There is almost nothing to discuss on the rent's timing, or when does a rent payment become due. And everybody knows what to do when the rent is past-due. Yet, there are a few more possible timing problems relevant to the rent obligations: retroactive application of rents, retroactive change of terms, or charging the already left tenants for a loss of future rent. While these problems were litigated over, the answers are not always straight-forward:
Retroactive Application of Rent Payments.
There seems to be no problem with the retroactive application of the rent payments, i.e., if the tenant failed to pay for January, but then paid for February, the February payment can be counted toward the preceding month, absent some express agreement between the parties. The landlord may also apply the funds from the tenant's security deposit toward such unpaid month. Important distinction here is that she may apply the deposit, while under no obligation to do so. Chinese Hospital Foundation Fund v. Patterson, 1 Cal.App.3d 627 (1969).
Retroactive Rent Increase
Retroactive rent increase means that the landlord notifies the tenant that his rent was in fact increased at some moment in the past. Can a landlord do so, especially since we have Cal. Civ. Code Section 827? As with everything else, it depends.
One possible scenario may be when the increases are specifically written-in and scheduled in the lease agreement. In this case, the landlord does not give a notice about an increase happened before, but rather reminds of the already agreed-upon, known increase, happened pursuant to the lease's schedule. Compare this with a situation, when the lease only allows the landlord to increase, but the amount of the increase is not specified, or, allows to increase for an expressly stated amount, while being silent as to the timing of the increase. In these cases, absent to any special circumstances, parties to the lease may not be viewed as agreed to a specific increase (of a certain amount, effective at a certain date), even though they might have generally agreed to allow increases.
Exclusion from the rule mentioned above would be a presence of some special circumstances, such as a subsidized housing. Consider Shustov v. Housing Authority of LA case, even though an unpublished one. The tenant there was renting an apartment with the help of a government subsidy, only so provided to people who have a limited income and who passed certification to that effect. Remedies available under the lease, when a tenant misrepresents his income, included retroactive increase of rents, as well as forfeiture of the lease and a consequent eviction. Court in Shustov v. Hous. Auth. of L.A., 2008 Cal. App. Unpub. LEXIS 6088 (note, the case is unpublished), found for the landlord and against the tenant. HUD's manual, however, is silent about retroactive increases, only provides for retroactive rebates.
Some landlords treat a retractive increase as retroactive cancellation of the former lease, at its prior rate, holding the tenant liable under a newer lease and an increased rate. Don't be one of those landlords. Such retroactive cancellation of a former lease is "wholly without effect." Nye v. Dotta, 112 Cal.App.2d 129, 132 (1952).
Retroactive Increase of Something Else
What if it is not the rent's rate increase, but some other charge added on retroactively? Court in Greening v. Johnson addressed the situation where mobile home residents were retroactively charged for a cable TV subscription, provided by the park owners. Court found for the residents and against the proposed payment. Greening v. Johnson, 53 Cal.App.4th 1223 (1997). Be careful though before applying this decision universally--this case was concerned with a mobile home park, a type of residency specifically distinguished in the decision from other rental situations.
Retroactive Rent Rebate
Retroactive rent increases, even if permitted, may be subject to the same limitations as if were made on time, increasing only the future rent payments. For instance, an argument can be made for an improperly high increase, conflicting with an applicable rent ordinance. However, it does not automatically make a tenant entitled for a rebate of the already-made, higher-than-allowed rent payments. See, Da Vinci Group v. San Francisco Residential Rent Etc. Bd., 5 Cal.App.4th 24 (1992) [Although a rent increase, which did not conform to a rent control ordinance, was null and void, the tenant was not entitled to retroactive rent rebates where there was no rebate prescribed in either the ordinance or the rules and regulations enacted thereunder.]
Compare the Da Vinci Group case with Village Trailer Park v. Santa Monica Rent Control Bd., 101 Cal.App.4th 1133, 1146 (2002): "If the inclusion of all unauthorized rent increases in the calculation of damages operates as a penalty upon landlords who fail or refuse to obey the Rent Control Law, it is the kind of permissible penalty agencies may impose to induce compliance with their regulatory authority," citing McHugh v. Santa Monica Rent Control Bd., 49 Cal.3d 348 (1989).
It is possible to synchronize these cases together, if we note that Da Vinci Group instructs to consider, whether the retroactive rent rebates were specifically addressed in the ordinance. If so addressed, the rebates may be permissible, even under Da Vinci Group. And in subsidized housing leases under HUD, HUD Manual provides for reimbursing a tenant for retroactively over-charged rent. (4350.3, §8-24).
Retroactive Change of the Rent Rules
Speaking of the rent ordinances, may their very provisions be changed retroactively? There is no clear answer here:
"Yes": Court in Danekas v. S.F. Rent Board treated a change in the rules as serving a significant public purpose, it being not a new restriction, but rather an ordinary change in procedure, retroactively applied to existing contracts. Danekas v. San Francisco Residential Rent Stabilization & Arbitration Bd., 95 Cal.App.4th 638 (2001).
Charging for Future Rents After Tenant Abandons or Vacates
Not every scenario falls back to address the past. Application of funds toward the future rents create its own set of issues.
Generally, "[a] California lessor with abandoned premises has two mutually exclusive remedies: deem the lease terminated and seek damages pursuant to Cal. Civ. Code § 1951.2, or, under Cal. Civ. Code § 1951.4, continue to perform under the lease and seek rent as it becomes due." 250 L.L.C. v. PhotoPoint Corp., 131 Cal.App.4th 703 (2005). According to the 250 LLC case, at least in commercial leases, parties could stipulate that their security deposit will be applied toward future rents. In absence of such stipulation, landlord may not withhold the deposit for rent "due" after the tenant had already moved out. Indeed, when the stipulation is present, the deposit can be applied as agreed; commercial parties can enter into a lease with specific waiver of statutory protections. Sherwood v. Zoro, 2004 Cal. App. Unpub. LEXIS 10314 (2004) (although this is an unpublished case, it contains an interesting discussion of the subject).
The landlord's right to collect for future rents under the lease receives similar treatment and analysis as the tenant's right to receive retroactive rent rebates, analyzed above under Village Trailer Park and McHugh cases. It still can be viewed as an unenforceable penalty. Ricker v. Rombough, 120 Cal.App.2d Supp. 912 (1953).
Conclusion
Time is definitely more than just money when one thinks of ways how the rent money may relate to different stages in time. Let the above remain of pure theoretical interest to you. As the tenant or the landlord, strive to have the requisite steps to be done on time. You won't then need to worry about issues with the rent's application, neither retroactively, nor prospectively.
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.
For detailed coverage of requirements in drafting an eviction notice for non-payment of rent (the "3-Day Notice To Pay or Quit") in San Francisco, see my book "Eviction Notice In San Francisco" on Amazon. Currently available is Volume I, covering general requirements and nine "for fault" evictions, including the ones for non-payment, late payment, and bad payment of rent. The second volume (for non-fault evictions) is still in the works.
______________________
Retroactive Application of Rent Payments.
There seems to be no problem with the retroactive application of the rent payments, i.e., if the tenant failed to pay for January, but then paid for February, the February payment can be counted toward the preceding month, absent some express agreement between the parties. The landlord may also apply the funds from the tenant's security deposit toward such unpaid month. Important distinction here is that she may apply the deposit, while under no obligation to do so. Chinese Hospital Foundation Fund v. Patterson, 1 Cal.App.3d 627 (1969).
Retroactive Rent Increase
Retroactive rent increase means that the landlord notifies the tenant that his rent was in fact increased at some moment in the past. Can a landlord do so, especially since we have Cal. Civ. Code Section 827? As with everything else, it depends.
One possible scenario may be when the increases are specifically written-in and scheduled in the lease agreement. In this case, the landlord does not give a notice about an increase happened before, but rather reminds of the already agreed-upon, known increase, happened pursuant to the lease's schedule. Compare this with a situation, when the lease only allows the landlord to increase, but the amount of the increase is not specified, or, allows to increase for an expressly stated amount, while being silent as to the timing of the increase. In these cases, absent to any special circumstances, parties to the lease may not be viewed as agreed to a specific increase (of a certain amount, effective at a certain date), even though they might have generally agreed to allow increases.
Exclusion from the rule mentioned above would be a presence of some special circumstances, such as a subsidized housing. Consider Shustov v. Housing Authority of LA case, even though an unpublished one. The tenant there was renting an apartment with the help of a government subsidy, only so provided to people who have a limited income and who passed certification to that effect. Remedies available under the lease, when a tenant misrepresents his income, included retroactive increase of rents, as well as forfeiture of the lease and a consequent eviction. Court in Shustov v. Hous. Auth. of L.A., 2008 Cal. App. Unpub. LEXIS 6088 (note, the case is unpublished), found for the landlord and against the tenant. HUD's manual, however, is silent about retroactive increases, only provides for retroactive rebates.
Some landlords treat a retractive increase as retroactive cancellation of the former lease, at its prior rate, holding the tenant liable under a newer lease and an increased rate. Don't be one of those landlords. Such retroactive cancellation of a former lease is "wholly without effect." Nye v. Dotta, 112 Cal.App.2d 129, 132 (1952).
Retroactive Increase of Something Else
What if it is not the rent's rate increase, but some other charge added on retroactively? Court in Greening v. Johnson addressed the situation where mobile home residents were retroactively charged for a cable TV subscription, provided by the park owners. Court found for the residents and against the proposed payment. Greening v. Johnson, 53 Cal.App.4th 1223 (1997). Be careful though before applying this decision universally--this case was concerned with a mobile home park, a type of residency specifically distinguished in the decision from other rental situations.
Retroactive Rent Rebate
Retroactive rent increases, even if permitted, may be subject to the same limitations as if were made on time, increasing only the future rent payments. For instance, an argument can be made for an improperly high increase, conflicting with an applicable rent ordinance. However, it does not automatically make a tenant entitled for a rebate of the already-made, higher-than-allowed rent payments. See, Da Vinci Group v. San Francisco Residential Rent Etc. Bd., 5 Cal.App.4th 24 (1992) [Although a rent increase, which did not conform to a rent control ordinance, was null and void, the tenant was not entitled to retroactive rent rebates where there was no rebate prescribed in either the ordinance or the rules and regulations enacted thereunder.]
Compare the Da Vinci Group case with Village Trailer Park v. Santa Monica Rent Control Bd., 101 Cal.App.4th 1133, 1146 (2002): "If the inclusion of all unauthorized rent increases in the calculation of damages operates as a penalty upon landlords who fail or refuse to obey the Rent Control Law, it is the kind of permissible penalty agencies may impose to induce compliance with their regulatory authority," citing McHugh v. Santa Monica Rent Control Bd., 49 Cal.3d 348 (1989).
It is possible to synchronize these cases together, if we note that Da Vinci Group instructs to consider, whether the retroactive rent rebates were specifically addressed in the ordinance. If so addressed, the rebates may be permissible, even under Da Vinci Group. And in subsidized housing leases under HUD, HUD Manual provides for reimbursing a tenant for retroactively over-charged rent. (4350.3, §8-24).
Retroactive Change of the Rent Rules
Speaking of the rent ordinances, may their very provisions be changed retroactively? There is no clear answer here:
"Yes": Court in Danekas v. S.F. Rent Board treated a change in the rules as serving a significant public purpose, it being not a new restriction, but rather an ordinary change in procedure, retroactively applied to existing contracts. Danekas v. San Francisco Residential Rent Stabilization & Arbitration Bd., 95 Cal.App.4th 638 (2001).
"No": An attempt to retroactively repeal a cost allowance, previously permitted by the rent ordinance, was held unconstitutional. Palacio De Anza v. Palm Springs Rent Review Com., 209 Cal.App.3d 116, 257 Cal. Rptr. 121 (1989).
Charging for Future Rents After Tenant Abandons or Vacates
Not every scenario falls back to address the past. Application of funds toward the future rents create its own set of issues.
Generally, "[a] California lessor with abandoned premises has two mutually exclusive remedies: deem the lease terminated and seek damages pursuant to Cal. Civ. Code § 1951.2, or, under Cal. Civ. Code § 1951.4, continue to perform under the lease and seek rent as it becomes due." 250 L.L.C. v. PhotoPoint Corp., 131 Cal.App.4th 703 (2005). According to the 250 LLC case, at least in commercial leases, parties could stipulate that their security deposit will be applied toward future rents. In absence of such stipulation, landlord may not withhold the deposit for rent "due" after the tenant had already moved out. Indeed, when the stipulation is present, the deposit can be applied as agreed; commercial parties can enter into a lease with specific waiver of statutory protections. Sherwood v. Zoro, 2004 Cal. App. Unpub. LEXIS 10314 (2004) (although this is an unpublished case, it contains an interesting discussion of the subject).
The landlord's right to collect for future rents under the lease receives similar treatment and analysis as the tenant's right to receive retroactive rent rebates, analyzed above under Village Trailer Park and McHugh cases. It still can be viewed as an unenforceable penalty. Ricker v. Rombough, 120 Cal.App.2d Supp. 912 (1953).
Conclusion
Time is definitely more than just money when one thinks of ways how the rent money may relate to different stages in time. Let the above remain of pure theoretical interest to you. As the tenant or the landlord, strive to have the requisite steps to be done on time. You won't then need to worry about issues with the rent's application, neither retroactively, nor prospectively.
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.
For detailed coverage of requirements in drafting an eviction notice for non-payment of rent (the "3-Day Notice To Pay or Quit") in San Francisco, see my book "Eviction Notice In San Francisco" on Amazon. Currently available is Volume I, covering general requirements and nine "for fault" evictions, including the ones for non-payment, late payment, and bad payment of rent. The second volume (for non-fault evictions) is still in the works.
______________________
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