LAW UPDATE 2003 - CALIFORNIA

Our legislature unfurled several tweaky bills during the last session that will have a substantial effect on how landlords may now do business in California. Having received the imprimatur of our Maximum Leader, Gray Davis, they take effect on January 1, 2003.
Security deposits.

We are all indebted to Assemblywoman Carol Migden for AB2330, which enlarges the portion of the Civil Code dealing with security deposits and complicates the procedures connected with its accounting at the conclusion of tenancy.
First, the bill redefines “security deposit” to include any charge made at or prior to the inception of the tenancy except the screening fee, which is limited by another law to $30. For those landlords who charge a “processing fee,” this law means you can still charge it, but it now counts toward the limit on the amount of the security deposit, which remains the same. It must be accounted for, with the balance of the deposit, at the conclusion of tenancy.
Second, the new law choreographs the security deposit accounting procedure into a somewhat complicated dance sequence. The landlord must, within a reasonable time after notice by either party of his intention to terminate the tenancy, or within a reasonable time before the termination of a lease by its own terms or an election not to renew, notify the tenant in writing of his right – yes, the tenant gets a new right here – to a preliminary walk-through not longer than two weeks before termination of the tenancy. If the tenant requests a walk-through, it is scheduled by the landlord giving at least 48 hours written notice of intent to enter and do the walk-through, during normal business hours, after which the landlord and tenant must confer to agree on a date and time at which the tenant can be present. If no agreement is reached, the landlord may enter and do the walk through at the date and time in the notice, whether the tenant is present or not, unless the tenant withdraws his request. At the conclusion of the walk-through, the landlord must give the tenant a copy of a list of things the landlord has discovered and that he intends to charge against the deposit, or leave a copy for the tenant if he is not present. The intent of this law is to give the tenant an opportunity to correct these things in advance, so they will not be charged against the deposit. The landlord is not stuck with the items in the list, but may charge other things, discovered after possession is obtained. The list must contain portions of the text of the statute. The landlord and tenant may mutually waive the 48-hour notice period, but only by a writing signed by both.
Finally, the new law increases the penalties that may be imposed on the landlord for withholding all or part of the deposit in bad faith. Now the penalty is limited to an amount equal to twice the amount of the deposit, rather than $600, as it has been for the past several years. Thus, in a proceeding in small claims court dealing with the deposit refund, the landlord’s exposure could amount to three times the amount of the deposit.
It is noteworthy that the new security deposit law does not in itself empower the tenant to do repairs before move-out. The law is framed to give the tenant an opportunity to correct problems in accordance with the rental agreement, as it says. The question that is begged is: what if the rental agreement prohibits repairs and alterations, as many do? On the face of it, the tenant would be powerless to act without breaching the rental agreement. Our best guess is that the law will be interpreted in just that way.

Not to be outdone, Senator Sheila Kuehl has given us a grab bag of changes in SB 1403.
Termination of tenancy.
A landlord terminating a periodic tenancy, or a lease that automatically renews on a periodic basis, must, in most circumstances, give 60 days notice of termination. Here are the details.
In all cases in which the tenant has occupied the premises for one year or more, the landlord must give a 60-day notice of termination of tenancy. In cases in which the tenant has occupied the premises for less than one year, then the landlord may give 30 days notice of termination. The period of occupancy is calculated as of the date notice is given. NB: this is a significant change in the law. Whereas, up to now, the landlord could, in the case, for example, of a week-to-week tenancy, give a one-week notice of termination, now the landlord must give a full 30 days. A landlord can still give a 30-day notice where all of the following are true.
1. The rental unit can be conveyed separately from any other unit; and
2. The landlord has contracted to sell the property to a bona fide purchaser and has opened an escrow with an escrow agent or a licensed real estate broker; and
3. The purchaser is a natural person or persons; and
4. The notice is given not more than 120 days after the escrow was opened; and
5. Notice has not previously been given to the tenant under this exception; and
6. The purchaser in good faith intends to reside in the premises for at least one year after termination of tenancy.
The law does not change the tenant’s right to terminate. He may still terminate on notice at least as long as the period of the hiring, not less than seven, nor more than 30 days.
Rent control.
New legislation has been passed dealing with the kind of things that can be passed through as rent increases in cities without vacancy decontrol. Owners of property in such cities should read the new Civil Code Section 1947.15 for the details of this typically complex rent control legislation.

Notice of entry.
The manner of giving notice of intent to enter a rental unit for the reasons permitted by law has been made clearer. Except in cases of emergency or when the tenant has abandoned or surrendered the premises, the landlord must give the tenant reasonable notice in writing of his intent to enter and may enter only during normal business hours. The notice may be personally delivered to the tenant, left with someone of suitable age and discretion at the premises, or left on, near, or under the usual entry door of the premises in such a way that a reasonable person would find it. Twenty-four hours is presumed reasonable notice in the absence of evidence to the contrary. The notice may be mailed to the tenant. Mailing of the notice at least six days before an intended entry is presumed reasonable notice in the absence of evidence to the contrary. If the purpose of the entry is to show the dwelling unit to prospective or actual purchasers, the notice may be given orally, in person or by telephone, if the landlord or his or her agent has notified the tenant in writing within 120 days of the oral notice that the property is for sale – not “will be” for sale, but “is” for sale – and that the landlord or agent may contact the tenant orally. Twenty-four hours is presumed reasonable notice in the absence of evidence to the contrary. At the time of entry, the landlord or agent shall leave written evidence of the entry inside the unit. The reader may speculate as to the utility of this new notice procedure where it cannot be used for the first 120 days that the unit is on the market.
Reinstatement after eviction.
This is a profound change in the reciprocal right of parties to a periodic tenancy to terminate it on notice, or, for that matter, of a landlord to regain possession of his premises on expiration of a fixed-term lease. It has been, we think, largely misunderstood thus far by writers in the landlord press.
Up to now, the court could relieve a tenant from the loss of his lease, and restore him to the tenancy, for the unexpired term of the lease, after a judgment for eviction, where the eviction was the result of a default and the tenant could show hardship. The new law would permit hardship reinstatement not only for the unexpired term of a fixed term lease, but also in cases of month-to-month tenancies where the tenancy termination was of a non-default nature, as, for example, where the landlord gives a 60-day notice of termination of a periodic tenancy. It might also apply in the case of lease expiration. The implications in commercial cases, where hardship is usually not difficult to show, if this interpretation is correct, are obvious.

Lead paint abatement.
Finally, Senator Deborah Ortiz found a way to force lead abatement while escaping the political consequences of doing so forthrightly. With SB460 a lead paint hazard is made a breach of the implied warranty of habitability. This means that while the landlord is not directly obligated to abate a lead paint hazard, he cannot collect rent on the premises until he does.