News & Views

RESIDENTIAL SMOKE ALARM CHANGES*

The laws affecting smoke alarms (formerly smoke detectors) in residential rental properties have been changing and will continue to change. Since January 1, 2013, an owner can no longer get a building permit unless the owner can prove that his/her smoke alarms are in compliance with the law. Also the law clearly made it the owner's responsibility to test and maintain the alarms.

Effective July 1, 2014, battery operated smoke alarms must contain a non-replicable, non-removable battery capable of powering the alarm for at least 10 years. (Alarms already in inventory are excepted until July 1, 2015.

Effective January 1, 2015 smoke alarms must (1) display the date of manufacture; (2) display the date of installation; and (3) incorporate a hush feature.

Effective January 1, 2016 owners must install additional smoke alarms as required by building codes.

SOME NEW LAWS AFFECTING LANDLORDS

Effective January 1, 2013, any notice to terminate a periodic tenancy must inform the tenant that he/she has the right to reclaim any personal property left behind subject to paying certain expenses. Also the notice to the tenant of his/her right to an initial inspection of the premises must contain the same information. (AB2521)

After January 1, 2013, if the tenant reclaims his/her personal property within 2 days he/she cannot be charged for storage. If the landlord notifies the former tenant that the abandoned personal property is valued at less than $700 and the tenant fails to reclaim the property before the notice expires, the landlord may retain the property for his/her personal use or dispose of it. (AB2521)

Starting January 1, 2013 landlords and tenants may agree in writing that the security deposit may be deposited electronically into the tenant's account after the tenancy terminates and that any itemized accounting for the security deposit may be delivered by e-mail to the tenant. (AB1679)

ACCESSIBILITY -NEW PROTECTIONS FOR BUSINESSES FROM ABUSIVE CLAIMS

Effective immediately, businesses that are sued for alleged construction-related architectural violations of the Americans with Disabilities Act (ADA) may be eligible for relief from huge legal fees and damages.

The new law, SB1186, provides relief for many businesses, primarily small businesses, that can establish either that there was no violation of the ADA or that, if a violation occurred, it was unintentional and quickly corrected. Thus the law protects business owners while protecting the accessibility rights of persons having disabilities.

Key features of the law (1) reduce abusive claims or extortion demands based on alleged failure to comply with the ADA and (2) minimize damages and attorney's fees that must be paid by businesses that may have unintentionally violated the law. Previously, damages and attorney's fees could have been considerable. Only businesses that could prove that they had been certified by a Certified Access Specialist (CASp) could qualify for some relief. Under the new law, more businesses may qualify to have a lawsuit put on hold (stayed) and to get an early evaluation of the case or a mandatory evaluation conference with a judge. The stay allows time for the property owner to bring the property into compliance, and both the stay and the evaluation help keep attorney's fees to a minimum.

Another feature that takes effect January 1, 2013 compels owners of commercial properties to disclose to new tenants whether the property has had a CASp inspection and whether the property has been found to be in compliance with ADA architectural requirements.

CARBON MONOXIDE

Please remember that by January 1, 2013 state law requires you to have an approved carbon monoxide detector installed in every apartment or duplex unit. The state fire marshal suggests that you place one outside each bedroom and on each level of the residence. You may place the device at any height on the wall you choose. Follow the manufacturer's directions.

The effective date for placing carbon monoxide detectors in single family homes was July 1, 2011. (Health and Safety Code Section 17926)

SECTION 8 DISADVANTAGES

A property owner should think carefully before agreeing to participate in the Section 8 program.

Section 8 is a federal program intended to help make housing affordable to more people. It is generally administered through the local county housing authority.

Many owners think that the government screens prospective tenants. The government does not discourage this thinking. Actually, the government does no screening except to determine a prospective tenant's financial qualification to qualify for the program. So the only benefit to the property owner is the assurance that the government will pay a portion of the rent.

This minor benefit is offset by 3 serious consequences.

First, you will be agreeing to accept rent which is below market. With certain exceptions, you may not be able to change your mind later. Many owners mistakenly believe that they can exit the program if they later decide to raise rents to market levels. The lease gives the impression that this is possible. The Section 8 lease says you can terminate it for business reasons such as a desire to raise the rents. [1] But the courts have held otherwise. The courts justify their decisions by claiming that they have the power to determine whether your motive is reasonable. Courts have ruled that since the primary goal of Section 8 is to make affordable housing available, a landlord's desire to exit the program to raise the rents is not reasonable. An example of such a ruling is found in Barrientos v 1801-1825 Morton, LLC 583 F. 3 rd 1197 (9 th Cir. 2009). [2] Thus, under Section 8 you will allow a judge to decide whether you have to permanently continue accepting below market rents.

Second, you will be giving up control of the maintenance and repair of your property and the timing of the work. Section 8 requires you to submit to government inspections annually. This means that the government can tell you what repairs you must make. It can order you to make repairs immediately. No consideration is given to your financial ability to make the repairs at that time. Under state law, however, you would have the ability to schedule your maintenance and repairs according to your budget.

Finally, you may not terminate a Section 8 lease except for good cause, for example, when the tenant has not paid rent. Under state law, you can terminate a tenancy and recover possession of the property for any reason. [3]

[1] Under state law you can terminate a tenancy by giving 30 days notice (60 days if the tenant has been in possession for more than one year). But, under Section 8, a 90 day notice is required.

[2] Barrientos involves a rental property in a rent controlled jurisdiction. The rent control ordinance limits evictions unless they are for good cause. The court linked the federal and local laws together in making its decision. Unfortunately, its decision was broad enough to include jurisdictions without rent control.

[3] Of course your reason to terminate cannot be based on unlawful discrimination. Also, if the property is in a rent controlled jurisdiction, good cause is required.


ACCESSIBILITY - NEW RULES, NEW DEFENSES*

The federal government revised ADA (Americans with Disabilities Act) regulations in 2010. Compliance became mandatory on March 15, 2012.

California's standards are higher. In this state any discrimination or distinction between the way goods or services are provided to members of the general public and persons with disabilities may be unlawful.

Businesses that violate the law may be sued and consequently incur legal fees and court costs and they may be required to pay the accuser's legal costs and attorney's fees as well as monetary penalties.

A business may reduce the risk of noncompliance by having an inspection made by a Certified Access Specialist (CASp). If the business is sued after having been inspected, it has certain legal rights not otherwise available.

Consider having your attorney hire the CASp so that the report can be kept confidential.

COUNTING TENANTS

Many landlords believe they can save money by limiting the number of occupants in a rental unit.  They generally use a "2 persons plus one per bedroom" rule.  They say that too many occupants cause higher water usage, a burden on the plumbing, and greater wear and tear on the carpeting.  The landlords tell me they have been limiting the number of occupants for years and "everyone else is doing it".  But that is no excuse.  You wouldn’t accept it from your kids and HUD would not accept it from you.

These landlords expose themselves to huge attorney’s fees, penalties, and fines for discriminating against families with children.  The amounts greatly exceed any possible savings in water, gas and replacement carpeting.

Will you be accused someday of discrimination?  You never know.  It can happen if you turn down a prospective tenant, and he/she complains to DFEH (the state fair housing agency).  It will send testers to apply to rent the unit.  This is how you can get caught.

There is no safe harbor for the landlord.  The "2 persons plus one per bedroom" rule is only a building code standard.  HUD relies on a number of factors. The building code standard is just one of them.

What can you do?  First, establish your standards and practices preferably in writing. If you want to limit occupancy of a studio to two persons, for example, consider:  What will you do if a husband and wife apply?  What if they have a child?  What if they give birth to twins?  What if 2 singles apply for the unit?  Three singles?

Make sure none of your documents contains discriminatory statements or rules against children. Make sure your procedures do not discourage families with children.

Second, follow your rules and procedures consistently.

Finally, document everything.

Isn’t it easier to avoid the issue by narrowing your concerns to TWO matters: Can the prospective tenants pay the rent?  Will they obey your rules?

WHY ARE RENTS INCREASING?

According to a recent article in the San Mateo County Times based on a study by RealFacts, the average rents in San Mateo County in the 2 nd quarter of 2011 for a one bedroom apartment were $1,638 and for a 2 bedroom, one bath, $1,838. Rents in San Mateo County had increased 9.3% above the average in the 2 nd quarter of 2010.

Investors in residential rental housing seek a reasonable return on their investment. Their revenue comes from rents. What is left over after paying costs and taxes is the return.

The market provides a limit on rents. A property owner whose rents exceed the market rents will see the demand for his units decrease as renters turn to other apartments that are more affordable.

The short answer to the question is supply, demand, and government.

Let's look at demand first as it is the easiest to understand. Demand is measured by the vacancy rate. That is the number of vacant apartments divided by the total number of apartments. The vacancy rate is now extremely low in the bay area. According to the Times the low rate is partly due to the increase in the number of tech industry employees in the region, who want to rent. These employees are generally well paid and are willing to pay the higher rents.

The alternative to renting is home ownership. But it is much more difficult to become a home owner. Generally, a buyer must make a large down payment and qualify for financing. More on the problem with financing will follow below.

Next, let's consider the role government plays in causing higher rents.

The government imposes taxes and fees and creates regulations that affect the supply of housing.

Increasing property taxes, income taxes, business taxes, and sales taxes decrease the return on investment. Therefore, owners are pressed to increase rents. Increasing fees and costs of government mandated services (garbage, water, and sewer) and inspections also decrease return on investment.

The federal government also affects rents. The federal reserve is engaging in "quantitative easing" which is a euphemism for increasing the supply of money or "printing new money". The effect is to decrease the value of the dollar. This tends to create inflation. We see this inflationary trend in rising prices for everything including gasoline, food, building materials, and consumer items.

Last, let's examine supply. If demand is high and vacancy rates are low, why don't more investors build new apartment buildings? First, it is difficult to obtain financing. One reason is that recent government regulations have resulted in tougher underwriting requirements. It is therefore more difficult to qualify to get a loan. Another reason is the uncertainty in our economy. It makes lenders less willing to take risks. Uncertainty comes in large part from the inability of federal, state and local governments to control their spending. Promised benefits far exceed their tax revenues. Thus we read constantly of budget deficits, rising long term debt, and the need to increase taxes. Second, local governments impose ever higher barriers. These barriers include zoning regulations, environmental regulations, and dedication requirements. The latter often mean that investors must commit a certain percentage of proposed rental units to low income renters. (In other words, the private investor must subsidize the cost of housing for some renters.) Other barriers include development fees, inspections, property taxes, business taxes, etc. All of these increase the cost of developing new rental housing. Fewer investors, therefore, are able to finance the construction of new rental housing.

Thus supply, demand, and government are behind the increase in market rents. Landlords raise rents to keep even with their competition. All are seeking a reasonable return on their investment.

ACCESSIBILITY - NEW RULES NEW DEFENSES

The federal government revised ADA (Americans with Disabilities Act) regulations in 2010. Compliance becomes mandatory on March 15, 2012.

California's standards are higher. In this state any discrimination or distinction between the way goods or services are provided to members of the general public and persons with disabilities may be unlawful.

Businesses that violate the law may be sued and consequently incur legal fees and court costs and they may be required to pay the accuser's legal costs and attorney's fees as well as monetary penalties.

A business may reduce the risk of noncompliance by having an inspection made by a Certified Access Specialist (CASp). If the business is sued after having been inspected, it has certain legal rights not otherwise available.

Consider having your attorney hire the CASp so that the report can be kept confidential.

THE ACCIDENTAL LANDLORD

I've observed over the years that clients who have had the greatest problems with tenants got into the situation accidentally or unintentionally.

Typically it started when the client inherited her grandmother's home. Grandmother had been renting a room, and the room was still occupied. The client either tried to get the renter to leave or tried to increase the rent. Then the problems began. The renter went to legal aid and then to the city code enforcement officer and possibly to the local fair housing agency. The renter got a lot of help at no cost. My client, however, had to incur attorney's fees.

I tell my clients that property management is a highly regulated business. A person who is accidentally or unintentionally thrown into the business needs to discover what his duties are, and he needs to know how to prove that he performed his duties. He also needs to know his rights, and learn the proper procedures. The new manager should, get a good landlord/tenant guidebook, hire a professional property manager, and/or hire an experienced attorney.

2012 SMALL CLAIMS COURT CHANGES

Effective January 1, 2012 the jurisdiction of the small claims court increases for individuals to claims of up to $10,000. That is an important change, because the cost of bringing a suit in the superior court is so high.

But an individual is limited to only 2 such claims in the small claims court per year. If he or she needs to file a third claim, the limit on that is still $2,500.

If the claim is for personal injuries resulting from an auto accident and the other party has a defense by an insurance company, then the limit is $7,500.

The small claims court jurisdiction for claims by corporations or partnerships will remain at $5,000.

USE A MOLD AGREEMENT

Have each new tenant sign a mold agreement. It helps minimize your risk and places the primary burden for preventing/eliminating mold on the tenant. The agreement does this by requiring the tenant to maintain the premises so as not to cause mold, and if mold does occur, the tenant must notify you in writing. This gives you a chance to deal with the problem before it gets worse.

A TIP FOR EASIER PROPERTY MANAGEMENT

Every landlord knows how to raise the rent. It is done by giving a written notice to the tenant. But did you know that you can also change the rules, commence enforcement of rules not previously enforced, impose new ones, or even change the terms of the rental agreement if your tenant is on a month to month contract?

The law provides you with a powerful tool that gives you more control over the use of your property. You can make the change by giving the tenant a written notice. The change goes into effect 30 days after the notice is served. Just as a rent increase notice requires no action by the tenant, this tool also requires no action by the tenant.

This useful law is Civil Code Section 827.

A TOOL FOR PROTECTING YOUR PROPERTY

Are you concerned about whether your tenant is damaging your property? Is your tenant delinquent with his/her rent and you are considering whether to evict him/her?

The Civil Code provides you with a valuable tool. [1] After giving reasonable notice, generally at least 24 hours is considered reasonable, you may enter the premises to inspect its condition and/or to perform maintenance. This must be done at a reasonable time, usually during normal working hours. Of course, you can enter without prior notice if there is a serious emergency (e.g. flooding water or a fire) or if the tenant says its "OK".

This tool should be part of your property inspection and maintenance practice. You should always do a walkthrough inspection with a prospective tenant using a checklist and have him/her sign the checklist. You should also do a walkthrough at the end of the tenancy and have the tenant sign the checklist. It is important that your lease agreement and/or rules require the tenant to report all problems to you in writing. This helps prevent a tenant from successfully defending against an eviction by alleging the premises are not habitable.

Also it is a good idea to inspect the unit prior to serving an eviction notice. If you inspect and test the heat, water and electric, etc. and then repair anything that is defective, the tenant has no habitability defense. If the tenant is present during your inspection and signs a form acknowledging that everything is in good working order, the tenant will have no habitability defense. If the tenant prevents you from entering (for example he/she has changed the locks) the tenant is in breach of the rental agreement and you have a separate cause to evict him/her.


[1] Section 1954 states in part: "A landlord may enter the dwelling unit ... to make necessary ... repairs, ...supply necessary ... services ... or make an inspection .... The landlord shall give the tenant reasonable notice in writing of his or her intent to enter and enter only during normal business hours.

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A TIP FOR SCREENING APPLICANTS

Screening applicants is one of the most important things a property manager does. Most are accustomed to asking for a credit check and contacting former landlords. But another great resource for managers, at least in San Mateo County, is the court's website. It allows a manager to see if the applicant has had any prior evictions in the county.

Of course, the court's information is limited. For one thing, it does not show evictions that were filed less than 6 months ago.

Check out the site at www.sanmateocourt.org.

You will find it a valuable resource for other things too such as directions, fees, rules and forms.

*   NOTE: Readers are not authorized to rely on this website for legal advice. Information about the law given in this site is not intended as a substitute for legal advice provided by qualified counsel.