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Entries in california landlord tenant law (10)

Friday
Jun012018

What are the Rights of a Non-Paying Month-to-Month Tenant?

Business LitigationReal Estate Litigation Attorney

by Nicholas Kanter
818-907-3289

 

When a month-to-month tenant stops paying rent and a landlord initiates an unlawful detainer lawsuit, does the tenant maintain tenancy rights in the premises pending the resolution of the lawsuit? The answer to this question (“no”) was unsettled until the Court of Appeal’s recent decision in Multani v. Knight.

Multani involved a lawsuit by a former tenant (Multani) against her former landlord (Knight) for breach of the covenant of quiet enjoyment, private nuisance and other causes of action arising from a sewage leak that damaged the premises (including equipment in the premises) that Multani leased from Knight. Prior to Multani’s lawsuit, Knight filed a lawsuit for unlawful detainer against Multani for failure to comply with a 3-day notice to pay rent or quit. At the time Knight served the 3-day notice to pay or quit, Multani was occupying the premises pursuant to a month-to-month tenancy. Knight ultimately prevailed in the UD.   

In defending Multani’s affirmative claims, Knight argued that at the time of the sewage leak (which was after Knight initiated the UD), Multani had no legal right of possession, and therefore could not prevail on her claims, which were dependent on legal possession of the premises. The Court of Appeal held:

[T]he implied month-to-month lease terminated when [Multani] failed to pay rent.  Further, even if [Multani’s]  failure to pay rent, in itself, did not terminate the statutorily-implied lease, it nevertheless constituted a material breach of the lease…Here, Knight’s service of a three-day notice to pay rent or quit and her initiation of an unlawful detainer action when [Multani] failed to comply with the notice indisputably establishes Knight’s election to terminate the implied lease. Thus, even if [Multani’s] initial failure to pay rent did not terminate her month-to-month tenancy, her failure to comply with the three-day notice to pay rent or quit, followed by Knight’s filing of an unlawful detainer action, terminated the implied lease and [Multani’s] legal right to possession of the premises.

The implied covenant of quiet enjoyment arises from a lease. And a claim for private nuisance can only be maintained by one whose property rights have been invaded. Because the service of the three-day notice to pay rent or quit and initiation of the UD terminated Multani’s tenancy rights, including her right to possess the premises, the Court found Multani could not prevail on her claims.   

Multani holds that a month-to-month tenant who fails to pay rent no longer has tenancy rights once an UD action for non-payment of rent is initiated. However, the case leaves open the question of whether the tenancy right terminates earlier, i.e., before the UD action is filed, but after the tenant stops paying rent.    

Nicholas Kanter is a Shareholder in our Real Estate and Employment Practice Groups.

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.

Friday
Feb162018

Court Confirms Landlord’s Right to Seek Damages in Unlawful Detainer Action and Separate Civil Action 

Business LitigationReal Estate Litigation Attorney

by Nicholas Kanter
818-907-3289

 

The Court of Appeal just confirmed that a landlord is not barred from recovering rent owed by a tenant in a civil action for breach of contract, even after obtaining a judgment for unlawful detainer against the tenant, so long as the landlord did not seek to recover the same rent in the unlawful detainer action.

Commercial Building Rent SignIn Hong Sang Market, Inc. v. Vivien Peng, Peng (the tenant) failed to pay rent for the period September 2009 through February 2011, as well as for the month of May 2011. Hong Sang (the landlord) filed an unlawful detainer lawsuit (UD) against Peng pursuant to a 3-day notice to pay rent or quit that was based on Peng’s failure to pay rent for the month of May 2011. Hong Sang obtained summary judgment against Peng in the UD and was awarded $4,725 in back-due rent for the month of May 2011.

Hong Sang filed a separate lawsuit for breach of contract based on Peng’s failure to pay rent for the period September 2009 through February 2011. The breach of contract lawsuit sought a damages in the amount of $85,040 for back-due rent. Before trial, Peng asked the court to dismiss the lawsuit on the grounds that it was barred by the doctrine of res judicata and collateral estoppel.

Peng claimed that the UD judgment awarding Hong Sang back-due rent for the month of May 2011 precluded Hong Sang from recovering in a separate lawsuit, the rent owed for the period September 2009 through February 2011. The trial court ruled in favor of Hong Sang, and Peng appealed.

The Court of Appeal affirmed the trial court’s ruling, holding that the UD judgment did not bar Hong Sang from seeking additional damages in a separate civil action on a number of grounds.

Among other reasons, the Court found that an UD judgment has limited res judicata effect “because the claim preclusion aspect of the res judicata doctrine applies only to matters that were raised or could have been raised, in the earlier action on matters that were litigated or litigable.”  Since Hong Sang’s UD was based on a 3-day notice to pay or quit for the month of May 2011 only, Hong Sang’s recovery of back-due rent in the UD was limited to the month of May 2011 – he could not have litigated or recovered rent for the period September 2009 through February 2011 in the UD action.

In addition, the Court of Appeal confirmed that a landlord is not required to litigate back-due rent in an UD action. Rather, when a landlord files a UD based on a 3-day notice to pay rent or quit, the landlord may seek to recover possession only, and later sue the tenant for the back-due rent in a separate civil action.

While the holding in Hong Sang is not novel, it confirms that a landlord has a number of options when it comes to recovering possession of its property and obtaining damages resulting from the breach of a lease.

Nicholas Kanter is a Shareholder in our Real Estate and Employment Practice Groups.

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.

Friday
Mar102017

Initiating Unlawful Detainer Actions: Perfection Not Required

Business LitigationUnlawful Detainer 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 LitigationReal 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 LitigationReal Estate Litigation Attorney

by 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.

 

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