Many landlords are aware that a tenant can defend an eviction proceeding by claiming that a rental unit is uninhabitable. Violations of building codes for things such as lack of heat, leaky ceilings and faulty electricity which go to the habitability of a unit and can be used as evidence by a tenant to have the Court declare the premises uninhabitable. If the Court finds that the premises are uninhabitable, then the landlord may not evict the tenant. Instead, the Court determines the reasonable rent for the premises. The tenant has an opportunity to pay the lower rent and avoid eviction.
On the other hand, if the landlord does not have a certificate of occupancy, he cannot collect any rent. In the case of Espinoza v. Calva 169 Cal. App. 4th 1393 (2008) a landlord sued for eviction and back rent. The Trial Court found the premises were uninhabitable and reduced the rent finding that the landlord was owed $2,350 for three months back rent.
The Court of Appeal reversed the monetary award. It ruled that since the landlord did not have a Certificate of Occupancy, the lease was an illegal contract and the tenant did not owe any money.
In another case, the Court of Appeal found that a tenant can sue a landlord for maintaining a public nuisance by allowing tobacco smoke in the common areas. In Birke v. Oakwood Worldwide 169 Cal. App. 4th 1540 (2009) the tenant was allowed to sue for damages and punitive damages because of alleged harmful effects suffered from second hand smoke in the common areas of an apartment complex.
October 1st, 2009
Posted by
aronofflaw |
Landlord Tenant |
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Landlords are often cautioned against representing the square footage of premises to a tenant. Accurate measurement is difficult; and there are many different ways to measure square footage. Thus, most listings for rental space described the square footage as “approximate.” The American Industrial Real Estate form lease, which is one of the most often used forms for California for commercial leases, goes even further. Paragraph 2.1 states:
“… Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating Rent, is an approximation which the Parties agree is reasonable and any payments based thereon are not subject to revision whether or not the actual size is more or less.”
Paragraph 2.4 further provides:
“Lessee acknowledges that: (a) it has been advised by Lessor … to satisfy itself with respect to the condition of the Premises … , and their suitability for Lessee’s intended use, [and] (b) Lessee had made such investigation as its deems necessary with reference to such matters and assumes all responsibility therefor as the same relate to its occupancy of the Premises … .”
Kelly McClain’s lease with her landlord contained those paragraphs and described the leased premises as “approximately 2,624 square feet.” So when Ms. McClain sued her landlord alleging that her premises was not 2,624 square feet, it was no surprise when the trial court said she did not have a case.
However, the California Court of Appeal thought otherwise. In McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784 (2008) the Court pointed to California Civil Code Section 1668 which states:
“All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”
The Court concluded:
“[T]he terms of the lease—including the exculpatory provisions in paragraph 2.1—do not bar McClain from asserting her fraud claim or showing that the misrepresentations reasonably induced her to accept the lease…. [T]he fact that Paragraph 2.1 put McClain on notice that the [Lessor’s] representations of size were approximations does not preclude her from showing that they were, in fact, materially and unreasonably inaccurate…. McClain alleges that the [Lessor] exaggerated the size of her unit by 186 square feet, or 7.6 percent of its actual size, and increased her share of the common expenses by 4 percent through a calculation that understated the size of the shopping center by 965 square feet, or 8.1 percent of its actual size…. [T]hese discrepancies … cannot be regarded as de minimis or necessarily “near to” the actual sizes as a matter of law.”
The lesson learn: Landlords should be certain to be as accurate as possible when making representations about square footage, or not do so at all. Everyone should understand that a contract cannot exempt a party from his or her own fraud or willful injury.
August 29th, 2008
Posted by
aronofflaw |
General Business, Landlord Tenant, Real Estate |
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It is not unusual for a landlord, particularly in a commercial situation, to allow a tenant to remain in possession after an eviction for a limited time, or a limited purpose. Even without the landlord’s consent, a tenant can remain in possession for the time of the judgment until the sheriff locks the tenant out. Having the tenant in possession after a judgment for eviction is risky. It can expose the landlord to additional liability and problems.
When a tenant fails to pay rent, or otherwise breaches a lease, the landlord gives the tenant a notice to pay rent or quit or a notice to cure covenant or quit. If the tenant fails to pay the rent or cure the covenant, or leave, within the time allowed, usually three days, the landlord can file an unlawful detainer suit to evict the tenant. If the landlord has followed all the procedures correctly, it will get a judgment restoring possession of the premises to the landlord. This usually takes about two months from the time of the default.
The tenant often vacates the premises within this time and before the sheriff forces the eviction. Sometimes, however, the tenant tries to make a deal with the landlord to delay the actual lock out by the sheriff. The tenant may promise to cure all the back rent and pay expenses within a short time to salvage its tenancy. The tenant may pay some money for a little extra time to move. There is no shortage of hard luck stories or benevolent landlords who are willing to soften the harshness of an eviction.
By cutting a deal with the tenant, a landlord may be getting more than he or she bargained for. First, by accepting money or other consideration, the landlord may be creating a new tenancy with the tenant. This new tenancy could be deemed to be an oral or implied agreement which does not give the landlord any of the protections of the prior written lease. When the tenant fails to abide by the new agreement, the landlord would have to start the entire eviction process over again, beginning with the notice to pay rent or quit.
Moreover, once the landlord has been restored possession of the premises, he becomes liable for injuries occurring on the premises. In the case of Stone v. Center Trust Retail Properties, Inc., 146 Cal. App 4th 1435 (2007), a restaurant continued to operate following the court’s order restoring the landlord to possession and before the arrival of the sheriff. Ten days after the order of eviction, Ms. Stone was injured at the restaurant. The court found that while the landlord was not liable for the restaurant’s negligence before the order restoring possession, after the order, the landlord had a duty to inspect the premises and insure that it was safe:
“It is one thing for a landlord to leave a tenant alone who is complying with its lease. It is entirely different, however, for a landlord to ignore a defaulting tenant’s possible neglect of property. Neglected property endangers the public, and a landlord’s detachment frustrates the public policy of keeping property in good repair and safe. To strike the right balance between safety and disfavored self-help, we hold that Center Trust’s duty to inspect attached upon entry of the judgment of possession in the unlawful detainer action and included reasonable periodic inspections thereafter. Upon entry of judgment, a tenant’s incentive to maintain a property dissipates because continued maintenance likely benefits only the landlord. To protect the public, the incentive to maintain the property must not be an orphan abandoned by a tenant and ignored by a shortly reoccupying landlord.”
Accordingly, the landlord was found liable for the plaintiff’s injuries. The lesson learned is that once the decision to evict has been made, landlords need to complete their evictions promptly and without any delay.
October 8th, 2007
Posted by
aronofflaw |
General Business, Landlord Tenant, Real Estate |
no comments
California Civil Code § 1950.7 governs security deposits held by non-residential landlords. It requires that security deposit amounts in excess of one month’s rent “shall be returned to the tenant no later than two weeks after the date the landlord receives possession of the premises.” Amounts up to one month’s rent may be held for thirty days after the landlord receives possession. The landlord is authorized to deduct from the deposit only “those amounts as are reasonably necessary to remedy tenant defaults in payment of rent, to repair damages to the premises caused by the tenant, or to clean the premises upon termination of the tenancy” if provided in the lease.
Civil Code § 1951.2 provides that if a tenant abandons the premises, or is evicted, before the end of the term, the landlord may recover the current value of future rent for the balance of the term. The landlord must use reasonable efforts to mitigate this amount. The California Court of Appeal in the case of 250 L.L.C. v. Photopoint Corp., ___Cal.App.4d ____, 2005 DJDAR 9136(July 28, 2005) recently held that this future rent is not authorized by Civil Code § 1950.7 and cannot be deducted from the security deposit no matter how certain it is that this liability will occur. The landlord must deduct only the rent that is due at the time the deposit is refunded in either two weeks or thirty days, as required by the statute.
Thus, if a tenant abandons the premises while still current on the rent, it may be entitled to a full refund of its security deposit even though the premises remains empty for many months in the future.
In 250 L.L.C. v. Photopoint Corp. the landlord security was a cash deposit and a letter of credit which totaled over $900,000, or nineteen months’ rent, because the parties knew that the premises would be difficult to re-rent should the tenant abandon the premises. Indeed, by the time the case came to trial, the landlord’s damages exceeded $1.5 million.
Nevertheless, the court ruled the rent accruing after the landlord should have returned the security deposit in accordance with Civil Code § 1950.7 and was not properly deducted from the security deposit. The landlord had to return almost all of the security deposit to the tenant’s assignee for the benefit of creditors (who has rights and duties similar to a bankruptcy trustee) for distribution to the tenant’s creditors. In other words, the landlord had to share its large security deposit with the tenant’s other creditors.
While 250 L.L.C. v. Photopoint Corp. was a commercial case and relied upon California Civil Code § 1950.7, the logic is equally applicable to residential security deposits governed by California Civil Code § 1950.5. Civil Code § 1950.7, unlike Civil Code § 1950.5, may be waived by commercial tenants. Therefore if a commercial landlord desires deposit, large or small, to be applied to future rent, that agreement must be specified in the lease specifically waiving the contrary provisions of Civil Code § 1950.7. As 250 L.L.C. v. Photopoint Corp. was just decided July 28, 2005, it is unlikely that existing leases contain this language. The most popular commercial form leases distributed by the American Industrial Real Estate Association do not contain language that would allow a security deposit to be applied to future rent. Thus, any landlord who expects to use his security deposit to cover future rent must add special language to the lease.
August 9th, 2005
Posted by
aronofflaw |
Landlord Tenant |
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In an opinion issued today, the Ninth Circuit Court of Appeals has held that in calculating a landlord’s claim for breach of a lease, the proceeds of a letter of credit held as a security deposit must be deducted from the “capped” damages claim under Bankruptcy Code Section 502(b)(6), and not from the gross amount of the claim. AMB Property, L.P. v. Official Creditors for the Estate of AB Liquidating Corp. (In re AB Liquidating Corp.), Case No. 03-16979 (9th Cir. July 19, 2005). The full text of this opinion may be viewed at: http://www.ca9.uscourts.gov. (Click on “Opinions”.)
July 20th, 2005
Posted by
aronofflaw |
Bankruptcy and Collection, Landlord Tenant |
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The first step in evicting a corporate tenant is to prepare a 3-Day Notice to Pay Rent or Quit. CCP § 1161, 1162. When the tenant is a corporation, as opposed to an individual, preparing and serving the notice can be tricky.
While the tenant may be ABC Corporation, addressing the notice solely to ABC Corporation may not be sufficient. To serve a corporation, you must serve one of the people designated by Code of Civil Procedure § 416.10. These people are the designated agent for the service of process, the president, the vice president, a secretary or assistant secretary, a treasurer or assistant treasurer, a general manager, or a person authorized by the corporation to receive service of process. Thus, when addressing the 3-Day Notice, it is always best to have one of these designated people named, as well as the corporation. Although the 3-Day Notice should make clear that the rent is owed by the corporation, it should be addressed to the corporation c/o or attention one of the foregoing designated people.
Once the 3-Day Notice has been prepared, it must be served in accordance with Code of Civil Procedure § 1162. That section provides for three methods of service. The first is by delivering it personally to one of the persons authorized by Code of Civil Procedure § 416.10, as noted above. If that person cannot be found, the second method is to leave a copy of the 3-Day Notice with a person of suitable age and discretion at the premises and then mail it to the tenant’s residence. That would mean that the notice would have to be mailed to the residence of one of the people designated above. Mailing to the corporation’s home office may not be sufficient. Commercial landlords often do not have the residential address of the officers of the corporation. Thus, this second method of service may not be practical.
The third method of service is available if the place of residence cannot be ascertained. In such an event, the 3-Day Notice should be posted “in a conspicuous place on the property” and given to a person of suitable age and discretion on the premises, should such person be present. The notice must then be mailed to the corporation, attention one of designated people, at the place where the property is situated.
Thus, if personal service cannot be obtained on a qualified individual for the corporation, and you do not have a residential address for a qualified individual, service should be made by posting the notice and mailing to the tenant at the premises’ address. Do not forget to give a copy of the notice to any person of suitable age and discretion that may be present when it is posted.
April 17th, 2003
Posted by
aronofflaw |
Landlord Tenant |
no comments
Beginning January 1, 2003, California tenants who have lived in their properties for longer than twelve months will be entitled to 60 days notice before their tenancy can be terminated. Prior to the first of the year, month-to-month tenancies could be terminated upon 30 days written notice. There is now an exemption from the 60-day rule when the property has been sold to someone who intends to occupy the premises for at least twelve months.
Also, landlords must notify residential tenants who take possession of premises after January 1, 2003, that they have a right to require a pre-move out inspection by the landlord or his agent. The inspection must take place, if requested by the tenant, two weeks before the termination of the tenancy. The landlord must inform the tenant at the pre-move inspection of everything that needs to be done to get the full security deposit returned.
The penalty for the bad faith retention of the security deposit by the landlord has been increased from $600 to twice the amount of the security deposit.
In other news, Robert Aronoff will be going to Cuba February 14 – 21 with a group of lawyers and judges to learn about the Cuban legal system and the potential for trade with Cuba in the future. Look for a report in the next legal update.
February 17th, 2003
Posted by
aronofflaw |
Landlord Tenant |
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The automatic stay provisions of the United States Bankruptcy Code, § 362, are designed to protect a debtor’s property so that it may be reorganized or liquidated by a bankruptcy trustee. If a tenant has a lease that is in default, the Bankruptcy Code gives the tenant or the trustee the opportunity to cure the default and preserve the value of the lease or the tenancy.
However, when there is no lease or default to cure, the delay and opportunity to cure provided by the Bankruptcy Code is pointless. The extra time will never result in the debtor or the trustee preserving any value for creditors, since there was no value to preserve. Nevertheless, many residential tenants, often advised by unlicenced, “eviction advisors,” file bankruptcy to stall the eviction process. Without proper legal advice, many debtors do not understand the long-term consequences of filing a bankruptcy petition. They often do not discharge very much debt while only delaying the eviction process by as little as a week. On the other hand, landlords can be subject to long delays and great expense without the debtor obtaining the relief for which the Bankruptcy Code was designed.
In 1984, Congress attempted to work on this problem by adding Bankruptcy Code § 362(b)(10), which exempted from the automatic stay “any act [to obtain possession] by a lessor … under a lease of nonresidential real property that has terminated by the expiration of the stated term of the lease before the commencement of or during ‛a bankruptcy case.” This solved the problem for commercial leases that had exprired. But It did not address the problem of non payment of rent or residential leases.
Accordingly, the California legislature went further in 1994 by enacting Code of Civil Procedure § 715.50, which provides that “a writ of possession issued pursuant to a judgment for possession in an unlawful detainer action shall be enforced…without delay, notwithstanding receipt of notice of the filing by the defendant of a bankruptcy proceeding.” The California Court of appeal upheld this statute in the case of Lee v. Baca, 73 Cal. App. 4th 1116 (1999). “The unlawful detainer judgment extinguishes the residential tenant’s interest in the property and that a postjudgment bankruptcy filing does not affect the landlord’s right to regain possession of his property–because it is not, at that point, property of the tenant/debtor’s estate.” Thus, the eviction would proceed regardless of the tenant’s bankruptcy.
This all changed in March, 2002, when the Bankruptcy Court for the Central District of California decided the case of In re Buttler 271 Bank.Rptr. 867 (Russell). The Court found the California Code of Civil Procedure § 715.050 was unconstitutional and unenforceable because it was preempted by the federal bankruptcy law. The Court decided that a debtor in possession of real property had an interest that was subject to the automatic stay provided for by the Bankruptcy Code.
That ruling, issued by a single bankruptcy judge in Los Angeles, holds that a landlord is still required to obtain an order from the bankruptcy court if the tenant files a bankruptcy petition before the sheriff can actually remove that tenant from the premises.
However since the ruling has yet to be adopted by an appellate court, it is not president. The Los Angeles County Sheriff is not treating it as the law. Instead the Sheriff is giving landlord’s the option of proceeding with an eviction even if a bankruptcy is filed after a judgment for eviction by a state court. The who landlord elects to proceed with the eviction after the bankruptcy could be exposed to being held in contempt depending upon the Bankruptcy Judge and future appellate rulings.
December 17th, 2002
Posted by
aronofflaw |
Bankruptcy and Collection, Landlord Tenant, Real Estate |
no comments
Beginning January 1, 2002, it became unlawful for any person to demand or collect any fees, often referred to as “key money” in connection with a commercial or non-residential lease unless such payment is disclosed in the written rental or lease agreement. Failure to disclose such a payment can subject the landlord or other person demanding the key money to a judgment requiring return of the key money, a penalty of three times the amount demanded, plus attorney’s fees and court costs. Key money is not prohibited by new Civil Code § 1950.8. It simply must be disclosed in writing.
March 17th, 2002
Posted by
aronofflaw |
Landlord Tenant |
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Before someone can be evicted for the failure to pay rent, he or she must be given a Notice to Pay or Quit. Unless the lease or rental agreement provides otherwise, the tenant has 3 days to pay the rent after the notice is served. The law relating to these notices to pay rent or quit has been changed effective January 1, 2002. The failure to have a person to whom rent can be paid in person, could cause delay in the landlord receiving the rent.
The notice now must contain the name, telephone and address of the person to whom rent shall be made. It must state whether payment may be made personally, and if so, the usual days and hours that person will be available to receive payment. If an electronic funds transfer procedure has been previously established between the landlord and the tenant, the notice may require payment to be made pursuant to that procedure within the required time.
If electronic payments have not been established and the notice and address do not allow for personal delivery of the rent money, then it shall be conclusively presumed that upon mailing the rent to the address on the notice to pay rent or quit, it will have been received by the landlord. The tenant must be able to show proof of mailing within the time provided in the notice.
January 17th, 2002
Posted by
aronofflaw |
Landlord Tenant |
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