What are the laws and best practices for new building ownership?
Legal Q & A
Question: I just bought a new building, and I’d like to know some of the most important issues I should be addressing now that I’m the owner.
Answer: When a new owner purchases a residential rental property in Oakland, he or she steps into the shoes of the prior owner. In other words, the new owner is bound by the prior owner’s actions regarding any residential residency and must comply with all of the terms and obligations of that residency. So for instance, if a rental agreement provides for no pets but the prior owner orally permitted the resident to have a pet, then a new owner cannot thereafter seek to enforce the no pet provision of the rental agreement. The new owner is bound by the prior owner’s agreement.
For this reason, it is important for a new owner to get as much information as possible about any residency. This is commonly done by getting copies of all rental agreements and rent increases and other agreements concerning the residency from the prior owner during the purchase process. It is also common to request the resident to provide a document commonly referred to as an estoppel. An estoppel document is a written statement by the resident certifying certain facts pertaining to the rental agreement. From the estoppel document, the new owner can typically get a better understanding of the terms and conditions of the residency. While estoppel documents can be useful, sometimes residents refuse to provide them.
From the information obtained about the residency, the new owner will be in a much better position to know the important terms and conditions of the residency and can act accordingly as the new owner. It will also help to have a general understanding of the local rent and eviction control ordinances. Most rental units in Oakland are subject to the rent and/or eviction control ordinances, so you will be expected to comply with it. You may consider consulting with an attorney for this purpose. Other groups and organizations, such as the East Bay Rental Housing Association and the Oakland Rent Board may also provide some information about the ordinances.
In addition to the above, there are a multitude of other issues a new property owner should or could address, but each owner’s obligations vary depending on the circumstances. So I will outline a few other “to-dos” that every new owner should address to make sure he or she gets off to a good start.
Introductory Letter
Inherited residents: Write an Introductory letter that includes name, street address, and phone number of the person to whom to serve legal documents and pay rent. (Civil Code 1962)
Within 15 days of an ownership change, the new owner must give the resident an introductory letter. The letter must disclose certain information, including the name, street address, and phone number of the person to whom legal documents may be served and to whom rent payments are to be made. You can find a more comprehensive overview of the required disclosures in California Civil Code Section 1962. If the new owner fails to make the required disclosures, then the owner is precluded from evicting a resident for nonpayment of rent. So a new owner should be sure to comply and deliver an introductory letter containing all the required disclosures. Since the introductory letter is often the new owner’s first communication or interaction with the resident, the new owner may tailor the letter accordingly. First impressions are important and may set the stage for the future owner/resident relationship. So for instance, it may go a long way to simply inform the resident that the security deposit was transferred to the new owner, that the current terms of the residency will remain in place, and that any concerns will be diligently addressed. Such a letter is customizable and varies depending on the owner and circumstances.
Insurance
The rent laws in California can make it lucrative for residential-residents to sue the rental property owner. Many local eviction ordinances allow tenants to recover treble damages and attorney’s fees if they prevail in litigation. These laws are flypaper for resident attorneys. One way to manage the risk of a resident lawsuit is to have insurance coverage for claims of wrongful eviction. All rental residential owners in rent or eviction control jurisdictions should have coverage for claims of wrongful eviction. So every new owner should be sure to obtain an insurance policy that includes coverage for wrongful eviction.
RAP Notice
An Oakland property owner of rent controlled units must serve his or her residents with a Notice to Tenants of the Residential Rent Adjustment Program (“RAP Notice”) at the commencement of the residency, at the time of any rent increase, and at the time of any notice changing the terms of residency. The RAP Notice provides the resident with information about rent increases and resident rights. If it is not properly given, then any rent increase may be void. If it is determined that RAP Notices were not properly given by the prior owner, then the new owner should immediately serve them on all the residents. By doing this, the previous failure to properly give the RAP notice will be cured 6 months after the new owner properly gives it, so future rent increases after that 6 month period can be safely given. Of course, the new owner must be sure to give the RAP Notice again with the future rent increases.
Habitability & Quiet Enjoyment
Every new owner must be aware that he or she is required by law to provide the resident with a habitable rental unit. This generally means a rental unit that is in good repair and free from dilapidations. Similarly, he or she must is also required by law to provide the resident with quiet enjoyment of the rental unit. This generally means peaceful possession of the rental unit without disturbance. If the new owner is ever informed that repairs are needed or that the resident is being disturbed, then the new owner should promptly respond and take any needed steps to rectify the situation.
Contributor: Steve Williams, Attorney