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Entries in california landlord tenant law (8)

Friday
Mar102017

Initiating Unlawful Detainer Actions: Perfection Not Required

Business LitigationReal Estate Litigation Attorney

by Nicholas Kanter
818-907-3289

 

In November 2016 the California Supreme Court ordered that a decision from the appellate division of the San Diego Superior Court in U.S. Financial, L.P. v. Michael McLitus (“McLitus”) be published.   

McLitus held that an owner that acquires a property at a non-judicial foreclosure sale is required to perfect title before serving a Three Day Notice to Quit, the first step in initiating an unlawful detainer action under Code of Civil Procedure §1161a. The court held if the Notice to Quit was served before title was perfected, the notice would be defective and could not support an unlawful detainer action.

Commercial Tenant Eviction

Based on the decision in McLitus, the new owner of a property purchased at foreclosure would have to wait to receive the Trustee’s Deed Upon Sale from the foreclosure trustee, and then until the Trustee’s Deed is recorded by the county recorder, before serving a Three Day Notice to Quit. Thus, McLitus had the potential effect of delaying a new owner from obtaining possession to an occupied property.

McLitus Decision Short-Lived

Four months after the McLitus decision was ordered published, the Second Appellate District of the Court of Appeal issued an opinion squarely rejecting the McLitus holding.   

In Dr. Leevil, LLC v. Westlake Health Care Center (“Westlake”), Westlake Village Property, which owned Westlake Health Care Center (WHCC), defaulted on a loan and filed for bankruptcy. The bank sold the loan to Leevil who instituted a non-judicial foreclosure, and subsequently purchased the health care center at a trustee’s sale. Leevil then served a Notice to Quit on WHCC. When WHCC refused to vacate the property, Leevil filed an unlawful detainer action under §1161a. Leevil ultimately obtained possession to the property.

On appeal, WHCC relied on the McLitus decision to argue the Notice to Quit was invalid because Leevil did not perfect title before serving the Notice. 

The Court of Appeal rejected WHCC’s argument and affirmed the trial court’s decision. The Court found that §1161a does not require that title be perfected prior to serving a Notice to Quit. Rather, this Section only requires that title be perfected before a party may be removed from the property following a foreclosure sale.

Code Civ. Proc. Section 1161a states, in pertinent part:

a person who holds over and continues in possession of . . . real property after a three-day written notice to quit the property has been served . . . may be removed therefrom . . . [w]here the property has been sold in accordance with [s]ection 2924 of the Civil Code . . . and the title under the sale has been duly perfected.

Nothing in Section 1161a requires that title be perfected before a Three Day Notice to Quit is served.  Further, the Court of Appeal held that “[n]one of the cases cited in McLitus support the requirement that title be perfected before service of the notice to quit.”

Future of Unlawful Detainer Suits

Because the Westlake decision is binding on lower courts, and decisions from the Appellate Division of the Superior Court are not, trial courts should be guided by Westlake.  Accordingly, as it stands now, purchasers at foreclosure do not have to wait until title is perfected before serving a Three Day Notice to Quit.  

Nicholas Kanter is a Real Estate and Business Litigation attorney. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
Apr092014

Rent Control re Former Resident Managers: Good News for Landlords

Business LitigationCommercial Real Estate Litigation Attorney

 

by Nicholas Kanter
818.907.3289

 

Many apartment building landlords utilize a resident manager to manage day-to-day operations. The resident managers are commonly provided rent-free or reduced-rent accommodations in exchange for performance managerial duties.

When the landlord decides to terminate the managerial duties and start charging rent, the question of how much rent may be charged in a rent-controlled apartment often arises. The Court of Appeal in 1300 N. Curson Investors, LLC v. Drumea recently answered this question.

Landlord LawIn Drumea, the plaintiff-landlord terminated the defendant-resident manager’s managerial duties after eight years. Prior to being a resident manager, the defendant was a tenant at the rent-controlled apartment paying $850 per month.

Concurrent with terminating the defendant’s managerial duties, the plaintiff served defendant with a rent increase notice which advised the defendant that she would have to start paying rent in the amount of $1,552.03.

The defendant refused to pay the increased rent claiming it violated the Rent Stabilization Ordinance (RSO) because:

 

  1. She was never served with annual rent increase notices during her eight years as a resident manager, and

  2. The rent increase was cumulative and retroactive in violation of the RSO.

 

Accordingly, the plaintiff filed a lawsuit seeking a declaratory judgment that the increased rent demand was lawful. While the RSO requires a landlord to serve a tenant with a notice in advance of any annual rent increase, and prohibits cumulative or retroactive rent increases, the Court found that such requirement and prohibition do not apply to a former-tenant resident manager that was paying no rent:

We conclude that a former resident manager who was already a tenant in the unit before being appointed resident manager may be charged rent upon termination of managerial services in the amount of the rent the former manager had been paying tenant, plus the annual adjustments authorized under the Ordinance, and the landlord has no obligation to serve annual registration statements or notices of rent increases during the period that the former manager occupied the unit rent-free. 

The Court reasoned that this decision was consistent with the purpose of the RSO in that it protects a former-tenant resident manager from having to pay the prevailing market rental value of the apartment, if the market rent has increased more than the increases allowed under the RSO.

California Law Commercial PropertyTwo words of caution: although the RSO mandated annual rent increase notices and annual registrations statements do not need to be served on resident managers that pay no rent, these notices must be served on a resident manager that pays partial rent.

Moreover, to avoid a wage and hour claim, a landlord employing a resident manager must also make sure he/she is paying minimum wage for all hours worked and applicable overtime. If the landlord is providing living accommodations towards minimum wage, there must be a voluntary written agreement that explicitly references that such credits are being applied toward the minimum wage obligation of the landlord-employer and the credit must not exceed the permissible caps as stated in the wage order.

Nicholas Kanter is a Real Estate Litigation Attorney and Shareholder in our Business & Civil Litigation Practice Group. Contact him via email: nkanter@lewitthackman.com.

For more information concerning proper payment and documentation of wages for a resident manager, contact Sue M. Bendavid, Chair of our Employment Practice Group via email at: sbendavid@lewitthackman.com.


Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Thursday
Jan302014

Protecting Tenants at Foreclosure Act: California Court of Appeal

Business LitigationSan Fernando Valley Business Litigation Lawyer

 

Nicholas Kanter
818.907.3289

Five years after the Protecting Tenants at Foreclosure Act was passed, the California Court of Appeal recently published its first opinion interpreting the Act in depth.

The PTFA, a federal statute, was passed in 2009 as an effort to protect tenants from being quickly displaced from a rental property following a foreclosure sale. Prior to the PTFA, a foreclosure sale would generally eliminate a lease that was junior to the deed of trust for the subject property.  

As a result, the purchaser at a foreclosure sale was able to file an unlawful detainer lawsuit against tenants in a foreclosed property following the expiration of a Three Day Notice to Quit. The PTFA changed this.  

Under the PTFA, a purchaser at a foreclosure sale takes title to the property subject to the rights of a bona fide tenant residing in the property under a bona fide lease, with certain exceptions. 

For example, where the lease is terminable at will, or the purchaser intends to occupy the property as his/her primary residence, the tenancy can be terminated upon 90 days written notice to the tenant. However, if these exceptions do not apply, a foreclosure purchaser must generally honor the bona fide tenancy through the end of the lease.  

In Nativi v. Deutsche Bank Nat'l Trust Co., (Cal. Ct. App. Jan. 23, 2014), Deutsche Bank purchased a residential property at a foreclosure sale in August 2009. At the time of the sale, Rosario Nativi was renting a converted garage unit on the property pursuant to a lease that did not terminate until June 1, 2010. Following the sale, Nativi was displaced from the property and sued Deutsche Bank for a number of landlord-tenant causes of action, including wrongful eviction, breach of the covenant of quiet enjoyment, illegal entry of landlord and illegal lockout.  

Ultimately, the trial court granted a motion for summary judgment filed by Deutsche Bank finding the foreclosure sale extinguished the lease under California law, and therefore Deutsche Bank, as the immediate successor in interest in the property, did not step into the shoes of the landlord.  

The Court of Appeals reversed the trial court finding that under the PTFA, 

…a subordinate bona fide lease survives foreclosure for the remainder of the term by operation of the Act regardless of the state law to the contrary and, consequently, the bona fide tenants under that lease and the immediate successor in interest in the foreclosed property have a landlord-tenant relationship, although the lease may be terminated as provided in the Act. 

While the Court’s holding is not surprising in light of the PTFA’s language, it reinforces the importance of the foreclosure purchaser to take steps to determine if the purchased property is tenant occupied, and if so, the terms of the tenancy. Moreover, if a bona fide tenancy exists, based on the Court’s ruling, the purchaser becomes the tenant’s landlord and should act accordingly or risk claims by the tenant. 

Although the Nativi ruling focuses on the rights of bona fide tenants under the PTFA, it also touches an important but overlooked aspect of the Act.  

In particular, the PTFA does not explicitly address whether a bona fide tenant is required to pay rent to the new owner of the property, and if so, whether the new owner can terminate the tenancy for failure to pay rent without waiting 90 days. Nativi appears to answer this question in the affirmative.  

As quoted above, the Court held that “bona fide tenants…and the immediate successor in interest…have a landlord-tenant relationship…” In a landlord-tenant relationship, the tenant pays rent to the landlord.  Furthermore, the Court relied on administrative construction of the PTFA to support its ultimate findings.  One of the administrative guidelines relied upon was a release by the FDIC which stated: “For tenants under a lease who are current on their rental obligations, PTFA prohibits eviction prior to the end of their lease terms…”  (Emphasis added). 

This implies that tenants must be current on their lease to enjoy the protections of the PTFA.  A logical conclusion is thus, if a tenant is not current on his/her lease, the new owner may terminate the tenancy prior to 90 days for failure to pay rent.  

The lesson learned here is this: anyone purchasing a residential property at a foreclosure sale should take steps to ascertain the status of the occupants in the property. 

If tenants are occupying the property under a bona fide lease the purchaser should try to obtain a copy of the lease to determine the rights and obligations of both the tenant and the landlord (i.e., the purchaser) thereunder. Depending on the lease terms, the purchaser may be able to terminate the lease upon proper notice to the tenant, or may have to honor the lease until it expires. 

 

Nicholas Kanter is a Real Estate Litigation Attorney at our firm. Contact him via email: nkanter@lewitthackman.com.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

Wednesday
Aug282013

Lessons in Commercial Lease Charges: Incorrect Estimates Could Lead to Fraud Claims

Business LitigationSan Fernando Valley Business Litigation Lawyer

 

by Nicholas Kanter
818.907.3289

Business Litigation Google+ 

A recent decision from the California Court of Appeals should give commercial landlords pause before providing estimated common area maintenance charges (CAM) and other lease expenses to prospective tenants.

In Thrifty Payless, Inc. v. The Americana at Brand, LLC, (2013) 2013 WL 3786374, Thrifty and Americana entered into lease negotiations for a space at the Americana Glendale shopping center prior to the development of the center.

A letter of intent (LOI) submitted to Thrifty set forth the annual property taxes at $3.00 per square foot , insurance at $0.80 per square foot and CAM at $14.50 per square foot. The CAM amount, stated as an estimate, was Thrifty’s proportionate share, based upon its square footage, was 2.2 percent of the total CAM. The parties executed a lease.

In 2009, when the first expenses became due, Americana charged Thrifty $169,686 in taxes, instead of the $43,836 that would have been due under the rate specified in the final LOI; $28,110 insurance, instead of the $11,689.60 that would have been due under the rate specified in the final LOI; and $412,307 for CAM, instead of the $211,874 that would have been due under the rate specified in the final LOI.

Thrifty sued Americana for fraud and negligent misrepresentation, claiming, among other things, Americana knew the estimated taxes, insurance and CAM charges, set forth in the LOI, were false at the time they were made, or made without a reasonable basis to believe they were true. Americana demurred to the complaint, arguing an integration clause in the lease, wherein Thrifty agreed it was not relying on statements made by Americana and that Thrifty had performed its own investigation, barred Americana from suing based on estimates in the LOI, which were superseded by the lease.

Citing the recent decision in Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn., (2013) 55 Cal.4th 1169, 1174-1175, the Court of Appeal ruled Americana could not rely on the integration clause, or the parol evidence rule, to prevent Thrifty from presenting extrinsic evidence to show the lease was procured by fraud.

The court held that under Riverisland, extrinsic evidence (i.e., the LOI and evidence that Americana had told other tenants that their pro rata shares would be substantially higher than the rates Americana represented to Thrifty) is admissible to establish fraud or negligent misrepresentation, despite the lease’s integration clause. The court also noted the large discrepancy between the estimates and ultimate costs supported an inference of misrepresentation.

The Thrifty decision makes clear that landlords cannot rely on exculpatory or integration clauses to avoid liability for misrepresentations, innocent or not, made during lease negotiations.

To protect against such claims, the lease negotiations cannot contradict the lease terms. If estimates are provided without equivocation, a lease provision stating the estimates are only estimates and may vary significantly will likely not protect against a misrepresentation claim. Based on Thrifty, a landlord should anticipate that, despite language to the contrary, evidence of lease negotiations will likely be admissible to prove the landlord made misrepresentations.

 

Nicholas Kanter is a Commercial Real Estate Litigation attorney. You can reach him via email: nkanter@lewitthackman.com. 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
Wednesday
Nov212012

2013 California Tenant Law - Landlord Obligations Upon Foreclosure (AB 2610)

Corporate Litigation Lawyer Los AngelesBusiness Litigation  

 

Paul C. Bauducco
818.907.3245

 

Governor Jerry Brown signed Assembly Bill 2610 in September, a California landlord tenant law which gives current renters more time to stay at a property when a landlord is undergoing foreclosure.

The new law will bring the state more in line with federal law regarding protecting tenants on foreclosed properties. (Senate Bill 1191 is the bill we discussed in my last blog, Responsibilities of Landlord in Default and Foreclosure, which addresses notices to prospective tenants. You may also want to read Seven New Laws in Effect January 1st, for an overview of other legislative changes affecting California property owners and managers.)

AB 2610 amends the Civil Code (section 2924.8) and the Code of Civil Procedure (sections 415.46 and 1161b). When a Notice of Sale is posted on a property, the new owner must post a notice in the same manner which informs tenants of protections available to them.

Landlords must notify tenants that:

1. If they are month to month tenants, the new owner must give them a new lease or rental agreement, or give them 90 days notice before evicting them.

2. If they have a fixed term lease, the new owner must honor the lease, unless:

a.  The new owner will occupy the property as his/her primary residence. 

b.  The tenant is the mortgagor, or the child, spouse or parent of the mortgagor. 

c.  The lease was not the result of an arms’ length transaction. 

d.  The rent is well below fair market excluding any federal, state or local rent control laws.

Landlord Responsibilities After a Notice of Default

 

While SB 1191 pertains to landlords who provide single-family, or four or fewer units in a multi-family dwelling, AB 2610 is broader, having no limitations on residence size.

The law will become operative on March 1, 2013 and will remain in effect until December 31, 2019.

One more thing:

Existing law permits the buyer of the foreclosure property to use a prejudgment claim of right of possession against a holdover former owner.

Assembly Bill 2610 specifically states that this existing law will not limit the rights of the tenant to also file a prejudgment claim of right of possession before judgment. Moreover, the tenant may also object to enforcement of a judgment for possession whether or not the tenant was served with the claim of right to possession.

 

Paul C. Bauducco is the Chair of the Business Litigation Practice Group at our firm. Contact him via email if you have any questions regarding construction defects, landlord tenant laws or real estate litigation: pbauducco@lewitthackman.com.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.
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