Recent Challenges, Payments, “Repair & Deduct” & Crime

“Recent events have been very challenging for housing providers.”

Q: The past few months have been difficult, I must admit I was not quite sure I would make it through. After a rough start, most of my residents paid their rent in April, May, and June. Some have agreed to payment plans over the next few months. All in all, except for one bad apple, my residents did the right thing, communicated well and are all on the right track. I read your articles religiously and I think you prepared my wife and I well for this unexpected and dramatic upheaval to our industry. What is your advice going forward? Should we be doing anything special now?

A: Recent events have been very challenging for housing providers. Our industry was hit hard, and very suddenly. Commercial retail and office Lessors have been hit very hard. Most residential housing providers have fared well, rent collections are at or near pre-pandemic levels. As of this writing (first week of June), we are still in semi-lockdown mode, and the courts are slowly beginning to wake up. The courts have begun re-setting trial dates for prepandemic unlawful detainer matters, and the Sheriff is now enforcing pre-pandemic judgments and scheduling lockouts. The Judicial Council has not yet revisited its draconian freeze on new unlawful detainer matters, but that may change any day; hopefully by the time this is published in July.

There is continued pressure on our state legislators to enact legislation that would further protect residential and commercial tenants from being displaced due to their inability to pay rent due to COVID-19. If you have been following my articles, you know that I have long been encouraging responsible and professional ownership.

Effective communication with your residents is critical as we continue to recover from recent events. Continue to treat residents with respect, and they will continue to reciprocate. Communicate in a positive manner, articulate your expectations clearly, and ensure that your expectations are reasonable and achievable. You will be rewarded with most residents meeting your expectations on a regular basis. Remember, you set the tone in the communication with your residents. Most residents truly want to do the right thing and will reciprocate accordingly. Continue to screen your prospective residents carefully, screen out the ne’er do wells, select the best of the lot. Look for consistent income, reasonable savings, and responsible credit experience. Commercial lessors should ensure that their tenants are sufficiently capitalized.

You should be responsible in your investment decisions, review your holdings, reallocate as necessary, diversify your investments, and minimize debt. Keep the trophy properties, rid yourself of the high maintenance and/or troubled assets. Surround yourself with positive and professional people. That extends to employees, vendors, residents, and friends. Stay active in your housing association, support its legislative activities, 2020 will continue to be challenging but together, we will get through this!

Q: Most of my residents pay on time and their checks are honored by their banks. Lately, it seems that I have been getting many checks from small banks, even some internet banks with no real offices, many I have never even heard of. I recently had one returned insufficient funds over three weeks after the check was deposited! Do I have to accept these types of checks? Should I require that all my tenants pay by cash or cashier’s check? What about direct deposit?

A: You can control the method of payment and the types of payment instruments that you will accept. If your tenancies are month-to-month, you may change the terms of the tenancy agreement to establish different payment methods or to require payment by certified funds. Service of a 30-day notice of change of terms will suffice. It is generally not a good business practice to accept cash as payment for rent, due to the increased risk of robbery, theft, or other criminal conduct.

Many owners allow residents to make direct deposits or transfers to the owner’s bank account. There are many benefits to this arrangement, but many drawbacks as well. If you do allow the resident to make direct deposits, then establish an account separate from your personal general account, and establish clear guidelines instructing the resident when and how to make deposits.

Suggested guidelines would state that you will not accept a partial payment without prior consent; that the resident is not authorized to make a direct deposit after service of a three day notice to pay rent or quit or a notice of breach of a covenant of the lease, or for any period of time after expiration of a notice of termination of tenancy. Once your payment terms are established, stick to them, and require the residents do the same.

Q: It is always something with one tenant of mine. When he first moved in three months ago, he deducted $110 dollars from the rent because he said he had to fix a few things in the unit. I did not say anything at the time, I needed the unit rented, and I did not want to upset my new tenant. Since then, he has been able to find something wrong each month, deducting a little bit each month. I told him I did not think that was right, but he did it again this month. He says he is entitled to do that, that California law says he can “repair and deduct” for anything wrong in his apartment. Is this true?

A: California law, specifically California Civil Code Section 1941.2, provides that a residential tenant may make repairs and deduct the cost from the rent only under certain circumstances. These limited circumstances require the tenant to give the landlord notice of the dilapidation before using the repair and deduct remedy. After giving notice, the landlord has a “reasonable time” to make the repairs, before undertaking to repair and deduct. Thirty days is considered reasonable. A shorter time frame would apply to plumbing leakage, water penetration, or defects that place the resident’s safety in jeopardy. Only defects that render the premises uninhabitable will qualify for this remedy. Tenants may only invoke this remedy twice in any 12-month period, and each time the remedy is utilized, the cost of repair cannot exceed one month’s rent.

In your situation, it appears that the tenant is abusing a privilege only available to tenants with serious dilapidations in their apartments. Without providing notice to you of the defect, and an opportunity for you to correct any serious defect, the tenant is not entitled to deduct anything from his rent. Provided you have not condoned his conduct or waived your rights to accept the full amount of rent, you may demand that the tenant pay all amounts previously deducted and become current.

Q: I recently bought a building in a rough neighborhood. Seems like a day does not go by without some sort of violent crime nearby. Just the other night, there was a shooting just down the street. I buy paint by the truckload to cover all the graffiti and tagging on the building. I have a couple of vacancies now, and I do not know if I must tell them about all the stuff going on. If I did no one would rent, what do I do?

A: Crime, unfortunately, is a fact of life in many communities throughout Southern California. When asked by the prospective resident about crime in the area, refer them to the local police department for statistics. Be careful not to portray your building as a “security” building or advertise it in any way that may create a false sense of security or safety. If your property provides an increased risk of harm, or has had a recent rash of criminal conduct, you may have a duty to disclose this fact to the prospective resident, even if not asked.

This article is presented in a general nature to address typical landlord tenant legal issues. Specific inquiries regarding a particular situation should be addressed to your attorney. Stephen C. Duringer is the founder of The Duringer Law Group, PLC, one of the largest and most experienced landlord tenant law firms in the country. The firm has successfully handled over 285,000 landlord tenant matters throughout California and has collected over $200,000,000 in debt since 1988. The firm may be reached at 714-279-1100 or 800-829-6994. Please visit www.DuringerLaw.com for more information.