rockwell publishing real estate law chapter 20

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© 2009 Rockwell Institute

1

California Real Estate Law

© Copyright 2007 Rockwell Publishing, Inc.

Lesson 20:Landlord-Tenant Law


Introduction

This lesson will discuss:leasehold intereststhe lease agreementpayment of rentsecurity depositsuse and condition of premisestransferring a tenancytermination of a tenancy


Leasehold Interests

Lease is:

contract between landlord and tenant

conveyance of real property interest

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Leasehold Interests

Leasehold: property interest conveyed by lease

also known as leasehold estate or tenancy


Leasehold Interests

Term tenancy: fixed-length term, usually a certain number of months or years

also known as estate for years, but term may be for any period (including less than one year)provisions of lease (such as rent amount) cannot be changed during term

Example: lease specifying term from January 1 to June 30 is term tenancy


Leasehold Interests

Periodic tenancy: no fixed term; tenancy continues from week-to week, month-to-month, or year-to-year

lasts until landlord or tenant gives proper notice of termination

provisions of lease (such as rent amount) can be changed with proper notice

may be arranged at start of lease or may arise after term tenancy ends

3


Leasehold Interests

Example: Term tenancy expires and tenant “holds over.” If landlord accepts rent payments, periodic tenancy is established.


Leasehold Interests

Tenancy at will: tenant is in possession of property with landlord’s consent, but neither a term tenancy nor a periodic tenancy exists

most commonly occurs when tenant holds over after term tenancy ends and no new lease has been agreed upon

once landlord accepts rent, periodic tenancy is created


Leasehold Interests

Tenancy at sufferance: tenant holds over without landlord’s express or implied consent

not really a tenancy at all

tenant no longer has right of possession

tenant has less protection under the law

4

Summary


Leasehold Interests

Leasehold

Term tenancy

Periodic tenancy

Tenancy at will

Tenancy at sufferance


The Lease Agreement

Lease agreement: contract between landlord and tenant

also known as rental agreement

all contract rules apply (capacity, consideration)

For lease terms longer than one year, statute of frauds applies.

must be in writing


The Lease Agreement

Written lease:

must contain adequate description of property

must be signed by landlord

signature by tenant not required (payment of rent = consent)

For residential lease, tenant must be given copy within 15 days.

5

Summary


The Lease Agreement

Lease agreement

Writing requirement


Payment of Rent

Lease should state:

rent amount

when rent is due

how and where rent should be paid


Payment of Rent

Residential lease must contain name, address, and telephone number of:

property owner

property manager (if there is one)

person receiving rent (if not owner or manager)

Residential lease must also state any restrictions on how and when rent is to be paid.

6


Payment of Rent

If residential lease with no written agreement:

landlord has 15 days to provide the lease-related information in writing

alternatively, landlord may post information in public place (such as elevator)

Landlord must give tenant receipt for rent upon request.


Payment of Rent

Under California law, landlord can’t require tenant to pay rent in cash.

Exception: if tenant’s rent check has been returned:

for insufficient funds, or

because tenant stopped payment

Cash payments


Payment of Rent

To require cash in such situations, landlord must give tenant:

written notice of the cash requirement, with attached copy of bad check

can only require cash payments for 3 months

Cash payments

7


Payment of Rent

Landlord can require late fee only if:

authorized by lease

reasonable

Late fees


Payment of Rent

Term tenancy rent increases:

landlord can’t increase rent during term, unless specifically permitted by lease

residential leases: rare

commercial leases: sometimes

Rent increases


Payment of Rent

Periodic tenancy rent increases:

state law doesn’t limit increases (but local rent control laws may apply)

requires advance written notice

generally, month-to-month tenancy requires 30 days’ notice

Rent increases

8


Payment of Rent

In residential month-to-month tenancy:

if rent has risen more than 10% in last 12 months, 60 days’ notice required

Rent increases


Rent Increases

Rent increases not limited by the state.

Some local governments have rent control ordinances.

strictly limit size of rent increases

15 cities in California have rent control laws

100 cities in California provide rent control for mobile homes

Rent control laws


Rent Increases

Costa-Hawkins Rental Housing Act: state law passed in 1990 that places restrictions on rent control laws

restricts any locality from enacting new rent control ordinances

no rent control in buildings built after 1995

no rent control in single-family home or condo tenancy that began after January 1, 1996 (regardless of building age)

Rent control laws

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Rent Increases

In buildings that are still rent-controlled, if tenant moves through no fault of landlord:

rent control no longer applies to that unit

Rent control laws


Rent Increases

Ellis Act: discourages landlord from trying to escape rent control by demolishing structure and putting up new building

if owner demolishes and replaces within 5 years, rent control restrictions continue

Rent control laws

Summary


Payment of Rent

Cash payments

Late fees

Rent increases

Costa-Hawkins Rental Housing Act

Ellis Act

10


Security Deposits

Most residential lease agreements require security deposit.

Provides some protection for landlord against:

damages

rent default


Security Deposits

California law:

limits size of security deposits

regulates refunds and deductions


Security Deposits

For residential tenancies, total amount of security deposit cannot exceed:

two months’ rent for unfinished units

three months’ rent for finished units

Size of deposit

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Security Deposits

Exception: deposit may be designated as advance payment of rent if rent term 6 months or longer

landlord can require deposit of 6 times monthly payment as advance payment of rent

Size of deposit


Security Deposits

State law doesn’t require landlord to pay interest on security deposits.

some local areas do (San Francisco)

Size of deposit


Size of Deposit

Tenant with fixed-term lease can’t be forced to add to deposit amount.

unless lease agreement provides for increase

Tenant with periodic tenancy can be required to increase deposit amount.

Increasing deposit during tenancy

12


Security Deposits

Landlord must fully refund deposit, unless tenant breaches lease agreement.

Refunds and deductions


Security Deposits

Landlord may deduct for losses caused by tenant’s breach, including:

back rent and fees

cleaning unit (to its original state)

repairing damage to unit (not including normal wear and tear)

repairing items in furnished unit (if lease allows)



Security Deposits

After tenant vacates, landlord has 21 calendar days to return deposit.

less any lawful deductions

deductions must be itemized in writing

If repairs and cleaning total more than $125, landlord must provide copies of receipts or invoices.


13


Security Deposits

If landlord withholds deposit in bad faith, tenant entitled to:

actual damages

penalty damages up to twice amount of deposit



Security Deposits

If landlord is selling or transferring leased premises, landlord may either:

return security deposits to tenant, or

give security deposits to new owner



Security Deposits

In some states, landlord and tenant are required to inventory premises at beginning of tenancy.

not required in California

In California: If tenant requests, landlord must inspect unit shortly before end of tenancy.

gives tenant time to correct any problemsmust occur no longer than two weeks before end of tenancy

Inspection of the premises

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Security Deposits

Landlord must notify tenant of right to inspection, in writing, either:

before lease term expires, OR

after either party has given notice of termination



Security Deposits

After inspection:

landlord must give tenant written list of charges

landlord cannot deduct for items not on list

doesn’t apply if tenant tries to hide damage


Summary


Security Deposits

Size of deposit

Increasing deposit during tenancy

Refunding deposit

Normal wear and tear

Inspection

15


Use and Condition of the Premises

Law imposes duties on both tenants and landlords:

landlord disclosures

tenant’s responsibilities

landlord’s responsibilities



Landlord can’t hide material facts about premises from potential tenant.

Under federal and state law, specific disclosures are required, including:

lead paint

drug manufacturing

death of occupant

Landlord’s disclosures



Before tenant signs lease for dwelling built before 1978, landlord must disclose presence of lead-based paint hazards by:

including a “Lead Warning Statement” in the lease

giving tenant pamphlet on lead hazards

giving tenant completed lead hazard disclosure form

Required by federal law.


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Landlord must inform prospective tenants if:

methamphetamine or other illegal drugs manufactured on premises

if occupant died on premises within preceding 3 years (including manner of death)

Exception: occupant died of or was ill with AIDS or HIV




Tenant’s responsibilities come from:

common law

statutory law

provisions in leases

Tenant’s responsibility



Under Civil Code, tenants must:

refrain from damaging premises or allowing guests to do so

keep dwelling unit clean and sanitary

use gas, electrical, plumbing fixtures properly

use various parts of premises as intended

Tenant’s responsibility

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Tenant’s Responsibility

Most residential leases: tenant can’t alter premises without landlord’s consent

Exception: alterations needed for disabilities

landlord can require tenant to pay for alterations

landlord can require tenant to restore premises at end of term

Alterations



Every lease includes two implied warranties (promises) by landlord:

covenant of quiet enjoyment

warranty of habitability

Landlord’s responsibility



Warranties:

originated in common law

since codified in statutory law

apply even if not stated in lease

cannot be waived

Landlord’s responsibility

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Landlord’s Responsibility

Covenant of quiet enjoyment: landlord can’t enter premises without good reason

Civil Code allows entry only to:

make repairs or agreed alterations

investigate tenant’s abandonment of premises

show apartment to prospective tenants, purchasers, or lenders

investigate or remedy an emergency

inspect a waterbed installation

Covenant of quiet enjoyment



Entry must take place

between 8:00 AM and 5:00 PM

on weekdays

unless emergency, abandonment, or agreement between parties




Landlord must give tenant written, advance notice of planned entry.

Notice must contain:

date of entry

approximate time of entry

reason for entry


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Notice must be delivered to one of following:

tenant

someone at unit of reasonable age

Method of delivery:

posting it at entry to unit, or

mailing it to tenant at least 6 days prior




Exceptions to written notice requirement:

oral notice of plans to show to potential renter or purchaser

oral permission from tenant

when responding to an emergency

when tenant abandons premises

tenant waives by inviting landlord entry




Warranty of habitability: residential landlord’s implied promise to provide dwelling that is weather-proof, pest-free, reasonably safe, and served by standard utilities

Warranty of habitability

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California laws contain requirements:

effective waterproofing and weather protection from roof and walls

plumbing in good working order; hot and cold running water

heating facilities and electric lighting

deadbolts and smoke detectors

window locks

etc.



Warranty of Habitability

Constructive eviction: occurs when landlord interferes so thoroughly with tenant’s quiet enjoyment of premises, or allows them to become so uninhabitable, that tenant is effectively forced to move out

Constructive eviction



If landlord makes or allows premises to become unusable, tenant is no longer obligated to pay rent.


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To claim constructive eviction:

commercial tenants must physically abandon premises

residential tenants may remain




In general, property owners are liable for injuries caused by unsafe property conditions resulting from their negligence.

includes rental propertymay include liability for assaults by other tenants

Landlords potentially liable for injuries suffered by:tenantstenants’ guests

Injuries to tenants and guests



If landlord fails to provide habitable premises or unreasonably interferes with tenant’s quiet enjoyment, tenant must give landlord:

notice of problem

opportunity to correct problem

Remedies for landlord’s violations

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After receiving notice, landlord has a reasonable time to remedy problem.

usually 30 days

less time for emergencies (lack of heat in winter)




If landlord fails to remedy, tenant has three remedies:

repair and deduct

rent withholding

lawsuit for damages



Remedies for Landlord’s Violations

Repair and deduct: tenant may perform repair and deduct expense from rent

Tenant can’t use repair and deduct remedy if:tenant (or tenant’s guest) caused damagerepair costs more than one month’s rent

Tenant can only use remedy twice in any 12-month period.

Repair and deduct

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Rent withholding: tenant withholds rent (or portion of rent) until landlord fixes problem

amount withheld should reflect degree to which premises are unusable

habitability defect must be serious (directly affecting health/safety)

Rent withholding



Tenant may sue:

to enforce repair

to seek damages

Lawsuit for damages



Civil Code requires tenant to prove several elements:

defect is substantialproblem wasn’t caused by tenant or tenant’s guesthousing inspector gave landlord written notice to repair problemat least 35 days have passed since inspector mailed noticelandlord continues to collect or demand rent

Lawsuit for damages

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If tenant wins:

actual damages

plus up to $5,000 in special damages

reasonable attorney’s fees

If landlord acted willfully or maliciously to force tenant out → subject to civil penalties.

Lawsuit for damages



Civil Code prohibits landlord from raising rent or starting eviction process against tenant in retaliation for making habitability claim.

Retaliatory acts



Court will presume rent increase or eviction is retaliatory if it occurred within 180 days after tenant:

complains about condition of premises

causes public agency to inspect property or issue citation

starts lawsuit or arbitration based on condition of premises

claims civil rights violation by landlord

participates in forming tenants union

Retaliatory acts

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Summary







Repair and deduct

Rent withholding

Retaliatory acts


Transferring a Tenancy

To grant another person all or part of leasehold interest, parties use:

assignment

sublease



Assignment: original tenant (assignor) transfers entire leasehold to new tenant (assignee)

Assignee:

takes over lease

responsible for making payments to landlord

Assignment vs. subleasing

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Subleasing: original tenant (sublessor) transfers part of lease term, or part of premises, to new tenant (sublessee)

Sublessee:

pays rent to original tenant

original tenant then pays landlord

Assignment vs. subleasing



Despite transfer, assignor and sublessor:

still liable to landlord

if new tenant fails to pay rent or damages premises, original tenant is liable

Assignor and sublessor liability



Only way for original tenant to avoid liability for lease is through novation.

Novation: new party steps into shoes of one of the original parties to the contract, and the other original party releases the withdrawing party from the obligation

Landlord usually won’t agree to novation unless original party pays some consideration.

Assignor and sublessor liability

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If lease says nothing about transfer rights, tenant may freely sublet or assign lease.

However, most leases limit or prohibit transfer.

Landlord’s consent

Summary



Assignment

Sublease

Novation


Termination of a Tenancy

Four ways a lease can terminate:

expiration

notice

abandonment

eviction

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If lease is for fixed term:

lease expires on date agreed to in contract

holdover tenant may be subject to eviction

Expiration of lease



In periodic tenancy, landlord or tenant can terminate tenancy by giving other party advance written notice.

Notice of termination



Required notice period is usually same as lease period.

Exception: residential landlords must give 60 days’ notice if tenant has lived on property for one year or more


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Notice of Termination

In some cases, landlord’s power to terminate tenancy is limited.

in certain forms of housing (government-assisted)

in cities with “just cause” eviction ordinances

“Just cause” ordinance: prevents landlord from terminating periodic tenancy unless tenant has materially breached leasehold agreement

Just cause exception


Notice of Termination

Material breach:

failure to pay rent

material damage to rental property

substantial interference with another tenant’s quiet enjoyment

illegal use of premises

Just cause exception



Abandonment: tenant leaves premises before a fixed lease term expires, or departs without giving the 30-day notice required to end a month-to-month tenancy

Abandonment

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Tenant who breaches without good cause remains liable for remaining rent.

But landlord has duty to mitigate (lessen) damages by re-renting property as soon as possible.

Landlord must start trying to re-rent property as soon as it’s clear tenant has abandoned.

Abandonment



Landlord can presume abandonment if:

rent overdue by 14 days, and

landlord reasonably suspects tenant has abandoned

Landlord must follow statutory abandonment confirmation process.

Abandonment



If tenant leaves personal property behind:

landlord must store it safely

landlord must deliver notice to tenant

after notice is delivered, tenant has 15 days (18 days if mailed) to reclaim property

Abandonment

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If tenant fails to reclaim property:

landlord can freely dispose of remaining property if it’s worth less than $300

if more than $300, must hold public auction

After auction, landlord can reimburse herself for storage costs, but must forward remaining proceeds to tenant or county.

Abandonment



Eviction: legal process to force tenant out of premises

Used for:

just cause termination

tenant holdover after lease expires

Eviction


Eviction

Landlord begins eviction process by serving tenant with three-day notice to quit (vacate) the premises.

Landlord must attempt to serve tenant personally.

if tenant evades service, notice may be mailed and posted in conspicuous location (like tenant’s door)

Notice to quit

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Eviction

If notice to quit is served for breaching lease terms, tenant has right to cure (fix) the default.

Example: Tenant can cure failure to pay rent by paying any overdue rent.

Notice to quit


Eviction

Curing the default:

stops eviction process

allows tenant to remain in possession

Notice to quit


Eviction

Three types of default landlord doesn’t have to let tenant cure:

damage to premises (waste)

substantial interference with another tenant’s enjoyment

illegal use of premises (such as for drug manufacturing)

Notice to quit

33


Eviction

If tenant fails to cure (or has no right to cure) default → must leave premises by end of third day.

If tenant ignores three-day notice to quit, landlord must file lawsuit called unlawful detainer action.

Notice to quit


Eviction

Unlawful detainer action: plaintiff (landlord) alleges that defendant (tenant) has illegally “detained” (remained on) premises without right to be there

tenant has 5 days to respond

cases usually decided quickly

Unlawful detainer action


Eviction

Writ of possession: pre-printed form stating that tenant has 5 days to leave premises; used when tenant refuses to move after losing an unlawful detainer action

judge must sign

sheriff must serve

After 5 days, sheriff can physically remove tenant and his belongings.

Writ of possession

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Summary



Expiration


Abandonment

Eviction

Notice to quit

Unlawful detainer action

Writ of possession

Legal Aspects of Real Estate Lesson 20 Cumulative Quiz

1. To change the terms of a periodic tenancy, a landlord must:

A. offer to compensate the tenants for any losses B. give the tenants advance notice of the change C. waive the rent for one month after the change D. bring an unlawful detainer action

2. A residential lease must state the:

A. name, address, and telephone number of the landlord B. name, address, and telephone number of the tenant C. emergency contact person for the tenant D. due date for rental payments

3. An apartment building will not be subject to rent control if:

A. it was built before 1995 B. it was built after 1995 C. the landlord demolishes the building and constructs a new one within five years D. the rent control law allows the landlord a reasonable return on investment

4. A security deposit:

A. must be the same whether the unit is furnished or unfurnished B. may be labeled a nonrefundable cleaning fee C. may be kept by the landlord to cover unpaid rent D. can be an amount up to six months' rent

5. A tenant may make alterations to the property:

A. and require the landlord to pay for the alterations B. and leave the landlord to cover the cost of restoring its original condition when the tenancy ends C. if the tenant is disabled and the modifications are necessary to accommodate the disability D. unless the lease states otherwise

6. For residential tenants, a requirement for claiming constructive eviction is that:

A. the landlord's neglect substantially interferes with the use or enjoyment of the premises B. the tenant moves out of the property C. the tenant continues to pay rent D. the landlord brings an unlawful detainer action

© 2009 Rockwell Publishing 1

7. A tenant who transfers an entire leasehold estate to another party is a/an:

A. sublessee B. sublessor C. assignee D. assignor

8. One of the tenant's responsibilities for a leased property is:

A. the covenant of quiet enjoyment B. to use the various parts of the premises as intended C. the warranty of habitability D. to repair significant defects with the property

9. If one tenant is substituted for another in the novation of a lease, the novation:

A. releases the new tenant from liability to the landlord B. releases the new tenant from liability to the old tenant C. releases the old tenant from liability to the landlord D. releases the landlord from liability to the new tenant

10. Which of the following does not meet the criteria for a just cause eviction?

A. Participation in formation of a tenants' union B. Failure to pay rent C. Using the premises illegally D. Substantially interfering with another tenant's quiet enjoyment

11. Nina, who has been living in her apartment for two years, decides to move to a new place. She is in a month-to-month tenancy, so how much notice does she need to give her landlord?

A. 7 days B. 15 days C. 30 days D. 60 days

12. A sublease is a transfer of:

A. a rental unit to a new tenant for only part of the lease term B. only part of the rental unit to a new tenant C. the entire tenancy for the remaining lease term D. A or B


13. A tenant notifies his landlord of a serious problem with the property, which will cost about $10,000 to repair, and the landlord fails to fix it. The tenant can:

A. waive the warranty of habitability B. withhold rent until the landlord fixes the problem C. claim retaliatory eviction D. refuse to allow the landlord to enter the property

14. A rent increase is presumed to be retaliatory if it occurs within six months after:

A. a previous rent increase B. the passage of a rent control ordinance C. the tenant has a public agency inspect the property D. a guest of the tenant is injured on the property

15. A tenant abandons a lease, leaving behind some personal belongings on the premises. If the tenant does not claim this personal property, it must be:

A. sold at a public auction if the property is worth $300 or more B. given to the next tenant to occupy the property C. taken to a landfill D. left on the premises until the tenant returns

16. When a landlord fails to fix problems with the property, in order to win a lawsuit for damages a tenant must show that:

A. the landlord has stopped collecting rent B. the problem was not caused by the tenant or one of her guests C. the tenant first tried to fix the problem herself D. a guest of the tenant suffered injuries

17. After the tenant vacates a residential unit, the landlord must return the tenant's security deposit within:

A. 7 days B. 14 days C. 21 days D. 28 days

18. The warranty of habitability requires that:

A. floors, stairways, and railings be maintained in good repair B. the tenant waive his right to notice before entry by the landlord C. the landlord not alter the property D. there are undisclosed material facts about the property


19. The landlord has an obligation to disclose:

A. the race of the previous tenant B. how much rent the last tenant was paying C. how many previous tenants have claimed constructive eviction D. if another tenant died on the property within the preceding three years

20. If a landlord sells his property to a third party:

A. the tenant's security deposit must always be returned to the tenant B. the tenant must give the new landlord an additional security deposit C. the landlord usually transfers the tenant's security deposit to the new owner D. the former landlord is allowed to keep the tenant's security deposit


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