March 7, 2012

Landlord-Tenant Law I

It is quite common for a trust beneficiary to inherit residential rental property from the settlor. Once the transfer has been formalized the beneficiary then becomes the new landlord. For example, the trustee transfers the property to the beneficiary's own name from the trust's name. The following are 5 helpful recommendations to consider for new landlords coming from a present landlord, myself.

1. Read the lease/rental agreement

In just about any situation, a person is best served to read the controlling document, e.g. the contract, before embarking on any action. A rental agreement definitely falls within this category. By reading the lease, the new landlord will be able to gather the necessary information about the property: the tenancy's term, the amount of rent, the amount of the security deposit, when rent is due, how many occupants are there, can the tenants assign or sub-lease their interest, etc. Without knowing this pertinent information, the landlord will not be able to make an informed decision about what to do next.

2. Communicate with the tenant

An old adage says that communication is key. When a new landlord takes over, he or she should contact the tenant(s) to arrange a time to meet. At this meeting, the landlord can state that they are the new landlord and any problems should be directed to them. Also, this meeting can provide the tenant with an assurance that the new landlord will not become a slumlord or absentee landlord who just collects rent. Rather, a meeting will indicate to the tenant that the landlord takes this obligation seriously.

3. Inspect the property to ensure habitability

California law requires a landlord, within the context of a residential lease, to provide the tenant with a habitable living environment. Green v. Superior Court (1974) 10 C3d 616 This naturally raises the question of what is a habitable living environment? The Green Court said that "in most cases substantial compliance with those applicable building and housing code standards which materially affect health and safety will suffice to meet the landlord's obligations under the common law implied warranty of habitability."

Also, the California civil code says that a residential dwelling breaches this implied warrant of habitability if it substantially lacks any of the following affirmative standard characteristics (see CC §§1941.1;1941.3;):
  1. effective waterproofing and weather protection,
  2. proper plumbing or gas facilities,
  3. hot or cold running water with connection to sewage disposal system,
  4. proper heating facilities,
  5. proper lighting or wiring,
  6. clean grounds or adequate garbage cans,
  7. floors, stairways, or railings in good repair or
  8. operable dead bolt locks on the entry doors.
It is particularly important for a landlord to ensure a residence's habitability because a tenant can lawfully withhold rent or sue the landlord for damages when this duty is breached.

4. Follow the correct procedure for disposing of the tenant's security deposit

One of the most common reasons for a small claims action is the dispute over a tenant's security deposit. Many landlords fail to properly follow the correct procedures when returning a tenant's security deposit. The entire body of statutory law is found in Civil Code Section 1950.5. A landlord is best served to read the statute in its entirety. Unfortunately, the law is very poorly written as many clauses are ambiguous. Regardless, a landlord must adhere to this law when returning a security deposit.

A small claims action is very desirable to a disgruntled tenant because the law states that any portion of a security deposit retained in bad faith is grounds for the tenant to recover twice the amount of the security deposit in addition to actual damages. For example, if the landlord in bad faith retains a mere $50 of the tenant's $1,000 security deposit, the tenant can sue the landlord for $2,000 plus actual damages. In light of this financial benefit for the tenant, it is quite clear why so many small claims court cases involve security deposit disputes. 

5. Have the tenant sign a fixed-term lease

This is a personal preference as I have been a landlord for 7 years involving multiple properties. Many landlords let fixed-term leases, for instance a 6-month lease, roll into a month-to-month tenancy at the conclusion of the lease. When this happens, the landlord and tenant are each put in a difficult situation. 

The landlord has to be concerned that the tenant can just provide 30-day notice and leave, and at that point the landlord will have to find a new tenant. This jeopardizes the landlord's cash flow because a vacancy will result in no rental income for that particular period.  Furthermore, screening tenants is not an easy matter. There are numerous fair housing laws that a landlord must be aware of when showing a unit to a prospective tenant. Sadly many people who post on Craigslist list blatantly discriminatory requirements for their unit such as no families, only one sex allowed, etc. There are serious legal consequences for running afoul of fair housing laws.

In contrast, the tenant has to be concerned because the landlord may unilaterally terminate the tenancy by giving 30- or 60-day notice to the tenant. Under California law, a tenant has no inherent right to live at a particular dwelling for an indefinite period of time. Ferry v. McNeil (1963) 214 CA2d 411. A landlord may evict, through lawful non-discriminatory means, a tenant from the unit if he or she so pleases. A notable exception to this rule is municipal ordinances which mandate cause to evict a tenant. These are known as "just cause" eviction laws. A few cities that have just cause evictions include Oakland and San Francisco. Still, the vast majority of California cities do not have just cause eviction laws to allow a tenant to remain at a residence indefinitely. Thus, the landlord is free to remove the tenant if he or she chooses. In light of this certainty, it is my opinion that a tenant should request a fixed term lease to guard against unexpected termination.