Rockwell publishing real estate law chapter 20

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© 2009 Rockwell Institute

California Real Estate Law

Lesson 20:
Landlord-Tenant Law

© Copyright 2007 Rockwell Publishing, Inc.

Introduction

This lesson will discuss:
leasehold interests
the lease agreement
payment of rent
security deposits
use and condition of premises
transferring a tenancy
termination of a tenancy

Leasehold Interests

Lease is:
contract between landlord and tenant
conveyance of real property interest


1

Leasehold Interests

Leasehold: property interest conveyed by lease
also known as leasehold estate or tenancy


Leasehold Interests

Term tenancy: fixed-length term, usually a certain
number of months or years
also known as estate for years, but term may
be for any period (including less than one
year)
provisions of lease (such as rent amount)
cannot be changed during term

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

Leasehold Interests

Periodic tenancy: no fixed term; tenancy continues
from week-to week, month-to-month, or year-to-year
lasts until landlord or tenant gives proper
notice of termination
provisions of lease (such as rent amount) can
be changed with proper notice
may be arranged at start of lease or may arise
after term tenancy ends


2

Leasehold Interests

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


Leasehold Interests

Tenancy at will: tenant is in possession of property
with landlord’s consent, but neither a term tenancy
nor a periodic tenancy exists
most commonly occurs when tenant holds
over after term tenancy ends and no new
lease has been agreed upon
once landlord accepts rent, periodic tenancy is
created


Leasehold Interests

Tenancy at sufferance: tenant holds over without
landlord’s express or implied consent
not really a tenancy at all
tenant no longer has right of possession
tenant has less protection under the law


3

Summary
Leasehold Interests

Leasehold
Term tenancy
Periodic tenancy
Tenancy at will
Tenancy at sufferance


The Lease Agreement

Lease agreement: contract between landlord and
tenant
also known as rental agreement
all contract rules apply (capacity,
consideration)

For lease terms longer than one year, statute of
frauds applies.
must be in writing

The Lease Agreement

Written lease:
must contain adequate description of property
must be signed by landlord
signature by tenant not required (payment of
rent = consent)

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


4

Summary
The Lease Agreement

Lease agreement
Writing requirement


Payment of Rent

Lease should state:
rent amount
when rent is due
how and where rent should be paid


Payment of Rent

Residential lease must contain name, address, and
telephone number of:
property owner
property manager (if there is one)
person receiving rent (if not owner or
manager)

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

5

Payment of Rent

If residential lease with no written agreement:
landlord has 15 days to provide the lease-
related information in writing
alternatively, landlord may post information in
public place (such as elevator)

Landlord must give tenant receipt for rent upon
request.


Payment of Rent
Cash payments
Under California law, landlord can’t require tenant to
pay rent in cash.

Exception: if tenant’s rent check has been returned:
for insufficient funds, or
because tenant stopped payment


Payment of Rent
Cash payments
To require cash in such situations, landlord must
give tenant:
written notice of the cash requirement, with
attached copy of bad check
can only require cash payments for 3 months


6

Payment of Rent
Late fees
Landlord can require late fee only if:
authorized by lease
reasonable


Payment of Rent
Rent increases
Term tenancy rent increases:
landlord can’t increase rent during term,
unless specifically permitted by lease
residential leases: rare
commercial leases: sometimes


Payment of Rent
Rent increases
Periodic tenancy rent increases:
state law doesn’t limit increases (but local rent
control laws may apply)
requires advance written notice
generally, month-to-month tenancy requires
30 days’ notice


7

Payment of Rent
Rent increases
In residential month-to-month tenancy:
if rent has risen more than 10% in last 12
months, 60 days’ notice required


Rent Increases
Rent control laws
Rent increases not limited by the state.

Some local governments have rent control
ordinances.
strictly limit size of rent increases
15 cities in California have rent control laws
100 cities in California provide rent control for
mobile homes


Rent Increases
Rent control laws
Costa-Hawkins Rental Housing Act: state law
passed in 1990 that places restrictions on rent
control laws
restricts any locality from enacting new rent
control ordinances
no rent control in buildings built after 1995
no rent control in single-family home or condo
tenancy that began after January 1, 1996
(regardless of building age)


8

Rent Increases
Rent control laws
In buildings that are still rent-controlled, if tenant
moves through no fault of landlord:
rent control no longer applies to that unit


Rent Increases
Rent control laws
Ellis Act: discourages landlord from trying to
escape rent control by demolishing structure and
putting up new building
if owner demolishes and replaces within 5
years, rent control restrictions continue


Summary
Payment of Rent

Cash payments
Late fees
Rent increases
Costa-Hawkins Rental Housing Act
Ellis Act


9

Security Deposits

Most residential lease agreements require security
deposit.

Provides some protection for landlord against:
damages
rent default


Security Deposits

California law:
limits size of security deposits
regulates refunds and deductions


Security Deposits
Size of deposit
For residential tenancies, total amount of security
deposit cannot exceed:
two months’ rent for unfinished units
three months’ rent for finished units


10

Security Deposits
Size of deposit
Exception: deposit may be designated as advance
payment of rent if rent term 6 months or longer
landlord can require deposit of 6 times
monthly payment as advance payment of rent


Security Deposits
Size of deposit
State law doesn’t require landlord to pay interest on
security deposits.
some local areas do (San Francisco)


Size of Deposit
Increasing deposit during tenancy
Tenant with fixed-term lease can’t be forced to add
to deposit amount.
unless lease agreement provides for increase

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


11

Security Deposits
Refunds and deductions
Landlord must fully refund deposit, unless tenant
breaches lease agreement.


Security Deposits
Landlord may deduct for losses caused by tenant’s
breach, including:
back rent and fees
cleaning unit (to its original state)
repairing damage to unit (not including normal
wear and tear)
repairing items in furnished unit (if lease
allows)


Security Deposits
After tenant vacates, landlord has 21 calendar days
to return deposit.
less any lawful deductions
deductions must be itemized in writing

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


12

Security Deposits
If landlord withholds deposit in bad faith, tenant
entitled to:
actual damages
penalty damages up to twice amount of
deposit


Security Deposits
If landlord is selling or transferring leased premises,
landlord may either:
return security deposits to tenant, or
give security deposits to new owner


Security Deposits
Inspection of the premises
In some states, landlord and tenant are required to
inventory premises at beginning of tenancy.
not required in California

In California: If tenant requests, landlord must
inspect unit shortly before end of tenancy.
gives tenant time to correct any problems
must occur no longer than two weeks before
end of tenancy


13

Security Deposits
Landlord must notify tenant of right to inspection, in
writing, either:
before lease term expires, OR
after either party has given notice of
termination


Security Deposits
After inspection:
landlord must give tenant written list of
charges
landlord cannot deduct for items not on list
doesn’t apply if tenant tries to hide damage


Summary
Security Deposits

Size of deposit
Increasing deposit during tenancy
Refunding deposit
Normal wear and tear
Inspection


14

Use and Condition of the Premises

Law imposes duties on both tenants and landlords:
landlord disclosures
tenant’s responsibilities
landlord’s responsibilities


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

Under federal and state law, specific disclosures
are required, including:
lead paint
drug manufacturing
death of occupant


Before tenant signs lease for dwelling built before
1978, landlord must disclose presence of lead-
based paint hazards by:
including a “Lead Warning Statement” in the
lease
giving tenant pamphlet on lead hazards
giving tenant completed lead hazard
disclosure form
Required by federal law.

15

Landlord must inform prospective tenants if:
methamphetamine or other illegal drugs
manufactured on premises
if occupant died on premises within preceding
3 years (including manner of death)

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


Tenant’s responsibility
Tenant’s responsibilities come from:
common law
statutory law
provisions in leases


Tenant’s responsibility
Under Civil Code, tenants must:
refrain from damaging premises or allowing
guests to do so
keep dwelling unit clean and sanitary
use gas, electrical, plumbing fixtures properly
use various parts of premises as intended


16

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

Exception: alterations needed for disabilities
landlord can require tenant to pay for
alterations
landlord can require tenant to restore
premises at end of term


Landlord’s responsibility
Every lease includes two implied warranties
(promises) by landlord:
covenant of quiet enjoyment
warranty of habitability


Landlord’s responsibility
Warranties:
originated in common law
since codified in statutory law
apply even if not stated in lease
cannot be waived


17

Landlord’s Responsibility
Covenant of quiet enjoyment
Covenant of quiet enjoyment: landlord can’t enter
premises without good reason
Civil Code allows entry only to:
make repairs or agreed alterations
investigate tenant’s abandonment of premises
show apartment to prospective tenants,
purchasers, or lenders
investigate or remedy an emergency
inspect a waterbed installation

Entry must take place
between 8:00 AM and 5:00 PM
on weekdays
unless emergency, abandonment, or
agreement between parties


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

Notice must contain:
date of entry
approximate time of entry
reason for entry


18

Notice must be delivered to one of following:
tenant
someone at unit of reasonable age

Method of delivery:
posting it at entry to unit, or
mailing it to tenant at least 6 days prior


Exceptions to written notice requirement:
oral notice of plans to show to potential renter
or purchaser
oral permission from tenant
when responding to an emergency
when tenant abandons premises
tenant waives by inviting landlord entry


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


19

California laws contain requirements:
effective waterproofing and weather protection
from roof and walls
plumbing in good working order; hot and cold
running water
heating facilities and electric lighting
deadbolts and smoke detectors
window locks
etc. © Copyright 2007 Rockwell Publishing, Inc.

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


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


20

To claim constructive eviction:
commercial tenants must physically abandon
premises
residential tenants may remain


Injuries to tenants and guests
In general, property owners are liable for injuries
caused by unsafe property conditions resulting from
their negligence.
includes rental property
may include liability for assaults by other
tenants

Landlords potentially liable for injuries suffered by:
tenants
tenants’ guests

Remedies for landlord’s violations
If landlord fails to provide habitable premises or
unreasonably interferes with tenant’s quiet
enjoyment, tenant must give landlord:
notice of problem
opportunity to correct problem


21

After receiving notice, landlord has a reasonable
time to remedy problem.
usually 30 days
less time for emergencies (lack of heat in
winter)


If landlord fails to remedy, tenant has three
remedies:
repair and deduct
rent withholding
lawsuit for damages


Remedies for Landlord’s Violations
Repair and deduct
Repair and deduct: tenant may perform repair and
deduct expense from rent

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

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

22

Rent withholding
Rent withholding: tenant withholds rent (or portion
of rent) until landlord fixes problem
amount withheld should reflect degree to
which premises are unusable
habitability defect must be serious (directly
affecting health/safety)


Lawsuit for damages
Tenant may sue:
to enforce repair
to seek damages


Lawsuit for damages
Civil Code requires tenant to prove several
elements:
defect is substantial
problem wasn’t caused by tenant or tenant’s
guest
housing inspector gave landlord written notice
to repair problem
at least 35 days have passed since inspector
mailed notice
landlord continues to collect or demand rent

23

Lawsuit for damages
If tenant wins:
actual damages
plus up to $5,000 in special damages
reasonable attorney’s fees

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


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


Retaliatory acts
Court will presume rent increase or eviction is
retaliatory if it occurred within 180 days after tenant:
complains about condition of premises
causes public agency to inspect property or
issue citation
starts lawsuit or arbitration based on condition
of premises
claims civil rights violation by landlord
participates in forming tenants union

24

Summary

Repair and deduct
Rent withholding
Retaliatory acts

Transferring a Tenancy

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


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

Assignee:
takes over lease
responsible for making payments to landlord


25

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

Sublessee:
pays rent to original tenant
original tenant then pays landlord


Assignor and sublessor liability
Despite transfer, assignor and sublessor:
still liable to landlord
if new tenant fails to pay rent or damages
premises, original tenant is liable


Assignor and sublessor liability
Only way for original tenant to avoid liability for
lease is through novation.
Novation: new party steps into shoes of one of the
original parties to the contract, and the other original
party releases the withdrawing party from the
obligation

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


26

Landlord’s consent
If lease says nothing about transfer rights, tenant
may freely sublet or assign lease.
However, most leases limit or prohibit transfer.


Summary

Assignment
Sublease
Novation


Termination of a Tenancy

Four ways a lease can terminate:
expiration
notice
abandonment
eviction


27

Expiration of lease
If lease is for fixed term:
lease expires on date agreed to in contract
holdover tenant may be subject to eviction


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


Required notice period is usually same as lease
period.
Exception: residential landlords must give 60
days’ notice if tenant has lived on property for
one year or more


28

Notice of Termination
Just cause exception
In some cases, landlord’s power to terminate
tenancy is limited.
in certain forms of housing (government-
assisted)
in cities with “just cause” eviction ordinances

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

Notice of Termination
Just cause exception
Material breach:
failure to pay rent
material damage to rental property
substantial interference with another tenant’s
quiet enjoyment
illegal use of premises


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


29

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

But landlord has duty to mitigate (lessen) damages
by re-renting property as soon as possible.
Landlord must start trying to re-rent property
as soon as it’s clear tenant has abandoned.


Abandonment
Landlord can presume abandonment if:
rent overdue by 14 days, and
landlord reasonably suspects tenant has
abandoned

Landlord must follow statutory abandonment
confirmation process.


Abandonment
If tenant leaves personal property behind:
landlord must store it safely
landlord must deliver notice to tenant
after notice is delivered, tenant has 15 days
(18 days if mailed) to reclaim property


30

Abandonment
If tenant fails to reclaim property:
landlord can freely dispose of remaining
property if it’s worth less than $300
if more than $300, must hold public auction

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


Eviction
Eviction: legal process to force tenant out of
premises
Used for:
just cause termination
tenant holdover after lease expires


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

Landlord must attempt to serve tenant personally.
if tenant evades service, notice may be mailed
and posted in conspicuous location (like
tenant’s door)


31

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

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


Eviction
Notice to quit
Curing the default:
stops eviction process
allows tenant to remain in possession


Eviction
Notice to quit
Three types of default landlord doesn’t have to let
tenant cure:
damage to premises (waste)
substantial interference with another tenant’s
enjoyment
illegal use of premises (such as for drug
manufacturing)


32

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

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


Eviction
Unlawful detainer action
Unlawful detainer action: plaintiff (landlord) alleges
that defendant (tenant) has illegally “detained”
(remained on) premises without right to be there
tenant has 5 days to respond
cases usually decided quickly


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

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

33

Summary

Expiration
Abandonment
Eviction
Notice to quit
Unlawful detainer action
Writ of possession

34

Legal Aspects of Real Estate
Lesson 20 Cumulative Quiz

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

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

2. A residential lease must state the:

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

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

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

4. A security deposit:

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

5. A tenant may make alterations to the property:

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

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

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

© 2009 Rockwell Publishing 1

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

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

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

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

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

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

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

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

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

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

12. A sublease is a transfer of:

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


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

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

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

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

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

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

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

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

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

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

18. The warranty of habitability requires that:

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


19. The landlord has an obligation to disclose:

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

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

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


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