Property Ownership

When a person inherits a piece of property, a question that naturally arises is "when does that person's interest in the property vest?" Or in other words, "when did that person become the property's owner?"

This is an important legal question because ownership gives the owner a bundle of legal rights. For example, ownership gives a property owner the ability to occupy, modify, improve, buy, sell, lease and exclude others from such property. 

The California Probate Code says this on the following subject:

"Subject to Section 7001, title to a decedent’s property passes on the decedent’s death to the person to whom it is devised in the decedent’s last will or, in the absence of such a devise, to the decedent’s heirs as prescribed in the laws governing intestate succession." Prob C § 7000.

You might then wonder, what does Prob C § 7001 entail? It reads as follows:

"The decedent’s property is subject to administration under this code, except as otherwise provided by law, and is subject to the rights of beneficiaries, creditors, and other persons as provided by law. Prob C § 7001." 

A common scenario where property ownership is important is when a relative has been staying with the decedent at their home. The following illustration encapsulates a scenario I have heard numerous times over the years.

Randy is a mooch and asks his Aunt Bee if he can stay with her at her country estate in Portola Valley. Aunt Bee is a widow without any chidren and longs for company at her huge home and pities Randy so she decides to take her nephew in. Aunt Bee then writes a will which bequeaths the entire home to her nephew Rufus, a modest man who lives with a spendthrift wife and sells women's shoes at the local mall. Rufus is Randy's brother. Aunt Bee does not believe that Randy should inherit anything because he is a scrounger and Rufus is a tireless worker. One day Aunt Bee passes away in a horrible canoe accident. Rufus retrieves the will from Aunt Bee's safe deposit box and reads that the country estate was bequeathed to him. Rufus retains counsel and his attorney informs him that he technically became owner of the home the moment Aunt Bee died, citing Prob C § 7000.

Rufus believes that Randy exploited Aunt Bee's kindness and demands that Randy leave the home immediately. Randy objects and says that he has squatter's rights and moreover, Rufus must complete probate before title will transfer to him. Rufus then asks his attorney to speak to Randy. His attorney informs Randy that title passed to Rufus on Aunt Bee's death and thereby he was he owner of the property and could make tenancy determinations. Consequently, Rufus was of the belief that Randy's tenancy was over and asked him to leave or face eviction. The attorney also explained that squatter's rights are the stuff of legal fiction. Randy then left the country estate in hopes of finding another sympathetic relative so he could freeload at their home.       

Landlord-Tenant Law II

In a prior post I discussed helpful tips for a new residential landlord. This week I thought I would write about tactics a landlord should not pursue. The following are 5 no-nos for a residential landlord.

1. Wrongfully turning off the utilities

Many landlords, for foolish reasons, do not like to use the legal process to remove a tenant from the rental unit. Even though eviction proceedings are largely expedient and straight-forward, many landlords nonetheless engage in non-judicial evictions, which is unlawful and potentially criminal. The term for this is "self-help." Even though it sounds harmless and borderline patriotic given the U.S.' self-reliance mentality, it is very much frowned upon by the law.

Assume that Thomas, the tenant, has not paid rent for the month of March. Leonard, the landlord, is irate over this because Thomas has been delinquent in paying rent for the past couple of months and Leonard has warned Thomas about being prompt with rent. Leonard then goes to an attorney who tells him that Thomas can delay eviction proceedings for weeks if he pulls the right legal levers. Incensed that he has to wait weeks to evict Thomas, Leonard decides to cut the power line to Thomas' unit because no rational human can live in a dwelling without electricity. Therefore, Thomas will naturally want to leave the unit immediately. 

The obvious problem with this is two-fold. First, California law says that a landlord is prohibited from tampering with utilities in order to terminate the tenant's occupancy. CC § 789.3. The civil penalties for this include (1) actual damages; (2) up to $100 for each day that the landlord violates CC §789.3, but not less than $250 for each separate cause of action and subsequent or repeated violations being treated as separate causes of action subject to separate awards of damages; (3) attorney fees; or (4) injunctive relief. Second, it may be considered criminal to interfere with utility equipment. Pen C § 591.

2. Improperly entering the unit

A residential landlord may enter the rented premises only during specified situations at certain times and typically only after giving the tenant written notice. CC §1954. Many landlord mistakenly assume that they can just show up to the rental unit without prior notice and demand entry into the unit to inspect the premises. The following are the permissible reasons to request entry into the unit

1. in an emergency;
2. to make necessary or agreed-on repairs, decorations, alterations, or improvements;
3. to supply necessary or agreed-on services;
4. to exhibit the unit to prospective or actual purchasers, mortgagees, tenants, workers, or contractors;
5. to make an inspection under CC §1950.5(f);
6. when the tenant has abandoned or surrendered the premises; or
7. under a court order.

Reason #5 relates to a security deposit inspection in case you were curious what CC §1950.5(f) meant.

Although it should be noted that a landlord may enter without prior notice if done to 

1. to respond to an emergency.
2. if the tenant is present and consents to the entry at the time of entry.
3. after the tenant has abandoned or surrendered the unit.

Two additional key components of the landlord's right of entry is the fact that notice of the entry must be given in writing and the landlord may only enter the unit during business hours.  
CC §1954(d)(1). Unfortunately there is no definition of "business hours" in civil code. Still, the reasonable interpretation of business hours is 8:00 - 5:00pm or 9:00 - 6:00pm Monday - Friday. Although the lease agreement may define what constitutes business hours such that the weekend is included.

If the landlord commits a significant and intentional violation of CC § 1954, the tenant can receive up to $2,000. CC § 1940.2(b). 

3. Appropriating the tenant's valuable belongings

A common scenario is where the tenant breaks the lease early and the landlord is relegated re-renting the unit as required by law. CC § 1951.2. The tenant will often leave behind belongings, e.g. clothes, furniture and/or appliances. The landlord will then decide that since the tenant put them in a bind, the landlord will return the favor by appropriating their possessions left behind. Surprisingly, a landlord is legally able to keep the tenant's property provided the landlord has served them with a notice of abandonment and the value of the property is less than $300. CC § 1988(a). However, if the value of the property is above $300, the landlord is obligated to sell the property at public auction.  CC §1993.07. 

Since the landlord is granted the discretion to appraise the value of the tenant's belongings and is probably disgruntled that the tenant left behind some possessions, it is easy to see that this situation is ripe for abuse. For example, the landlord can easily devalue or deflate the true value of the items because there is no check on their discretion, plus they already view the tenant in a negative light for breaking the lease early. Moreover, many tenants are not prepared to litigate over a $275 couch and $50 mattress that the landlord misappropriated since attorneys charge that for an hour of time typically. Still, a landlord should know that just because the tenant left behind some property, this does not give them a license to appropriate the item for their own personal use. Rather the landlord needs to value the items and then make the appropriate legal determination.

4. Improperly raising rent for a month-to-month tenancy

When a new landlord takes over, he or she often likes to increase rent to put their unique stamp on the situation. In other words, the new landlord wants to show that they are in charge. However, California law is very specific as to when rent increases become effective. If the rent increase is 10% or less of the rent charged during the 12 months preceding the increase, the landlord needs to give 30-day notice before the rent increase becomes effective. CC §827(b)(2). If the rent increase is more than 10% of the rent charged during the 12 months preceding the increase, the landlord needs to give 60-day notice before the rent increase becomes effective. CC §827(b)(2).    

5. Retaliating against the tenant's lawful conduct

Retaliation seldom leads to positive results in life and the landlord-tenant relationship is no different. California law bars a landlord from retaliating against a tenant who invokes his or her tenant rights. CC § 1942.5. 

A common example is where the tenant complains to a city's housing authority about the habitability of the unit and when the landlord learns of this, attempts to evict the tenant. In short, this is prohibited by California law. CC § 1942.5. Moreover, if a tenant engages in protected tenant activities, the landlord is barred for 180 days from terminating the tenancy, increasing rent or decreasing any services, if done in retaliation. CC § 1942.5. This can be particularly frustrating to a landlord because they will have to endure a tenant they clearly dislike for an additional 6 months unless the tenant leaves under their own free will. In light of this, whenever a tenant invokes the right to live in habitable unit, a landlord should not reflexively think "eviction" to eliminate the problem immediately. Instead, the landlord should constructively engage the tenant or else they run the risk of having to deal with the tenant for at least another 6 months.

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.

Lease Termination

It is undisputed that millions of Americans rent their place of living. Whether it is a house, condominium, duplex, manufactured home, triplex, townhouse, fourplex, etc., renters make up a large segment of the housing population. Since it is very likely that at least a portion of those renters will pass away while they were renting, the continuity of their lease is a topic for estate planning.

First, it is worth discussing the lease types a renter may sign because California law treats specific leases in unique ways. Although there are a couple of different types of leases, the two main types are a month-to-month lease and a fixed-term lease. Generally speaking, in a month-to-month lease the tenant is only obligated to live in the unit for at most 1 month and they are free to vacate the unit, provided appropriate notice is given to the landlord, at the end of the month. Whereas in a fixed-term lease, the tenant is obligated to live at the dwelling for the duration of the lease even though they might want to vacate the unit beforehand.

California law says that a month-to-month lease is automatically terminated when the landlord receives notice that the tenant has died, whereby the tenant’s beneficiaries have no rights to the lease but may occupy the dwelling until 30 days have passed since the last rent payment was tendered. Miller & Desatnik Mgmt. Co. v Bullock (1990) 221 CA3d Supp 13. Conversely, in a fixed-term lease, California law says such a lease does not terminate due to the death of either the tenant or the landlord. Joost v Castel (1939) 33 CA2d 138; City of Los Angeles v Greines (1930) 107 CA 481.

For illustrative purposes, assume Thierry signed a month-to-month lease on January 1, 2011. Thierry unfortunately died in a tragic car accident on June 10, 2011. Thierry timely paid his monthly rent on June 1, 2011. Thierry wrote a will the previous year and named his friend Cesc as the sole beneficiary of his estate. Cesc is therefore entitled to occupy Thierry’s unit, albeit only until June 30 because Thierry’s death automatically terminated the lease. On the other hand, if Thierry had signed a fixed-term lease, January 1, 2011 to December 31, 2011 for instance, then Cesc would be entitled to occupy Thierry’s apartment because Thierry’s death did not end the lease. However, the lease may provide that upon Thierry’s death, the fixed-term lease would terminate and his beneficiaries would have 30 days to gather his belongings and move out. It is common to see the aforementioned clause placed in a fixed-term lease because landlords want to avoid the hassle of dealing with the tenant’s beneficiaries because the landlord has no prior history with them.