Friday, July 11, 2014

Drafting the Owner Move-In Notice in San Francisco

Termination of tenancy starts from drafting and serving the notice of such termination, and the importance of making that notice as accurate and complete as possible is hard to understate. If the notice is defective, the landlord most likely will have to go back to the square one, starting the whole process again by reissuing and reserving the notice. Sometimes, months will pass before the landlord finds out about the deficiency. It may become a very expensive mistake to learn.

This article concentrates on the elements of a notice of termination of tenancy on the grounds of owner's move-in, the so called "OMI notice." It has quite a few elements and steps to be concerned about.

ATTENTION: commencing on January 1, 2018, significant changes in the OMI/RMI procedure will come into force. Read more here.

The San Francisco OMI notice is rightfully considered to be a complicated document, certainly requiring more content than its more popular cousins, such as a notice "to pay or quit." Requirements for what should be included in that notice can be found in several sources. There are also procedural requirements for certain steps to perform before and after the service of that notice*. This article is an attempt to assemble to a comprehensive list of all things related to issuance and service of that notice.

This article is covering only the main issues concerned with this kind of eviction notice. While most scenarios will fit within the requirements addressed here, consider that in my book, 10 pages cover just this type of "just cause" alone, and there are another 10 pages addressing elements generally applicable to all "non-fault" notices. In other words, this is one of a more complicated notices, than it is generally presumed.

Preliminary Considerations.

Before you start doing anything further, it will help to find out if the targeted tenant(s) claim(s) a "protective" status. See, Sec. 37.9(i) and 37.9(j). A tenant protected on the grounds of disability may not be evicted by this notice, save for three exceptions, addressed below, and stated under Sec. 37.9(i)(2). A tenant protected on the "educator" grounds or being a "household with a child" have lesser exceptions, but still can be evicted during the school year's summer break.

Another stop-sign will be to determine that the moving-in landlord, has a comparable unit vacant. See,  Sec. 37.9(a)(8)(iv). This is true even if such unit were to become vacant after the notice was issued, but is particularly important to consider before any process started.

Elements of the notice covered below should serve you as an outline of facts and evidence you have to have in order to succeed on the desired termination of tenancy. Remember that, should your notice be contested or in a case the tenants will not vacate once notice's term expires, the notice will become a mandatory exhibit in the eviction process (the "unlawful detainer" action), attached to a verified complaint, and everything said in that notice--or omitted from it--can be used against you. Cliché, but true. Don't state nonexistent facts in the notice, don't make promises you don't mean to fulfill, double- and triple-check all the information disclosed, or be susceptible for an attack on the notice's deficiency.

Consider that invalidation of the notice alone, regardless of the factual dispute of the substance of eviction, may be a successful ground to stop and restart the eviction process. You've been warned.

Get familiar with the applicable rules and regulations. In addition to the obviously necessary reading of the Rent Ordinance, particularly Sections 37.9(a)(8), (i), (j),  and 37.9B, check the Rule 12.14 and Fact Sheet 4. This article may not, and aims not to, substitute the actual law applicable to the issuance and service of this notice.

Elements and information to state in the notice.

Addressees' Names.

Include all known to you names for the residents of the targeted unit. This means including tenants' children names as well. Include the clause to cover residents, whose name and form of residency is unknown, who may happen to claim residency under the named occupants.

Term.

The term of the notice is 60 days, i.e. it shall expire and the tenants vacate no sooner than the end of the 60th day following the service of the notice. The first day to count is the next day after the service. If the last day falls on a weekend or holiday, the last day is extended through the following Monday or first business day. The notice may not be issued for shorter term, but can be made for a longer duration. For instance, if an argument of retaliation is anticipated, the notice may be stated to terminate only on 180th date, under CC § 1942.5.

Why would a notice be made for a longer term than 60 days? Different considerations may dictate so. Here are four most popular factors: (1) an issue with tenant's complaint preceding the service of notice, making it a requirement to terminate at no sooner time than 6 months; (2) a complication in calculating a per-diem rent due for a termination happening in the middle of a month, thus requiring to round-up the term by increasing its length through the end of the month; (3) inability of the noticing owner/landlord to take possession at the certain time following expiration of the notice 37.9(a)(8)(v); (4) inability to perfect service on the tenants at the certain time. Whatever the reason, the notice can be efficiently expanded in its term, but not contracted.

Claims and Statements.

The landlord may be presumed to act in bad faith [37.9(a)(8)(v)], so the statement confirming that whoever plans to move-in does so in good faith, without ulterior reasons and with honest intent, is advisable, unless it is not true, in which case the project has a little-to-none chance to succeed.

It then has to be claimed, whether the subject property is to be recovered as a "principal" residence, and whether it will serve as such principal residence for the next continuous 36 months following owner's moving in.

State when the claimant intends to move in, remember that if the claimant won't be able to move-in within three months, (s)he is presumed to seek termination of tenancy in bad faith. [37.9(a)(8)(v)]

State the lawful amount of rent currently due. [37.9(c), first sentence] State that if the rental unit will be offered for rent during the 36-month period following service of the notice, the tenant will have a right to re-rent the unit at the same rent the tenant rented the property before, plus any allowable increases. Advise the tenant to keep the landlord and the Rent Board apprised of his/her updated current address during that 36-month period of time.

Disclosures.

Disclose where the tenants can surrender the keys and deliver up the possession. This disclosure has to be made similar to the requirements of California Civil Code, Section 1161(2) (i.e., include the name, address, telephone number of the designated person, and the usual dates and hours that person is available, etc.).

Disclose the consequence of what will happen if possession will not be delivered up, that the legal proceedings for recovery of possession might be instituted, that such proceedings may result in a judgment against the tenant(s), which may include damages for each day that tenant(s) continue to occupy the property after the periods covered by the notice, as well as recovery for the rents, if any will be remaining due and unpaid, and attorneys’ fees and court costs as allowed by law. Note that a typical disclosure of potential award of punitive damages up to $600, usually made in a notice for non-payment of rent, is not required here, since the code provides for this award only "if the alleged unlawful detainer be after default in the payment of rent." California Code of Civil Procedure, Section 1174(b).

Another difference from a "for-fault" 3-day notice, is that the landlord needs not to declare forfeiture of the lease in a 60-day termination notice. See how the CCP § 1174(a) treats the forfeiture statement.

Property ownership disclosures, per Section 37.9B(c)(1)--(7): state the percentage of ownership the moving-in party or related-to party has (has to be 25% now, or 10% if became an owner or or before February 21, 1991,  Sec. 37.9(a)(8)(iii)), when that interest was recorded, what kind of ownership it is (the manner of holding title). One more comment on ownership timing, if the moving in owner obtained the interest in property within 30 days of issuing the notice, consider to serve/include additional disclosure pursuant Sec. 37.9(k)(2). San Francisco Association of Realtors has a form, called "Tenants Rights Disclosure ..," if you don't have that form, follow requirements from (A) to (E) on what (and how) has to be disclosed on that form.

Disclose where the issuer of the notice currently resides, and how much pays for that residency. Identity of those for whom the residency is sought (for the owner herself, or for a family member, such as "grandparents, grandchildren, parents, children, brother or sister, or the landlords spouse or the spouses of such relations," including Domestic Partners. Sec. 37.9(a)(8)(ii)). All applicable names needs to be identified, and relationship in between, including the names of the recovering tenancy claimant's children, if they will be moving in too.

Since the notice may later operate as landlord's rebuttal of bad faith, a wider approach in disclosure may be appropriate, to disclose all properties owned by all co-owners. This is a discretionary, strategic step to consider, it may be inappropriate in case of many co-owners or ownership of many properties by those co-owners, it may unduly convolute the notice or create an additional burden of proof on the noticing party.

Explain how rent will be handled during the term of the notice. The payments may be pro-rated on a per diem basis, if the notice's term ends on an day within the calendar month. Don't risk to calculate a wrong amount due by simply dividing the monthly rent amount by 30. If that particular month when the notice ends has 31 day, divide by 31, but if 28--by 30. It is Ok to understate amounts due, but not Ok to overstate. Where to deliver payments shall be disclosed in accordance with CC § 1161(2).

Just because the moving-in party will make payments to vacating tenants, it does not negate tenants' obligation to make rent payments in accordance with the lease. It may seem counter-intuitive, but those obligations of payments (tenant to landlord under the lease agreement, and landlord to tenant under the municipal law requiring to pay for relocation) are not mutually dependent or exclusive of each other. If the tenant stops making rent payments during the period set under the termination notice, the landlord can serve such tenant with a 3-day notice to pay rent or quit and then proceed on eviction, without waiting on the longer termination notice to expire.

Disclosures are also made to the recipient of this notice that (s)he can claim a protected status, either on the grounds of disability and long-term occupancy of the unit (37.9(i)), or on the grounds of being an "educator" or having a "household with children." (37.9(j)). Disclosure informs that failure to claim such status within 30 days from receipt of the notice will waive that claim, even if there were facts supporting it otherwise.

Notices.

The following notifications have to be given in the body of the notice:

Advising regarding main relocation expenses. Tenants get paid for vacating the property through no fault of their own, the moving-in landlord has to pay vacating tenants. Sec. 37.9C(a)(1). Landlord shall notify tenants about this right. Sec. 37.9C(c).  How much? The required minimums are updated annually and published online. I see it as a good idea to include this payment schedule as part of the notice (see more on attachments below), but the disclosure of what payments are coming tenants' way needs to be made to avoid ambiguity, i.e., the attached table of payments won't make a reading tenant fully notified of what payments are due to her.

Advising regarding additional relocation expenses.  50% of the main payments due are sent together with the notice. This is always the rule, even if you already know the tenants may be eligible for additional payments (for a child, or because of disability). Upon receiving the notice, the tenants have to send a request, and then the 50% of the additional payments due is provided. Sec. 37.9C(e)(2). Notices of these payments potentially available to the tenants, and the requirement for the tenants to notify the landlord and request those payments is thus part of this notice. Landlord's request for this information also shall inform the tenant that failure to respond to that request equals admission that such special status (and eligibility for additional payments) is not applicable to that tenant. Secs. 37.9(i)(4) [protected tenants] and 37.9(j)(3) [tenants with children].

Notice about personal property left behind by the vacating tenant. In order to avoid dealing later with such left personal property, and in compliance with the recently amended Civil Code, Section 1941.1, include the disclosure stated under CC § 1941.1(h) or 1941, regarding abandoned property.

Notice about inspections. Besides handling the rent payments from the tenant, and main + additional payments to the tenant, remember that the return of a security deposit is also has to be made soon after the tenancy is terminated, pursuant to CC § 1950.5. This means including a notice about the property inspection, see CC § 1950.5(f)(1). Read its timing requirements closely: the notice is given within "reasonable" time, hence it can be a part of this 60-day notice, but the inspection is made no earlier than two weeks prior to termination of the lease. Note that this requirement applies to this kind of notices, while is not required in the "for fault" notices made under CC § 1161(2)-(4). Since we keep in mind the overarching requirement of eliminating ambiguity in the notice, it should be useful to mention in this disclosure that the return of tenant's security deposit is not made part of the total payments due to tenant under the Rent Ordinance. Sec. 37.9C(d).

Notice about Rent Board's advice. True for each notice made for evictions administrable under the Rent Ordinance's Just Causes, this notice has to appraise its readers that the advice about it is available from the Rent Board, and provide the Board's address.

Debt Collection Disclaimers. Unless this notice is made by the owner and the owner is an individual, it will be prudent to include both Federal and California debt-collection disclaimers, uned the Federal Fair Debt Collection Practices Act and the state Rosenthal Fair Debt Collection Practices Act. By virtue of spanning over 60 days and advising the tenant on how to make rent payments during that time, this notice "collects" rent and thus may be deemed an act of a debt collection practice. See, M. Bender, 1-4 MB Practice Guide: CA Landlord-Tenant Litigation 4.23. Although advising about the future rent may be exempt, as not a debt. De Dios v. Int’l Realty & RC Invs., 641 F3d 1071, 1076 (9th Cir 2011). It won't hurt to include the disclaimers. While including those two disclaimers, make them distinct from each other and from the rest of the notice's text. Difference in font should suffice, and don't make them with a smaller typeface than 12. Finally, read and remember to comply with the language of the stated disclaimers.

Optional clauses.

Signature and date. Some cases held that the issuer of the notice does not have to sign or date it. In those cases, other circumstances had established with certainty the notice drafter and when it was served. Signing and dating the notice will serve to the issuer's advantage, establishing who is the witness/drafter and when the notice was presumably made. Remember that, in the case of a following up eviction, this notice will be a fundamental part of the action and an "Exhibit 2" of the verified complaint.

Notice superseding other notices. It won't hurt to mention that the subject notice supersedes all prior notices. But proceed with caution, if you served any other notices simultaneously with this one, you have to exclude them from this superseding clause, and do the same in those notices, excluding this OMI notice from being superseded as well.

Payments.
50% of the main relocation expenses have to be delivered together with the notice. Sec. 37.9C(e).
50% of the additional relocation expenses have to be paid after the tenant timely claims her applicable status (Id.), if the landlord does not challenge it under Sec. 37.9(i)(4) or 37.9(j)(3) (in case the status is challenged, the Rent Board has to be notified)
Remaining halves of all payments due are paid at the time of termination and vacating the property.
Within 21 days following tenants' return of possession, their security deposit has to be administered pursuant to CC § 1950.5.
Quirky details:
(1) payments should be presented in a form of cashier's checks, not personal checks, to satisfy the requirement to actually tender the payment, rather than to make an offer to tender the payment. This is in the light of the recent decision in Kruger v. Reyes (2014) 181 Cal. Rptr. 3d 521, 527 discussing tenant's payment performance under CC § 1500.
(2) keep in mind that tenants' acceptance of the relocation payments does not mean their agreement to vacate and may not be used as a waiver of any of their defenses. 37.9C(d).
(3) for a residency less than 12 months no payment is required. Of course, a usual lease is made for a year term: if the eviction starts with a notice expiring before its expiration, the landlord then is breaching the lease contract--if after, the tenant had already resided for 12 or months and now is entitled to a payment. 37.9C(a)(2). The take out from this rule is that if the landlord anticipates a sale or an OMI in some soon time, that landlord should not enter into a lease more than 11 months long on its expressed term.

Attachments.

The notice has to include copies of applicable Rent Ordinance sections, and it will be prudent to make those copies from the oficial legal publisher of the San Francisco Administrative Code, the American Legal Publishing Corporation (amlegal.com).

Include the following:
- Sections 37.9, 37.9B, 37.9C;
- A table of currently due amounts for payments (link checked as of 2-8-16);
- A multilingual form (link checked as of 2-20-16);
 If a new buyer-owner, tenants' rights disclosure form within 30 days from purchase, per Sec. 37.9(k)(2);
- Copies of the checks issued together with the notice.

Exceptions to consider.

Tenant-families with children under age of 18 or "educators" may fall under Section 37.9(j), prohibiting owner-move-in and relative-move-in (among other) evictions during the school year.

Tenants who claim protected status may not be evicted on the grounds of owner moving in. Sec. 37.9(i), (j). There are exceptions. The defense in the case where protection is claimed under 37.9(i), it will not apply in three scenarios: if the moving-in owner has only one unit in the building, or if her relative is also a person over 60 y.o. of age, or if all units are occupied by tenants with similar protected status under 37.9(i). Sec. 37.9(i)(2). The defense claimed under 37.9(j) does not apply during the school year's summer break.

Requirements and Deadlines.

First of all, this newly minted notice has to be served on the tenant(s). Landlords are advised to use professional licensed servicers of process, so that a legitimate competent witness will be available for the eviction trial, should it ever come down to one. Landlords can serve the notice themselves, but this practice is not recommended. Service is done by means defined in CC § 1162(a).

A copy of the notice and all accompanying documents shall be filed with the rent board within 10 days following the service of the notice. Note that the rule is stated differently under 37.9(c), where it just mentions that the notice needs to be filed, vs. the rule under 37.9C(c), where it expressly requires the landlord to file. In any event, since Sec. 37.9C applies to this notice, it should be filed by the landlord. The Rent Board will open a case and issue and record a notice of OMI eviction against the property.

The landlord may make more filings under that case, for instance if she will challenge tenant's claimed eligibility for additional payments under 37.9(i)(4) or 37.9(j)(3). In this case, tenant's notice of eligibility and landlord's challenge get filed with the Rent Board under the same case No.

Finally, the landlord shouldn't forget to move-in within 3 months following tenant's vacating the property.


As a final consideration, remember that each situation is different and each real property is presumed unique (CC § 3387). Your options and available strategies will depend on your case's particular facts. If you are currently in a similar situation and need to learn more about your rights and obligations, make your first step toward taking control over the circumstances, and call my office at (415) 987-7000. I will be glad to assist in guiding you through the jungle. The only thing you can't afford is to stay put and uninformed. My office provides a confidential assessment of your particular scenario, free of charge, and I will share with you the results of the analysis along with my thoughts on available solutions.

This type of eviction is considered a "non-fault" eviction, is now covered in my book on drafting an eviction notice in San Francisco. You may currently obtain its copy on Amazon (print and e-book versions).


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More real property posts

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* This article aims to cover those requirements to the best of the author's knowledge, but does not pretend to be a legal advice. Consult with a counsel before issuing your notice and check the latest sources: the law is an ever-changing matter and this article may become obsolete before the author had a chance to update it. Read our disclaimer here.

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