by Ted Kimball, Partner
Kimball, Tirey & St. John LLP

Security deposits are the subject of more disputes between landlords and tenants than any other. This is often because of misunderstandings about the law and differences of opinion regarding what constitutes "clean" or "normal wear and tear." The law received a major overhaul because of legislation that went into effect in 2004.

Collecting the Security Deposit

1.  You may charge up to two times the monthly rent if the rental unit is unfurnished, up to three times the monthly rent if the unit is furnished, plus an additional half-month's rent if there is a waterbed.

2.  Last month's rent, pet deposits, key deposits, cleaning deposits, and any other "deposits" for potential future losses are all considered to be a part of the security deposit. When totaled, they may not exceed the legal limits. We advise that you label all deposits as "security deposit." This gives you the maximum flexibility in its use.

3.  The law does not permit any "nonrefundable" deposits of any kind, such as an automatic deduction for flea spraying when there has been a pet.

Initial Inspection Prior to Move-out

Landlords generally must provide tenants with a notice of the tenant's right to a pre-move-out inspection.

Returning the Security Deposit

1.  The lease can allow the landlord up to 21 days to provide the tenant with the final accounting and return the balance of the tenant's security deposit. The time period begins when the landlord regains possession of the property.

2.  This final "disposition of the security deposit" accounting must be either personally delivered or sent by first-class mail, postage prepaid, to the last known address of the tenant. Often this means mailing it to the premises the tenant just vacated. If it is returned to you by the post office, keep the original, plus a copy of the unopened return envelope as proof that you mailed the accounting within the prescribed time. If the returned mail has a forwarding address, send it to that address.

3.  If you have a roommate situation, it is advisable to make any refund check payable to all of the tenants who have signed the lease. This way you avoid the situation where each tenant claims he or she should have received the deposit refund.

Security Deposit Accounting Requirements

1.  Owners and managers must provide their tenants with written receipts showing the charges incurred to repair or clean the apartment if the total amount is $125 or more. The receipts must be attached to the final security deposit accounting.

2.  If the landlord did the work personally, he or she must "reasonably" describe the work performed and must include the time spent and the reasonable hourly rate charged. Arguments about what is "reasonable" are common, so a conservative approach is highly recommended.

3.  If a contractor does the work, the owner or manager must provide the tenant with a copy of the bill, invoice or receipt supplied, including the contractor's name, address and telephone number.

4.  Owners and managers must also provide receipts for materials if the tenant is being charged for them. Property owners or managers who purchase materials on an on-going basis may provide the tenant with a copy of a vendor price list or any other vendor document that reasonably documents the cost of the item used in the repair or cleaning of the unit.

5.  If a repair cannot be made, or receipts are not available within the 21-day period, the owner or manager may deduct only a good faith estimate of the deduction amounts and must provide an estimated accounting to the tenant within the 21-day period.

6.  If the owner or manager doesn't have the receipts within the 21-day period because they are still with the contractor, the owner or manager must provide the name, address and telephone number of the contractor along with the estimate. When the final figures and receipts are available, the owner or manager must provide a final statement within 14 days from the date the repair is completed or from the date the owner or manager receives the receipt documents from the vendor.

7.  The tenant has 14 days after receiving the final itemized statement to request additional receipts from the owner or manager. If receipts are requested, the owner or manager has another 14 days to provide the additional receipts.

The only exception to this law exists if the repairs or cleaning do not exceed $125 total, or if the tenant signs a written waiver of his/her right to receive the receipts. The waiver can only be signed after the termination notice is given, including three-day notices, or within 60 days of the expiration of a fixed term lease. If the waiver is signed, the tenant can still request receipts within 14 days after receiving the final security deposit statement.

We recommend that you use a well-drafted comprehensive security deposit accounting form, such as the CAA form, to help you comply with the law.

The security deposit may be used:

1.  For unpaid rent;

2.  To repair damages to the premises, not including ordinary wear and tear, caused by the tenant or by a guest or licensee of the tenant;

3.  To clean the premises to return it to the same level of cleanliness it was in when the tenant moved in; and

4.  To restore, replace, or return personal property or appurtenances, exclusive of ordinary wear and tear, if the rental agreement authorizes this use of the security deposit.

The express terms of the security deposit law do not specifically list other items but indicate that this list may not be complete. It remains unsettled whether it is appropriate to use the deposit for other purposes such as late charges, unpaid utility charges, and N.S.F. check charges.

The Penalties

The damages for the bad faith retention of a security deposit by a landlord are up to two times the amount of the security deposit. They may be awarded in a lawsuit even if the tenant did not ask for those damages in the lawsuit.

Resolving Security Deposit Disputes

If you cannot reach an amicable agreement with the tenant over a security deposit dispute, the tenant may file suit in Small Claims Court. The jurisdictional limit of Small Claims Court is $7,500 per claim by an individual as of January 1, 2006 (up from $5,000). Claims by entities such as partnerships, corporations and LLCs are limited to $5,000 or less. Actions against guarantors or co-signers of the lease are limited to $4,000 per claim or $2,500 if the guarantor does not charge a fee for the service.

Kimball, Tirey & St. John LLP is a full service real estate law firm representing residential and commercial property owners and managers. This article is for general information purposes only. Before acting be sure to receive legal advice from our office. If you have questions about this article, please contact Ted Kimball at 800-338-6039. For past articles on other related topics, and a list of our offices, please consult the resource library section of this website.

Each January 1st, the maximum application screening fee that can be charged to prospective tenants is increased based on changes in the CPI.

A Trap for the Unwary: Prohibitions Against Daycare


by Craig D. McMahon, Esq. and Edward O'Connor
Kimball, Tirey & St. John LLP

Imagine this scenario: Your on-site manager is approached by one of your residents. The resident indicates that they plan to open a small day care business operated out of the apartment. They want to know if management has any objection and the manager points out that the rental agreement prohibits operating a business out of the apartment. The manager also points out that the area in which the apartment building is situated is not zoned for commercial businesses. Unfortunately, as well intended as the manager might be in providing this response to the resident, the manager is wrong. Here's why:

Under California law, all single family residences, including rental apartments and condominiums, can be used for small family day care homes. Qualifying operations are not considered a "business use of the property."

There is no legal requirement that providers of day care services own their own home. Even in situations where a rental agreement specifically states that an apartment can only be used as a residence, family day care is still allowed.

The California legislature made findings and declarations in support of legislation which created rights for residents in rental properties who choose to operate a family day care home. This was enacted in the California Health & Safety Code at Section 1597.30, et seq.

The law establishes a "public policy" to provide home environments for day care and creates restrictions governing real property in order to promote the operation of family day care homes. Health & Safety Code §1597.40 states that it is "the intent of the Legislature that family day care homes for children should be situated in normal residential surroundings so as to give children the home environment which is conducive to healthy and safe development. It is the public policy of this state to provide children in a family day care home the same home environment as provided in a traditional home setting."

These laws were enacted by the legislature to meet a perceived need for greater access to day care facilities within residential neighborhoods in which the families reside.

The legislature declared that: (a) it has a responsibility to insure the health and safety of children and family homes that provide day care; (b) there are insufficient numbers of regulated family child care homes in California; (c) there will be a growing need for child day care facilities due to the increase in working parents; and (d) there should be a variety of child care settings, including regulated family day care homes, as suitable alternatives for parents.

The Legislature went on to declare this policy to be of statewide concern with the purpose of occupying this field of law to the exclusion of municipal zoning, building and fire codes and regulations governing the use or occupancy of family day care homes for children….and to prohibit any restrictions relating to the use of single-family residences for family day care homes for children.

But what about restrictions or regulations prohibiting commercial activities in a residential area that existed before this law was enacted?

In Barrett v. Dawson (1998) 61 Cal.App.4th 1048, residential neighbors attempted to force a day care center to shut down because of a restrictive covenant prohibiting any residence from being used for any "business" activity, including a family day care home. The covenant was in place in 1968, 13 years prior to the passage of this law in 1981. The original code section declared that "every restriction or prohibition entered into on or after the effective date of this section, whether by way of covenant, condition upon use or occupancy, or upon transfer of title to real property, which restricts or prohibits directly, or indirectly limits, the acquisition, use, or occupancy of such property for a family day care home for children is void." In 1983, the section was amended to remove the italicized language above. The court in Barrett held that this amendment showed legislative intent that all restrictions on family day care homes were void, whether they were created before or after the code section was put into law. Thus, the residential neighbors challenging the family day care home were prevented by the statute from using the 1968 covenant to shut down the day care home.

Under this law every provision in a written contract entered into relating to real property, which purports to forbid or restrict the leasing of real property for use or occupancy as a family day care home for children, is void.

A prospective family day care home operator, who resides in a rental property, is expected to provide 30 days' written notice to the landlord or owner of the rental property prior to the commencement of operation of the family day care home. The reality is that many operators do not provide prior notice. Since the operator is not required to obtain the landlord's "consent," the failure of an existing resident to provide prior notice should be treated as a small technical deviation from compliance responsibilities and does not provide you a basis to stop the day care activity. In order to avoid disruption of services to the children involved, residents moving a family day care home to a new location may not be required to give the new landlord 30 days' notice.

The law does provide that upon commencement of, or knowledge of, the operation of a family day care home on their property, the landlord or property owner may require the family day care home operator to pay an increased security deposit for operation of the family day care home. The increase in deposit may be required notwithstanding that a lesser amount is required of residents who do not operate family day care homes. In no event, however, shall the total security deposit charged exceed the maximum allowable under existing law.

Family day care homes must be licensed by the California Department of Social Services¹. The Department establishes requirements for the home and the qualifications of the care providers (for example, each licensee must have at least fifteen hours of training on health practices). Officials inspect the premises for compliance with required elements such as smoke detectors and fire extinguishers and restrict the number of children allowed. If the Department approves a "small" day care home in a particular location, the operator can provide care for up to six children, including resident children under ten years of age, without the owner's permission and can add two more school-aged children with the owner's consent. "Large" day care homes are rarely approved, but if they are, the limitations are the same except that the numbers allowed are 10 without consent and 12 with consent.

Operators are required to carry either liability insurance of $100,000/$300,000 or a bond of $300,000. In lieu of this requirement, they can inform each parent they do not carry either liability insurance or a bond and keep affidavits on file signed by each parent acknowledging that they have been made aware of the lack of insurance or bond. Operators must also inform parents that it is possible that the property owner may not carry insurance coverage for losses "arising out of, or in connection with, the operation of the family day care home," except if the losses are "caused by, or result from, an action or omission by owner for which they would normally be liable under the law."

If there is insurance or a bond, the property owner can be named as an additional insured if so requested by the owner in writing. If this causes an increase in premiums, that increase is at the owner's expense. Adding the property owner to the insurance policy as an additional insured is allowed, as long as it does not result in cancellation or non-renewal of the insurance policy. Note that apart from the day care operation, if the landlord otherwise requires residents to carry renter's insurance, that requirement will still apply to the home within which a family day care home is located.

Though the law requires that you allow a day care home to be run from an apartment, the same, reasonable rules that apply to other residents may be imposed. For example, you are not required to tolerate excessive noise that unduly disrupts the peaceful and quiet enjoyment of other tenants, or conduct that damages the property, if you censure non-day care operators for similar activities. If there are breaches of conduct in terms of excessive noise, etc., you can provide warnings or notices in a manner consistent with any other rule violation. However, you should be careful to evaluate the circumstances and any contemplated action carefully in each instance as it might be viewed as a retaliatory or discriminatory response to the operation of the family day care home. Not only could there be repercussions from fair housing enforcement agencies, but also from attorney advocates who specialize in child care issues.

In summary, all of your managers and staff should be made aware of the prohibition against restrictions for licensed family day care homes. Additional material concerning family child care homes is available in the form of a "Manual of Policies and Procedures" provided by the State of California . This manual summarizes the regulations and other information pertaining to the operation of licensed family day care homes. It is available online at http://www.dss.cahwnet.gov/getinfo/pdf/fcc.PDF.

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¹Health & Safety Code Section 1596.792 recognizes certain limited exceptions where a license is not required.

Craig D. McMahon is a partner at Kimball, Tirey & St. John LLP. Mr. McMahon consults on ADA and fair housing cases throughout California . Kimball, Tirey & St. John specializes in landlord/tenant, collections, business and real estate law, with offices throughout California . This article is informational only and should not be used as legal advice. Check with your attorney before acting. If you have any questions regarding this article, please call 1-800-574-5587.
Edward O'Connor is a Harvard graduate and currently a law student at the University of San Diego . He is a law clerk at Kimball, Tirey & St. John LLP in the Business Real Estate Practice Group.

Legal Alert: Evictions Statewide Decrease Slightly   March 1, 2007

During the State of California's most recent fiscal year, which is between July 1, 2005 and June 30, 2006, there were almost 9,113 fewer reported unlawful detainer actions filed in California than the previous fiscal year. However, some of the more populated counties experienced increases in the number of evictions filed.

There were over 153,019 evictions filed compared to 162,865 filed the year before. The high water mark for evictions was during the difficult economic times in the late 1990s. In 1997, there were almost 240,000 evictions filed statewide.

The counties that experienced a decline in the number of evictions were Los Angeles, Orange, San Bernardino, San Diego, San Francisco, Santa Clara, Solano, Sonoma and Tulare. Those with an increase were Alameda, Contra Costa, Kern, Merced, Monterey, Riverside, San Joaquin, San Mateo, Stanislaus and Ventura.

Los Angeles experienced the largest number of evictions statewide with 53,942 followed by San Bernardino with 13,402, San Diego with 13,001, Orange County with 11,469, Riverside with 10,466, and Alameda with 6,321.

The available statistics do not break down the reason for the eviction filings, but our law firm finds that over 75% of evictions are filed for non-payment of rent followed by 15% for other breaches, 5% behavioral issues and illegal activity and 5% because the lease terminated and the tenant failed to vacate.

Trying to determine the exact reasons why evictions were up in some counties and down in others is difficult. One factor for the increase could be the growth in the number of rental units in the county. Another factor for an increase is when the rental market is soft, some landlords lower their application standards and accept higher risk tenants. However, it is also true in some cases that landlords will attempt to work with a struggling tenant in a soft market and hold off on an eviction rather than risk a vacant apartment for a prolonged length of time.

Reasons for decline in the number of evictions could be based on a tight market where landlords can afford to raise their standards and accept financially stronger applicants as their tenants.

Another factor for a decline in the number of evictions is the still relatively low number of unlawful detainer actions following foreclosure of properties. While the number of foreclosures filed is starting to increase, most property owners are able to reinstate the loan or use other means to avoid going through the eviction process.

Although a strong economy is certainly one of the primary reasons why evictions have dropped so much since 1997, the fact that residential property management has done a much better job of screening potential residents is another major reason for the overall decline. The increase in professional management has obviously been good for the industry!

This legal alert is for general information purposes only. Before acting be sure to receive legal advice from our office. If you have any questions about this alert, please contact the nearest KTS office in your location. For past alerts and articles on other related topics, please consult the resource library section of our website.

        2007 Legal Update: Significant Legislation and Case Law in California


by Ted Kimball
Partner, Kimball, Tirey & St. John

What is in store for residential and commercial rental property owners for 2007? This article will inform you of new legislation, court cases and legal trends that affect the way you operate your rental properties.

Significant New Legislation

60-Day Notices

Effective January 1, 2007, month-to-month residential tenants, must be given a 60-day notice to terminate the tenancy (instead of a 30-day notice) when they have occupied the rental unit for one year or longer. If any of the tenants or residents have occupied the unit for less than one year, only a 30-day notice is required. In other words, a 30-day notice is permissible unless all tenants and residents have been in possession for one year or longer. In a situation where a new roommate moves in - even though the old roommate(s) may have been in possession one year or longer, only a 30-day notice is required until all residents of the unit have been in possession one year or longer.

Keep in mind this law only applies to month-to-month tenancies. If your resident is on an unexpired fixed term lease, no notice to terminate the tenancy is required by law. However, many fixed term leases require the landlord or tenant to serve a notice of intent not to renew the lease if they do not intend to continue the tenancy after the lease expires. Since there are no laws regarding this type of notice, the notice period can be whatever the lease provides.

This law has a negative effect on property owners and law abiding tenants. Tenants who are suspected of illegal activity or who are causing major ongoing disturbances will benefit as they will be able to continue their disruptive activities for 60 days unless the landlord bases the eviction on a 3-day breach of lease notice. This would normally require peaceful residents to appear in court to testify against their disruptive neighbors.

The new 60-day notice law contains a sunset provision. It will expire automatically in 2010 unless re-enacted by the legislature.

Towing

Also new for 2007 is substantial legislation outlining the rights and obligations of rental property owners, tenants, vehicle owners, and towing companies to tow unauthorized vehicles on rental property. Basically, a rental property owner can tow a vehicle under any of the following circumstances:

1.   Posting a sign at least 17 by 22 inches with at least one-inch lettering at all entrances to the property prohibiting public parking and stating that vehicles will be removed at the owner's expense, the telephone number of local traffic law authority and, if there is a contract with a towing service, their name and telephone number; or 

2.  The vehicle has been issued a notice of parking violation and 96 hours have elapsed; or 

3.  The vehicle lacks an engine, transmission, wheels, tires, doors, windshield, or any other major part necessary to operate safely and the local traffic law enforcement agency was notified at least 24 hours prior to the tow; or 

4.  The rental property is a single-family home. 

The tow truck operator must obtain written authorization for the tow identifying the vehicle, the person authorizing the tow, the grounds for removal, the time the vehicle was first observed parked illegally, and when the authorization to tow was given. The authorization must be provided upon request to the vehicle owner, although the tow truck operator will not provide the identification of the person who authorized the tow to the vehicle owner.

If there are 16 units or more, the property owner or manager must authorize the tow in writing and be on-site when the tow takes place (although the owner or manager does not have to be physically present at the place where the vehicle is being towed - he/she must simply be present at the property). For less than 16 units, a tenant can authorize the tow but must provide a written request to do so (that request must be provided to the owner or the owner's agent within 24 hours of authorizing the tow; the owner/owner's agent must then provide a copy of the written request to the tow company within 48 hours of authorizing the tow). The vehicle's owner or his agent can stop the tow in process if they immediately move the vehicle to a lawful location. The tow company can charge the owner of the vehicle ½ of the normal towing fee if the vehicle has already been coupled to the tow truck or lifted off the ground, but not yet removed from the property.

Domestic violence

Domestic violence in rental property was a legislative concern in 2006. Although a comprehensive bill was vetoed by Governor Schwarzenegger, we expect to see new legislation again introduced in 2007 to protect victims of domestic violence. In the meantime, a new law, VAWA (Violence Against Women Act), prohibits the eviction of residents or removal of assistance in public or Section 8-assisted housing if the grounds is action arising out of the domestic violence, dating violence, sexual assault, or stalking.

Illegal immigration

Illegal immigration ordinances aimed at targeting illegal residents residing in rental housing and their landlords are starting to be enacted in California. On October 18, 2006, the city of Escondido (in San Diego County) passed a law which penalizes landlords who do not "correct" the violation within 10 days from the time the city verifies that one or more of the residents reside in the United States illegally. After the ordinance was challenged through a lawsuit, the city of Escondido repealed the ordinance.

Registered sex offenders

New legislation dealing with past convicted sex offenders requires the Megan's Law Internet database to include the date of the offender's last sexual offense and the year of his or her release from jail. This will assist owners and managers in determining their level of risk when a past convicted sex offender applies for a rental unit or is a current resident. The legislature hasn't yet solved the legal dilemma facing residential landlords when they learn that an applicant or current resident is a convicted sex offender. We will likely see proposed legislation to help solve the legal dilemma next year.

Debt collection

On October 13, 2006, President Bush signed several amendments to the Fair Debt Collection Practices Act (FDCPA) to clarify that unlawful detainer actions and other lawsuits are no longer considered an initial communication requiring that tenants be advised of their right to receive documents to verify the debt. Before these amendments were put into place, a tenant subject to unlawful detainer could claim they were entitled to a 30-day delay in the process by requesting verification of the debt.

Significant New Case Law

Gang activity

An appellate court recently ruled that rental property owners have a greater duty to protect residents from gang activities than against random criminal acts. Under most circumstances, rental property owners are not liable for third party criminal conduct without prior incidents on the property. However, this case seemingly imposed an automatic duty on landlords to protect against violent gang-related crime whenever they notice the presence of gang members and gang activity on the property, even without prior incidents of violent gang-related crime occurring on the premises. This case, Castaneda v. Olsher, is being appealed to the California Supreme Court.

Section 8

In a Section 8 subsidized housing case, an appellate court overturned a Los Angeles city ordinance which allowed Section 8 residents to continue to pay only their share of the rent even after the Section 8 contract was terminated. The court ruled that the ordinance was preempted by state law which only allows the resident to pay their share of the rent for 90 days before they are responsible for the entire amount.

Dangerous dog

On October 16, 2006, a California appellate court in Chee v. Amanda Goldt Property Management ruled that the landlord and the landlord's property management company were not liable for injuries caused by the tenant's Jack Russell Terrier to a neighbor as the landlord had no actual knowledge of any danger posed by the dog. The plaintiff alleged that the landlord should have been liable for allowing a dangerous condition to exist on his property because the landlord knew or should have known that the Jack Russell Terrier breed was dangerous, especially if not restrained on a leash. The court did not agree with this theory. Be advised that it is wise to provide further protection by having an addendum to the lease in which the resident certifies that they warrant that the particular animal in question is not dangerous.

Identity theft

In the case of UD Registry, Inc. v. The State of California, the appellate court found that legislation designed to protect consumers from identity theft was unconstitutional. The legislation allowed consumers to place a "security freeze" on their credit report to prohibit credit reporting agencies from sending the report to customers without their express written consent. The court declared the law denied credit reporting agencies their First Amendment right to send credit reports to its customers.

Kimball, Tirey & St. John LLP tracks legislation and case law pertinent to our clients' real estate interests and we assist the residential and commercial rental industries in protecting their interests from unwarranted governmental interference. To receive our articles and legal alerts through e-mail or for more information, please contact the author at 800-338-6039.

Kimball, Tirey & St. John LLP offers a variety of legal resources to assist owners and managers in adopting new business practices. The legal resources include forms and information packages on a variety of subjects such as utility cost recovery from residents, the use of security cameras, arbitration provisions, employee occupancy agreements and privacy laws. If you are interested in more information on these packages, any other issues or our California Residential Lease Form, please contact Jamie Sternberg at 800-574-5587.

This article is for general information purposes only. Before acting be sure to receive legal advice from our office. If you have questions about this article, please the nearest KTS office in your location. For articles on other related topics, please consult the resource library section of the KTS website

Kimball, Tirey & St. John
Legal Alert:     60 Day Notice Legislation Signed by Governor

October 4, 2006

Effective January 1, 2007, all California residential landlords will again be required to serve their tenants with a 60-day notice to quit instead of a 30-day notice when the tenancy is month-to-month and the tenant has resided in the premises for one year or longer. The 60-day notice requirement ended January 1, 2006 when previous legislation expired. Unfortunately, a bill reinstating the 60-day notice requirement was successful and will take effect in 2007. The enactment of the notice requirement has created a fair amount of confusion in the rental housing industry. To clarify, the following points should be understood:

1. The new legislation does not affect fixed term leases. However, some fixed term leases contain within the contract, a requirement that a notice of intent not to renew be given if either the landlord or the tenant do not intend to renew the lease after the expiration date. This law does not pertain to these notices. Because there is no law requiring a notice of intent not to renew a fixed term lease, the time frame for such a notice can be set by the landlord in the lease, if desired. Therefore, you do not need to make changes to your fixed term leases.

2. The law does not require the tenant to give the landlord a 60-day notice to terminate a month- to-month tenancy. The tenant is still only required to serve a 30-day notice.

3. The tenant must be in possession of the unit for at least one year for the extended notice provision to apply. Otherwise, the landlord can serve a 30-day notice to quit. In addition, this law adds a new twist that was not included in the previous law: in the event that "any" tenant or resident in the household has resided there less than one year, the landlord is allowed to give only a 30-day notice. If a landlord plans to take advantage of such an exception, he should be prepared to prove that one or more of the residents of the unit has resided there for less than one year.

4. The law retained the "sales" exception to the 60-day requirement that existed previously. If a single family or condominium residential unit is in escrow and the buyer is a person who plans to reside in it, the landlord can give a 30-day notice if it is given no more than 120 days after the escrow has been established.

5. The tenant must pay rent through the last day of the notice or they can be served with a notice to pay rent or quit. However, if the landlord accepts rent that goes beyond the 30- or 60-day notice, the notice is presumed to have been invalidated by the landlord.

6. Finally, note that all other notices are still enforceable. That is, residents who violate the law or the agreement can be served with 3-day notices to terminate tenancy if necessary.

To recap, the new law requiring a 60-day notice only pertains to tenants who are on month to month rental agreements and only if they have been in possession for one year or longer.

New Legislation and Laws Present Challenges For California Property Owners in 2006  

by Ted Kimball Partner, Business Real Estate Group, Kimball, Tirey & St. John

Both commercial and residential California rental property owners and managers will face new legal requirements and challenges in 2006. Prudent landlords should be aware of changes in both federal and state law. This article is intended to inform the reader of some of the more significant new laws and legal trends.

Sixty Day Notices

In 2001, the state legislature imposed a sixty-day notice requirement on residential landlords who intended to terminate a month-to-month tenancy when the tenant was in possession for one year or longer. Otherwise, a thirty-day notice was all that was required. This statue contained a "sunset" provision which caused it to automatically expire if the law was not extended by the end of 2005. Attempts to make this law permanent failed for the past two years so effective January 1, 2006, a sixty-day notice will no longer be required. Landlords should amend their leases to delete any references to 60 day notices.

Megan's Law

Registered sex offenders still present a major problem and dilemma for California landlords. Since 1996, each convicted sex offender is classified as either a "high-risk" sex offender "serious" sex offender or "other" sex offender as defined by the Penal Code. Sex offenders are subject to public disclosure of specific information found on the Department of Justice web site. As of January 1, 2006 new legislation signed by the Governor will require that this information include the dates of conviction and the date the sex offender was released from custody.

California has enacted legislation that requires rental property owners and sellers to make certain disclosures to tenants and purchasers regarding the existence of the database and website. The required language for the notice has changed. Effective April 1, 2006, the State of California requires the following language be inserted in all residential leases, in not less than 8-point type:

Meth Labs

Rental properties that were illegally used by residents as a methamphetamine lab will be the subject of statewide assessment and clean-up standards and procedures as of January 1, 2006. This new law will assist property owners and managers in following specific guidelines to ensure that their property will not be permanently labeled as a contaminated property. However, until the clean-up is completed, landlords must notify any prospective purchasers or tenants of the prior illegal use and the status of the clean-up.

Proposition 64

Proposition 64, passed by voters in 2004, prohibits private attorneys from bringing a lawsuit against landlords for unfair and unlawful business practices unless they represent a person who has actually been harmed by the alleged unfair or unlawful practice. The question of whether or not Prop 64 applies retroactively is still an issue before the courts. After several conflicting appellate court decisions the California Supreme Court will review the issue. A ruling is expected sometime in 2006.

Sexual Harassment Training

The deadline is approaching to complete sexual harassment training, required for all companies who employ 50 or more employees. The two-hour training requirement is for anyone who is involved in a supervisory capacity and was employed as of July 1, 2005. The training must be completed through a live presentation no later than December 31, 2005.

After January 1, 2006, covered employers must provide continuing sexual harassment training and education to its supervisory employees once every two years and to each new supervisory employee within six months of their assumption of a supervisory position.

The training and education must be given by trainers or educators with knowledge and expertise in the prevention of harassment, discrimination and retaliation. The training must include information and practical guidance regarding federal and state laws concerning sexual harassment, including how to prevent and correct sexual harassment, and what remedies are available to victims of sexual harassment.

Kimball, Tirey & St. John is able to present Sexual Harassment seminars for our clientele. Please contact Leslie Mason at 800.338.6039 or leslie.mason@kts-law.com to arrange a seminar for your employees.

December 8, 2005
Legal Alert: Court Fee Increases Effective January 1, 2006

The Judicial Council of California has just announced that a new, uniform civil filing fee schedule will go into effect in the state's trial courts effective January 1, 2006. For the vast majority of court filings and services, the same fees will be charged for the same services across all 58 counties. The changes result from the enactment of the Uniform Civil Fees and Standard Fee Schedule Act, which was approved by the Legislature and the Governor earlier this year.

Many of the increases are substantial and will noticeably impact the cost of litigation. The good news is that the new structure establishes a moratorium on fee changes so that the uniform civil fee amounts will stay in effect through December 31, 2007, except for possible changes by the Legislature to implement recommendations regarding funding for law libraries and fees pertaining to probate actions.

Some of the more significant increases are as follows:

·        The unlawful detainer filing fee will increase from $163.00 to $195.00 for most cases (and go up to $320.00 depending on the amount in controversy);

       Note: In three counties, Riverside, San Bernardino and San Francisco, the filing fees will be higher because of local
       courthouse construction surcharges.

·        the small claims filing fee will increase to a graduated fee structure based upon the amount in controversy ranging from $30.00 to $75.00; for those "large filers" filing more than 12 claims in 12 months, the filing fee will increase to $100.00;

·        the small claims court jurisdiction will increase from $5000.00 to $7500.00 per case;

·        the general motion fee, for motions other than summary judgment or summary adjudication, will increase from $36.00 to $40.00;

·        the summary judgment motion fee will increase from $165.00 to $200.00;

·        the fee to issue a writ of possession or any other writ for enforcement of an order or judgment will be increased from $7.00 to $15.00;

·        the issuance fee for an abstract of judgment will increase from $7.00 to $15.00

The court costs for an eviction will therefore be increased by approximately $45.00 per case for 2006 in most jurisdictions.

The court costs for an eviction will therefore be increased by approximately $45.00 per case for 2006 in most jurisdictions.

Cash Payments Restricted

Effective January 1, 2005, cash may not be required to be the only form of payment of rent or security deposit unless the tenant has previously tendered a check to the landlord which was dishonored due to insufficient funds or stopped payment.  If a “cash only” requirement exists in the lease or month-too-month agreement the landlord must give the tenants a written notice stating that the check was dishonored and informing the tenants that they are required to pay in cash for a specified period, not to exceed three months.  A copy of the dishonored check must also be attached to the notice.

If the lease does not allow the landlord to insist on “cash only” under these circumstances, a thirty-day notice to change of terms of tenancy must be served on the tenant if the rental agreement is month-to-month. If the tenancy is a fixed term lease, the appropriate language must be added after the initial term has expired.

Prudent property owners and managers should make sure their leases include the appropriate language to enforce this new provision of the law.

The California Department of Justice is now required to utilize a web site to inform the general public about certain sex offenders by July 1, 2005. They must also update this information on an on-going basis. The information that must be provided is the same as what is now currently available to the public on a CD-ROM in most police departments. Effective July 1, 2006, the home address of the most severe violators will be available.  

This information will allow both landlords and their tenants to identify more easily the existence of a former sex offender who is living in the community, neighborhood or apartment complex. This creates legal challenges for landlords as Megan’s law in California specifically prohibits using this information to deny housing accommodations. If a property owner or manager is found liable under this statute, a fine of up to $25,000 can occur. On the other hand, state and federal laws recognize the right, if not a duty of rental property owners to not rent to anyone who is reasonably considered a direct threat to the health or safety of other residents. When a sex offender is identified landlords should seek legal advice immediately.

Residential Hotel owners cannot avoid going through an unlawful detainer action by requiring the occupant to check out and reregister before the thirtieth day of occupancy. Occupants of hotels are not subject to eviction procedures if they have been in possession of the unit for less than 30 days. Some owners were alleged to be circumventing the eviction process by “re-registering” occupants, to prevent there from being a continuous 30 day occupancy of a unit. Under the new law, if an occupant was required to check out and re-register before the 30 days were up, there will be a legal presumption that the owner is attempting to circumvent the law by maintaining the transient status of the resident.

The Department of Justice (DOJ) and the Housing and Urban Development Department (HUD) recently issued new guidelines regarding disability accommodations under the Federal Fair Housing Act. Most of the guidelines also apply to requests for disability modifications to the property. Under the new guidelines, if a person's disability is obvious, or otherwise known to the owner or manager, and if the need for the requested accommodation is also readily apparent or known, then the owner or manager may not request any additional information about the person's disability or the disability-related need for the accommodation. For example, if an applicant or resident who is obviously blind is requesting that he or she be allowed to keep a seeing eye dog as a disability accommodation, even though the property does not allow pets, the owner or manager may not require the person to provide any additional information about the disability or the need for the accommodation, since both are readily apparent.

If the person's disability is known or readily apparent to the owner or manager, but the need for the accommodation is not readily apparent or known, then the owner or manager may request only information that is necessary to evaluate the disability-related need for the accommodation. For example, a resident who is obviously blind is requesting to have the windows changed as a disability accommodation. The disability is obvious, but the need for having the windows changed is not. The owner or manager may ask the person to provide information about the disability-related need for the change.

Under the new guidelines, and depending on the person's circumstances, information verifying that the person meets the Act's definition of disability can be provided by the person themselves (for instance, proof that a person under 65 years of age receives SSI or SSDI benefits, or a “credible statement” by the disabled individual). A doctor, or other medical professional, a peer support group, a non-medical service agency, or a reliable third party who is in a position to know about the person's disability may also provide verification of a disability. However, the guidelines seem to indicate that owners and managers may no longer insist that verification of a person's disability come from a health care provider. Unfortunately, this may open the door for potential abuse.

The guidelines go on to say that once an owner or manager has established that a person meets the Act's definition of disability, the owner or manager's request for documentation should seek only the information that is necessary to evaluate if the reasonable accommodation is needed because of the disability.
 
The guidelines also confirmed that you cannot deny an accommodation or modification because the person didn't follow the company's formal disability procedure, or because the person made the request orally, rather than in writing.

It is important to note that this is not a new law, or even a written "requirement." However, we believe it is the standard which the DOJ and HUD, may use to prosecute fair housing complaints in the future. Additionally, although the California Department of Fair Employment and Housing (DFEH) has not issued any formal comment on the new guidelines, we expect that they will likely follow them.

It is important to check with the city and county where your rental property is situated to determine if additional new laws are imposed upon your property rights. Many cities in California have or are contemplating passing laws establishing such requirements as: just cause for evictions, moratoriums on condominium conversions, lead-based paint inspection and removal programs, mandatory sprinkler retrofits, and laws that allow city and county prosecutors to file unlawful detainer actions against tenants who are unlawfully engaged in illegal drug offenses (plus charge the property owner for the costs of suit).

This article is intended as information only and is not to be construed as legal advice.  For expert legal representation in landlord/tenant law, please consider the law firm of  Kimball, Tirey & St. John.  Our clients reach us by calling (800) 338-6039 and by visiting our web site a www.kts-law.com.  Our web site contains numerous articles regarding rights and obligations of California landlords.