Changes for 2009

While Sacramento was quiet, the voters in San Francisco made a major change to the landlord-tenant arena by passing Proposition M in November. As explained by industry attorney Clifford E. Fried in a feature article appearing in the SFAA Magazine, Prop M faces immediate legal challenges by way of the court system. Aside from Prop M, rental property owners thankfully have few new laws on the books to contend with in 2009.

The first major state law became effective in September 2008, and centers on the rights of victims of domestic violence to prematurely terminate their rental agreement. Drafted as urgency legislation, AB 2052 declares the act of domestic violence to be a nuisance, thereby allowing owners to evict the perpetrator. The victim, in order to be released from the rental agreement without penalty, must provide the landlord with a written request of termination with a copy of a temporary restraining order, emergency protective order, or a police report. The victim must submit this request within 60 days after the restraining order was issued or the police report was made. Once the victim exercises the right of early termination, the tenant is responsible to pay rent for 30 days following the submission of notification to the owner; after the thirty-day period, the victim is legally released from the lease and may not be saddled with any further lease obligation. In addition, should the victim depart under thirty days after giving notice, and the premises is re-rented within 30 days, rent due from the victim for the 30-day period may only be prorated. The security deposit law remains unchanged, meaning that the owner is only responsible for returning the deposit when the unit is completely vacated.

As for tenants who remain in the unit and are not victims, they will continue to be obligated under the operative rental agreement. In rent controlled jurisdictions, the owner may have rights under the Costa-Hawkins Rental Housing Act to raise the rent if the remaining occupants are not original tenants. Moreover, if the abuser remains, the law now states that there is a “rebuttable presumption” that the offender who committed an act of domestic violence, sexual assault, or stalking against another tenant or subtenant has committed a nuisance if the victim has vacated. Currently, a nuisance is just cause to terminate a tenancy, and is broadly defined as any act by a tenant that interferes with the comfort, safety, or quiet enjoyment of other occupants in the building. This new law enhances the landlord’s ability to evict the abuser for committing a nuisance, as it creates a presumption of a nuisance when someone is forced to leave because of the abuse of another.

Early in 2008, the San Francisco District Attorney’s Office, after consulting with and receiving support from rental housing leaders, including the SFAA, drafted legislation that would change the Rent Ordinance to allow a victim of domestic violence to remain in possession of a rental unit after the owner terminated a tenancy for nuisance arising out of the abuse. The DA correctly noted that many victims of domestic violence become homeless, as an eviction typically terminates everyone’s right to live in the unit. The proposed legislation, which did not come out of a Board of Supervisors committee, would have allowed the victim to remain in occupancy when the abuser was evicted. In essence, the lease would be modified to eliminate the perpetrator. Like the state law which did pass, this local legislation required the victim to substantiate the claim to the landlord. Perhaps in 2009 the DA will renew her efforts to protect tenants who are victimized.

On the federal level, the Federal Trade Commission issued a rule that imposes new duties on rental property owners and management companies with regard to combating identity theft. The legislation, called the Fair and Accurate Credit Transactions Act, became mandatory in November 2008, and applies to residential property owners and managers if they use consumer reports, such as credit and eviction reporting data bases. These owners must now implement a reasonable policy, preferably memorialized in writing, to verify the tenant-applicant’s identity when a “Notice of Address Discrepancy” is received from a consumer reporting agency. This notice informs the user that there is a substantial difference between the address in the tenant-applicant’s credit report and that which was provided on the application. The landlord-manager must now have reasonable procedures to respond to the notice, which could include cross-checking the addresses in the credit report against those provided in the application and/or asking the tenant-applicant about the discrepancy in order to clear up the confusion. As identity theft is now rampant, this new rule is designed to assist tenant-applicants with detecting and correcting identity theft occurrences.

With foreclosures on the rise, the Rent Board has issued a policy statement reminding landlords that foreclosures do not affect tenancy rights. Thus, tenants in foreclosed buildings continue to be tenants with the same rights and obligations set forth in the operative rental agreement and the rent law. A foreclosure sale is also not grounds for an eviction under the San Francisco rent law. The one exception is if the occupant remaining in possession was the prior owner, who lost the property in a foreclosure sale. Under that circumstance, the new owner may evict the former owner by serving a special three-day notice to quit, and thereafter filing an eviction complaint. However, please remember that this ability to evict only applies to the former owner who remains in possession after the foreclosure action is completed. Tenants and subtenants, who were renting from the former owner, cannot be forced to leave after a foreclosure sale, and the residential tenancy survives the sale on the same terms and conditions as before.

Owners and buyers of San Francisco rent-controlled properties must now provide written disclosures to all tenants before and after the property is sold. The disclosure law, which was incorporated into the Rent Ordinance in the Spring of 2008, imposes an affirmative obligation onto the seller of rental property to disclose, in writing, the following information to tenants: (1) that tenants cannot be evicted or asked to move simply because the property is being sold; (2) rent cannot be increased beyond rent control limitations on account of a sale; (3) the rental agreement cannot be materially changed because of a new purchase; (4) the right to show property to prospective purchasers is subject to state law governing the right to enter a tenant’s unit; (5) tenants do not have to sign an estoppels certificate unless required by the lease agreement [the SFAA Residential Tenancy Agreement does contain such a requirement], and that tenants should seek advice before signing estoppels; and (6) a statement that information about tenant rights is available from the Rent Board. Likewise, the buyer is also and separately bound to disclose similar information, in writing, within 30 days after escrow closes. The buyer’s disclosures must state that (1) tenants cannot be evicted solely because of the sale; (2) rent cannot be increased except as allowed by law; (3) rental agreements cannot be materially changed because of the sale; (4) tenants, subtenants, and roommates who were in lawful occupancy at the time of sale remain lawful occupants; and (5) housing services cannot be changed or severed on account of a sale. The Greater San Francisco Association of Realtors has developed a disclosure form to ensure compliance with this law.

In November 2008, the SFAA amended its policy on “Rules and Regulations 6.14” notices. Industry attorneys noted that Rule 6.14, which was passed by the Rent Board Commissioners to address vacancy decontrol after the Costa-Hawkins Rental Housing Act was passed in 1994 but before it became fully effective after 1999, was now outdated and, in many instances, detrimental to owners. The SFAA has offered roommate and sub-tenancy classes to members, and a new “Roommate and Subtenant” form is available from the SFAA office. Owners may still serve 6.14 notices, but they should be aware of new and improved industry standards dealing with subsequent occupants, subtenants, and roommates.

The 2009 SFAA Lease is also available. Changes include the addition of a parking and storage space addendum. The attorney drafting panel also omitted outdated lease provisions and updated the agreement’s contents. Landlords may also elect in the new lease to make tenants liable for their legal fees in the event the owner prevails in a legal action, although, as noted in the past, these provisions often encourage tenant attorneys to defend tenants in eviction actions where they might otherwise have declined to become involved so as to garner tenant fees in the event of a tenant victory.

Lastly, Prop M, while it remains law, seeks to prohibit “tenant harassment.” The underlying problem with this voter-passed initiative is that it broadly defines harassment to include almost any action, or inaction, that a tenant might find offensive. For example, landlords are now liable for abusing the right to enter a unit, threatening or attempting to coerce a tenant to move out, or interfering with a tenant’s right to privacy. Remedies for violation of Prop M include the filing of a tenant petition at the Rent Board for decreased housing services, a civil action in court for actual and punitive damages or injunctive relief, or criminal prosecution by the District Attorney’s Office. In an eviction action, the tenant will also be entitled to attorney’s fees should the tenant prevail (and consequently the SFAA lease was amended to allow landlords to also recover their fees). Not only does Prop M chill buy-outs, but it also encourages tenant lawsuits while simultaneously diminishing the owner’s ability to administer the tenancy. Hopefully, our industry lawyers will have this measure declared unconstitutional by the end of the year.

Now more than ever, the SFAA needs your continued financial support. Not only must we fight Prop M, but we have less influence at the Board of Supervisors as a result of the November 2008 election. So please participate with your attendance at meetings and financial donations. With the legislature and majority of voters showing indifference, if not outright hostility, to the industry’s mission of providing safe and quality housing, we need to defend the property rights of our membership with utmost and pervasive vigor.

DW

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