Monday, December 28, 2015

2015 Roundup In CA/SF Real Property Law

2015 was an eventful year, if measured in the scope of the real property legal changes. No stone left unturned. I got to witness it from the front seat myself: for this was the year when I decided to publish my book on the San Francisco eviction notices. It got published in April 2015, and I thought to be done with it for awhile. Little did I know, the changes would demand me to issue seven revisions during next five months, after which a big slew of changes came at once with the Ordinance 171-15, making me to rewrite almost the whole book anew! Version 2.0 went out in December (and yes, with some of the even more recent changes mentioned here, version 2.1 is already in the making).  But enough about me, let's look back and observe, what an enormous year 2015 was for the legal landscape in CA/SF real estate:

California Legislature

SB 328 (Hueso) - Notice of Pesticide Use - landlords and property managers are now under stricter notification standards with regard to the pesticides applied at the property. Requirements include a pre-application 48-hour notice.   Due to the ongoing bed bug epidemic in California, pesticides practice is growing and so is the tenants' concern.

SB 655 (Mitchell) - Lessened Duty Re: Mold - If the above bill added another hoop to jump for the lessors, this one is a long-time awaited relief with regard to landlords' duty in curing mold. Landlords are now off the hook from a duty to repair a dilapidation in connection with visible mold until a notice is received from the tenant, and it is the tenant who will is presumed responsible for mold if it was caused by tenant's housekeeping. The bill now also expressly exempts "mold that is minor and found on surfaces that can accumulate moisture as part of their proper and intended use."  Landlords may consider amending House Rules to accommodate the changes introduced with this bill.

AB 447 (Maienschein) - insurance coverage to landlords of subsidized tenants - prohibiting insurance companies to deny or lessen coverage to landlords who lease under the "Section 8" and other subsidized housing programs.

And sometimes it may be more important what law did not get enacted, as it happened with SB 364 (Leno) proposed limits on the Ellis Act. Thanks to the SPOSFI heroic efforts in pulling community together, the bill was stopped in it tracks. Everyone is sure that this attack on housing was not the last, and there will be more to come. 

And in general, the first half of 2016 has already a packed schedule of new proposals. Read here on more initiatives passed or failed in 2015, and what to look for in 2016, including the proposed mysterious state-wide Housing Agency.

San Francisco Legislature

San Francisco housing scene was even busier than that of the state. Chapter 37 of the S.F. Admin. Code (the "Rent Ordinance") got rewritten several times over during the last 12 months.  Main big-picture changes are the following three passed and one failed:

Buyout Ordinance. It technically started being implemented in the late 2014, but became fully effective in March of this year. I personally don't see any benefit so far from this program, neither for tenants, nor for the landlords' side, but, hey, it keeps plenty people occupied, including lawyers and program administrators. I witness an increase in litigation as a direct result of this new rule, because the both the adjudication of the claim through the court and a settlement achieved by and between the parties while litigating is the exception from the Buyout Ordinance requirements.

One of the factors surfaced up in discussion of the Buyouts was the determination of an optimal prices. Several lately proposed amendments to the Rent Ordinance refer the market level rent rate as one established by the City Controller's Office. If you would ever need to know their data, it is available for public view here (and there is more published on that site, if you click around).

Short-term rentals policy updates. The City is still searching for a working solution to the short-term rentals phenomena, updating its policy this year, after the Planning Department threw white flag and admitted it had no resources to enforce the first version of the law, where the Planning Department was to be the main supervisor of those rentals. There is now a new Office of Short-Term Rental Industry, under the auspices of the same Planning Dpt, with hopes that the enforcement will catch up. These hopes are also fueled by a more self-regulated industry than it was before, where many enforcement steps, from disclosures to collection of taxes are now embedded in the app.

And just recently, SF voters said "no" to further tightening of this area of regulation, denying a right of standing of private action to many activist groups looking forward to sue short-term renters on behalf of the city and for the own private gain.

"Tenancy Protections 2.0." A big chunk of the Rent Ordinance was re-written in September of this year. Some changes were substantial, some nominal, and some slipped-in entirely unnoticed. Example: a never-before rental protections for commercial tenants in San Francisco, in cases where they can establish residential use of their commercially leased places, legal or illegal. See, S.F. Admin. Code, Section 37.9(a)(4)(B): “a landlord shall not endeavor to recover possession of a rental unit solely: ... because the illegal use is the residential occupancy of a unit not authorized for residential occupancy by the City.” 

Still No Increased Limits For Ellis Act Relocation Payments. Despite the City's continuous efforts to substantially increase minimally required relocation payments for the Ellis Act terminations, these efforts remain thwarted in courts on both the state and federal level. With the last year's proposal still pending appeal, a lesser impactful ordinance was enacted this year, which would cap the payouts at $50,000; this proposal was stopped in its tracks even faster than the first one, never in fact becoming active. The ordinance remains on the books, with the statement explaining being off-air for now. The Ellis Act, despite its artificially trumped-up statistics, continues to be in the center of attention and so it comes with no surprise that it is a subject of many cases heard this year, sometimes going surprisingly in opposite directions (Naylor and Kaushik M. Dattani). This naturally leads our discussion to its final chapter, to look what law was brought to us by the court this year.

State and City case law.

Mosser Companies v. San Francisco Rent Stabilization & Arbitration Bd., (2015) 233 Cal. App. 4th 505. An important decision explaining that a living child who was already born and the time parents moved into an apartment is an intended and original occupant under the lease, protected from a rent increase under the Costa-Hawkins Act. Shortly thereafter, court in T & A Drolapas & Sons v. San Francisco Rent Stabilization & Arbitration Bd. (2015) 238 Cal.App.4th 646, confirmed the same outcome.

Boston LLC v. Juarez (Cal. Super. Ct. 2015) 240 Cal.App.4th Supp. 28, 34. [Re: materiality of the breached terms of the lease] Update: on 2-25-2016, Appellate court reversed the previous holding in Boston LLC v Juarez: (2016) 245 Cal.App.4th 75, 82-83, now distinguishing on the issues in whose benefit runs the forfeiture, and who was benefiting from the lease's clause, which got breached.

And on the same subject of lease terms interpretation and enforcement, see this decision regarding the "Section 8" evictions, previously and generally held to be sufficient for a for-fault eviction under the state-law proscribed minimal notice periods (as in a 3-day notices, under CCP 1161). The court in  Long Beach Brethren Manor, Inc. v. Leverett (2015) 239 Cal.App.4th Supp. 24, held that, even for a material breach under the Section 8, an eviction notice may need to be 30 days long, depending on the language of the lease.

Another important clarification for the lease agreements came from 511 S. Park View, Inc. v. Tsantis (2015) 240 Cal. App. 4th Supp. 44. It holds that an attorney's fees provision in the lease, which limits the amount of what amount of fees can be recovered by a prevailing party, is an enforceable term of the contract.

But before you rush amending your lease agreements and the House Rules, consider two more 2015 decisions on the subject. First, an unpublished and very instructive discussion on oral amendments to written lease agreements, issued in Gambord v. Galli Produce Co., 2015 Cal. App. Unpub. LEXIS 3660, *17-19 (Cal. App. 6th Dist. May 26, 2015).  This is a very handful summary of the current rules of contact interpretation, including the caveats of oral amendments and no new consideration.

And then, directly on point of lease and House Rules amendments in San Francisco, comes December decision in Foster v. Britton (2015) 242 Cal.App.4th 920. The Foster court upheld the S.F. Rent Board Rule 12.20, which prohibits evictions under the unilaterally changed House Rules. Contrary to popular belief,  Rule 12.20 does not prohibit to amend the House Rules, only prohibits to evict under the amendments not agreed to by the tenants.

On the issue of vacancy decontrol under Costa-Hawkins Act, a recent decision in Mak v. City of Berkeley Rent Stabilization Bd. (2015) 240 Cal.App.4th 60, capitalized on the earlier case
Bullard v. San Francisco Residential Rent Stabilization Bd. (2003) 106 Cal. App. 4th 488, and discussed how and where local municipal regulations may enhance statewide law regarding vacancy decontrol, such as CC § 1954.53

Two more decisions to mention, of interest to those who litigate evictions:

One is Borsuk v. App. Div. of the Sup. Ct. (2015) 242 Cal. App. 4th 607, which finally eliminated a confusing practice of the last 32 years, where a legal challenge to the complaint was required to be done through a motion to quash summons (the so-called "Delta Motion").

Another notable decision came from Needelman v. DeWolf Realty Co. (2015) 239 Cal. App. 4th 750. It is important in the context of wrongful eviction claims, when those asserted by an already moved out tenant. The court explained that in the scenario, where an underlying eviction action was first settled between the parties by a stipulated judgment, the tenant is estopped from bringing new claims against the landlord under the res judicata principles (CCP § 1908), if such claims were raised as defenses and so settled, or "could have been raised as defenses" and settled in the prior eviction action.

This concludes the roundup of what had most notably changed in the housing law in 2015, (although we still have 3 more days to go!). I am only left to wish you all a great New Year and hope to see you all in great shape in 2016!

More real property posts

Your options and available strategies in handling evictions will depend on your case's particular facts. If you want to learn on your options, rights, and obligations in contesting or preserving your real property rights, including the procedural caveats to avoid in litigating evictions, 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.

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