the measure for ADUs, which we support, placing the other amendments on the ballot at this time may prove to be a waste of hundreds of thousands of dollars paid for by Berkeley Resident’s tax dollars. If the effort to repeal Costa-Hawkins on the state level fails, a significant amount of money will have been spent for no reason.
Please show up at City Council meeting to tell your story or email/call your Councilmembers and the Mayor by clicking HERE
THE ONLY WAY TO STOP THIS IS IF YOU ACT
What: Special City Council Meetings in Oakland and Berkeley.
When and Where:
Tuesday, July 24th @ 3:00 P.M.
City Council Chamber, 3rd floor at 1 Frank H. Ogawa Plaza Oakland
Tuesday, July 24th @ 6:00 P.M.
Council Chambers, 2134 Martin Luther King Jr. Way, Berkeley
If you can’t make it to either City Council meeting, please email or call your elected officials. Click HERE
Please email OBAR’s Government Affairs Director with questions or concerns:
At Bornstein Law, we love teachers. As parents, we are the first to acknowledge the toils of educators and the indispensable role they have in the classroom. We also love protecting the rights of property owners, and it’s not our call to take sides, but to educate the industry on laws on the books that have been decided by legislators and the courts. One such matter has played itself out in the judicial process and is now resolved.
San Francisco’s prohibition of no-fault evictions against school employees during the academic year has survived a final legal challenge and remains the law of the City by the Bay.
With several caveats, owners can evict a tenant when the owner or a close relative desires to live in the rental unit, but teachers and kids are nearly eviction-proof, at least during the school year. That’s because Ordinance No. 55-16, unanimously passed by the Board of Supervisors in 2016, catapulted school staff to a newly protected class, prohibiting their displacement through a no-fault eviction during the academic year. The law also bars condominium conversion, removal of the rental unit, capital improvement and “substantial rehabilitation” evictions for educators and students during that time.
Landlord groups successfully challenged the new protections in court, with Superior Court Judge Ronald Quidachav’s ruling that the law was “invalid on its face, pre-empted by state law and unenforceable.” However, an appellate court panel disagreed with this logic, and teachers rejoiced when the judge’s ruling was reversed.
When we first visited this topic, we predicted that given the constitutional gravity of the matter – a clash between state and local law – arguments for and against the ordinance would be heard by the state Supreme Court. California’s highest court aired out the issue and affirmed the city’s limitations on a landlord’s ability to effectuate no-fault evictions during the school year.
Bornstein Law has proudly represented aspiring homeowners who make their first purchase. But, with the vacancy rate so low in San Francisco, these buyers must use an owner move-in eviction as a vehicle to gain access to their property. Having stretched their finances for an astronomical mortgage to purchase a property, we’ve taken great pride in giving these buyers the ability to use the property.
A great number of these buyers themselves have children, and so while we recognize there is perhaps no other occupation that brings more value to our community than educators, taking a balanced approach, we maintain that the rights of homeowners should deserve some consideration and not be a casualty.
There is some misplaced sentiment propagated by tenant advocates that owner move-in evictions are overused by opportunistic landlords who attempt to raise rents for an incoming tenant willing to pay it. While there are always some bad apples, those cases are few and far between, and you will get some argument from first-time homeowners who, without availing themselves of this highly regulated path to homeownership, would not be able to live in a property located in a city that is short of unoccupied units and, as it now stands, will have difficulty moving in during the school year.
While there has been a steady erosion of property owner rights, you can rely on Bornstein Law for proper counsel in achieving your real estate goals.
Tenant advocates are in a celebratory mood after Proposition F sailed to victory in Tuesday’s special election. In an only-in-San-Francisco moment, 56 percent of the voters passed the measure, which guarantees free legal representation to tenants facing an eviction, regardless of the underlying cause for the eviction.
Dubbed the “No Eviction Without Representation Act,” the measure also makes no distinction from poor tenants or the well-to-do – counsel is afforded to tenants of all income levels, including the wealthy, without means testing to determine if the person headed for eviction has a genuine need for free legal help. The city controller estimates this ambitious initiative will cost between $4.2 million and $5.6 million annually.
Bornstein Law joined the San Francisco Apartment Association and other industry partners in opposing the measure, but the people have spoken. With Proposition F the law of the land, we won’t dwell on the colorful storyline that led up to the law being minted, but instead, focus on what this means for rental property owners in the wake of its passage.
Rest assured, the newly appointed tenant attorney will make every effort to delay the unlawful detainer by using tactics and wedging obstacles that are beyond the sophistication of tenants who ordinarily would fend for themselves if not for the free legal aid.
Tenant attorneys are inventive
In an earlier post on California’s implied warranty of habitability, we noted that it is not uncommon for non-paying tenants to claim that the rental unit is unfit or unsafe for humans to occupy, a favorite gambit tenant attorneys use to drag on an unlawful detainer action. This affirmative defense is rarely successful, but clever smoke and mirrors are used to delay the inevitable eviction.
Other stalling tactics include any number of frivolous pre-trial motions, such as a “motion to quash service,” motion to strike, allegations of discrimination, and still more demurrers designed to put a monkey wrench into the court case and ratchet up the legal costs of owners, who have no legal entitlement to free legal counsel but are forced to pay attorneys fees to defend against assertions that oftentimes go unsupported by any evidence.
Don’t kick the can down the road
From our hard-won experience, many rental property owners are conflict avoiders and would rather kick the can down the road in hopes that a failed relationship will resolve itself on its own. We have always warned these wishful thinkers that an unlawful detainer action can take some time. Translation: if swift and proactive action is not taken at the outset of the dispute, the landlord can lose months of rent by waiting for the unlawful action to play out.
The message of addressing a problem early on is one we’ve been parroting to rental property owners for years, but now must be amplified on the heels of Proposition F because, rest assured, the newly appointed tenant attorney will make every effort to delay the unlawful detainer by using tactics and wedging obstacles that are beyond the sophistication of tenants who ordinarily would fend for themselves if not for the free legal aid.
Our biased or not-so-biased conclusion
When Proposition F first appeared on our radar, we debunked its logic in the blogosphere, on social media, and in thousands of emails.
If we didn’t steadily rail against it, you might think we are opportunistic by saying the measure calls for aggressive representation and a counter-narrative by a law firm dedicated to protecting the rights of rental property owners and standing up to tenant attorneys.
Until recently, San Francisco was the only major Bay Area city with rent-control laws to allow landlords to pass on portions of property taxes and mortgage loans, but it no longer stands alone.
The San Francisco Board of Supervisors has passed an ordinance that blunts the ability of rental property owners to increase rents by up to 7 percent on top of the annual allowable increases, to pay down rising property taxes and debt services.
A landlord may still petition the Rent Board to pass through to tenants the costs of certain renovations to the property, which are considered capital improvements — new windows, a roof replacement, or exterior painting, for example.
In deciding whether to nix these pass-throughs, the Board of Supervisors received no shortage of input from a phalanx of tenant advocacy groups and predictably, the rhetoric against “greed-fueled displacement” and “outside speculators” was barbed, falling squarely on the side of tenant advocates.
Although debt service and property tax pass-throughs have been utilized by large corporate landlords and property management companies, they also are used by “mom-and-pop” owners who rely on the pass-throughs to keep themselves solvent. The new law, then, disproportionally impacts these smaller rental businesses owned by predominately responsible, studious landlords who are being saddled with rising costs.
The East Bay Rental Housing Association put human faces on these engaged, positive and compassionate members by profiling several private rental properties owners here, noting they are the providers of the community’s largest segment of safe, clean and affordable housing.
Back when efforts to scuttle debt service and property tax pass-throughs first captured our attention in December 2017, Charley Goss, government affairs managers for the San Francisco Apartment Association, noted that tenants facing financial hardship may apply for an exemption to a pass-through rent hike.
“You want to protect tenants who need protection with hardship petitions, but there has to be a give-and-take with the ability to recoup costs and investments in the property.”
By not engaging in this compromise and instituting a blanket prohibition against rising expenses, the city has dealt a blow not only to Goliath landlords who can absorb rising costs and huge mortgages with less discomfort, but to smaller rental businesses that are already struggling to keep afloat.
As we noted earlier, landlords can still petition the Rent Board for rent increases in other circumstances, but oftentimes, owners are uninformed about their respective rights under the law. Having made regular appearances before rent bodies throughout the Bay Area for over 20 years, Bornstein Law has become well-versed in this nuanced area of law.