AB 1506 IS DEFEATED IN COMMITTEE

A MESSAGE FROM AAGLA EXECUTIVE DIRECTOR, DAN YUKELSON

COSTA-HAWKINS IS SAVED…
FOR NOW. TO BE CONTINUED.

Today is a great day for the multifamily housing industry. An Assembly bill introduced by Richard Bloom (D-Santa Monica), AB 1506, to repeal the Costa-Hawkins Rental Housing Act of 1995 (“Costa-Hawkins”) has been defeated. In a meeting today in front of the Housing and Community Development Committee, a 5 member committee, two members were in favor, two were against, and one member, Ed Chau, abstained; therefore, preventing the Bill from moving forward to the General Assembly.

Just prior to today’s Housing and Community Development Committee meeting on AB 1506, your Apartment Association of Greater Los Angeles and its affiliated associations mobilized and encouraged their members to email and call Ed Chau’s offices urging him to Vote No on AB 1506. As a result, calls and emails flooded into Ed Chau’s offices and eventually, Ed Chau shut off his phones! We sent busloads of sign-carrying housing providers to today’s meeting in Sacramento to urge the Committee to Vote No on AB 1506. And, it worked! Ed Chau abstained, which is the same as a No Vote.

Advocacy works!
Your efforts paid off. Thank you all that contributed to the effort to defeat AB 1506.

Costa-Hawkins is a landmark, California state law that places many protective limits on local rent control ordinances. Costa-Hawkins provides two major benefits: (i) first, it prohibits municipalities from establishing rent control over certain types of housing units such as single-family homes, condominiums and newly constructed rental units; and (ii) second, it permits “vacancy de-control”, or in other words, it allows rental housing providers to set their rents at the prevailing market following a tenant’s vacancy. Without Costa-Hawkins, rental housing providers in cities such as Santa Monica and West Hollywood could not raise their rent to market under any circumstances. It is Costa-Hawkins that mandates cities to permit an apartment owner to rent an apartment, when vacant, at any price (e.g., market price). AB 1506 would have repealed Costa-Hawkins entirely.

Although we have won today’s major battle, it is likely that AB 1506 will return in a different form by “chipping away” at some of the protections we have under Costa-Hawkins instead of the full repeal sought by Bloom. In addition, we are faced with a statewide ballot initiative that has been filed by well-funded, price control extremists that, if passed, would repeal Costa-Hawkins in its entirety. The proponents of the initiative have raised nearly $20 million to assure its passage.

We must all continue to join in the battle against these dangerous threats to the rental housing industry in California. The only way that we can defeat the initiative or other attacks on Costa-Hawkins is with money and your involvement.

IT IS IMPORTANT THAT YOU GIVE GENEROUSLY TO THE AAGLA POLITICAL ACTION COMMITTEE TODAY.

If you have the means, please give generously. Now more than ever, we need those that can afford to, to write $1,000, $2,5000, $5,000 or even $10,000 or more checks. If we lose the battle to save Costa-Hawkins, we could lose billions of dollars in lost rental income and property value. If we lose the battle over Costa-Hawkins, many of our members will end up in financial peril.

Now more than ever, stay involved, advocate and give to the AAGLA POLITICAL ACTION COMMITTEE. The Apartment Association of Greater Los Angeles is your regulatory insurance. AAGLA is constantly working on your behalf to ensure your voice is heard and your property rights are protected. We always have your back every step of the way. Support us and we will win.

GIVE YOUR SUPPORT

BLOWING UP COSTA-HAWKINS: WHAT IS IT AND WHY SHOULD YOU CARE?

It is Not Just Your Apartments, But Single-Family Homes and Condominiums Will Also be Impacted

By Daniel Yukelson and Stevie Funes

Although a great deal has already been said about it, there is much more discussion and debate to take place this year regarding the Costa-Hawkins Rental Housing Act of 1995 (“Costa-Hawkins”). Anyone that owns a residential property here in our golden State of California, whether new or old, or whether multi-family, single family or even a condominium needs to be informed and care about Costa-Hawkins.

Costa-Hawkins is a landmark, California state law that places protective limits on local rent control ordinances. Costa-Hawkins provides two major benefits: (i) first, it prohibits municipalities from establishing rent control over certain types of housing units such as single-family homes, condominiums and newly constructed rental units; and (ii) second, it permits “vacancy de-control”, or in other words, it allows rental housing providers to set their rents at the prevailing market upon a tenant’s vacancy. Without Costa-Hawkins, rental housing providers in cities such as Santa Monica and West Hollywood could not raise their rent to market under any circumstances. It is Costa-Hawkins that mandates cities to permit an apartment owner to rent an apartment, when vacant, at any price (e.g., market price).

Before Costa-Hawkins, rental housing providers in many jurisdictions were often forced out of business and faced bankruptcy. Prior to the protections provided under Costa- Hawkins, a rental housing black market formed, and apartment buildings became dilapidated due to deferred maintenance as owners suffered financially. It was not that long ago when the City of Santa Monica was referred to as the “Skid Row by the Sea” because housing providers could no longer afford to upkeep their properties.

Causes Leading Up to Rent Control

Rent control policies first appeared in the early and mid- 1900s during the World Wars in reaction to these two national emergencies. It was then during the late 1970s that various municipalities throughout California and nationwide began enacting rent control ordinances due, in part, to rising real estate values and surging interest rates, which had made single family homes in California less and less affordable. As a result, people began moving into apartments in larger numbers causing a rental housing shortage. At the same time, municipalities were making poor land use decisions by restricting construction of new housing units. As the demand for rental housing increased and the supply decreased, rental housing providers increased rents – it’s just the “old” supply and demand. And, to make matters worse, in the “perfect storm,” state and federal low-income housing assistance fell, inflation increased, and yet at the same time, wages and salaries fell.

The City of Berkeley became the first California city to adopt a post-war rent control ordinance in 1972. In 1976, Governor Jerry Brown, vetoed state legislation (AB 3788) that would have prohibited local rent control laws. AB 3788 was supported the California Housing Council (CHC), a real estate trade association. Subsequently, the CHC was able to get an initiative to prohibit rent control laws on the ballot in 1980, Proposition 10, but this initiative was soundly defeated.

In the meantime, in June 1978, Proposition 13 had been approved by a two to one margin by California voters. Prior to the election, Proposition 13 proponent, Howard Jarvis, and the California Apartment Association, had suggested that landlords would lower rents if Proposition 13 were to pass. Apparently, numerous voters were said to have thought that by lowering landlord property taxes, Proposition 13 would automatically mean lower rents. The CHC, then became fearful of a tenant backlash if landlords failed to follow through in lowering rents, and decided to oppose Proposition 13. Despite post-election efforts by Governor Brown and the CHC, few landlords lowered their rents.

Across California, tenants quickly began to feel their numbers and formed local groups, which quickly grew in intensity and strength. Tenant activists organized political agitation directed at state and city government. Governor Brown’s newly created ‘tenant hot line’ was at one point, getting 12,000 calls per day. Due to continuing tenant pressure, rent strikes, and adverse news coverage about rent increases and angry tenants, especially seniors, the Los Angeles City Council passed a six-month rent freeze in August 1978. By 1988, fourteen California municipalities had adopted full rent control ordinances.

While the strength of the tenant activism eventually began to dissipate, later attempts to repeal rent control at the state level failed. Today, approximately two-dozen out of 482 California cities have enacted rent control laws.

The Birth of the Costa-Hawkins Rental Housing Act

Authored by Jim Costa, a Democrat Senator from Fresno, and Phil Hawkins, a Republican member of the Assembly from Bellflower, Costa-Hawkins was first introduced in the Senate and eventually became Assembly Bill 1164. After several negotiated changes, it was passed in both chambers. Republican Governor, Pete Wilson, then signed AB 1164 into law and Costa-Hawkins was born.

Although Costa-Hawkins placed limitations on rent control, which was an agenda more favored by Republicans, quite a few Democrats supported the Act. The pro-tenant Western Center on Law and Poverty (WCLP) requested several amendments to the bill such as the prohibition of rent increases “if serious health, safety, fire, or building code violations were discovered and not corrected for six months.”

Costa-Hawkins was later amended in 2002 to close a loophole and clarify the law related to condominium conversions. It prevented owners of apartment buildings, who obtained a certificate for conversion, to an exemption to rent control laws, without selling any such apartments as condominiums.

Life Before Costa-Hawkins and the Passing of the Ellis Act

Without vacancy-decontrol afforded under Costa- Hawkins, municipalities can control the rental marketplace in its entirety. Some cities, such as Santa Monica before the passage of Costa-Hawkins, have exercised “vacancy control” by limiting what rental housing providers can charge for their units once a tenant vacates. Without the protections of Costa-Hawkins, rental housing providers simply could not keep up with the increasing costs to profitably operate their property. As a result, some owners decided to leave the multi-family housing business entirely, while others converted their properties to other uses, such as condominiums.

In the mid-1980’s, California passed the Ellis Act, a law to protect the right of owners to go out of the rental housing business so that they would not be forced to continue operating them at a loss. The Ellis Act was in response to the City of Santa Monica’s challenge to the right of property owners to stop offering their rental housing, and in essence, attempted to compel owners to operate rental housing, even at a loss.

It is clear that Costa-Hawkins has been a great lifeline to the rental housing industry and to property owners who have been able to make-up for some of the lost rental income “ground” once units are vacated. Without Costa-Hawkins protection, rent control laws would expand and California would return to the “dark ages” when the worst effects of rent control were allowed to thrive without abatement while at the same time driving owners out of business, creating a decaying housing stock and drastically reducing housing supply.

Some price control extremists have suggested only certain portions of Costa-Hawkins be modified by, for example, removing only the prohibition on new construction, which excludes from rent control properties built 1995 or later. The multi-family housing industry considers any attempt to alter Costa-Hawkins similar to allowing the “camel’s nose under the tent,” and any change, no matter how extensive, can only lead to a moving the goal post until it is ultimately repealed in its entirety. When it comes to Costa- Hawkins, any modification is the proverbial red line in the sand.

Threatening Costa-Hawkins

Costa-Hawkins is now being threatened with repeal both in the state assembly, and by well-organized, and extremely well-funded tenants’ rights groups who have submitted a ballot initiative. We, as rental housing providers, are under attack! If repealed, many municipalities would dramatically expand rent control.

A bill, AB 1506, that has been proposed by Assembly Member Richard Bloom, a Democrat from Santa Monica, would repeal Costa-Hawkins. However, that bill has been temporarily put on hold by its author amid fierce opposition from the rental housing industry. AB 1506 proposes a simple, one-line repeal of Costa-Hawkins. Bloom’s bill must pass the Assembly by the end of January, but even if it fails, it is likely that another legislative attack will be introduced in early 2018. The simple text of the bill is as follows:

“THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Chapter 2.7 (commencing with Section 1954.50) of Title 5 of Part 4 of Division 3 of the Civil Code is repealed.”

In addition to the Bloom bill, a new threat being led by tenant advocacy groups and Michael Weinstein, president of the AIDS Healthcare Foundation. These rent control zealots have proposed a ballot initiative that would repeal the Costa-Hawkins. This group is well organized and well- funded, and have raised, by some accounts, more than $20 million to ensure this initiative gets on the ballot and is passed. The proponents of this initiative submitted a letter to the California Attorney General requesting a title and summary for the initiative on October 23, 2017, which at the time this article was written, was pending issuance by the California attorney general’s office, but expected on December 27, 2017. The proponents will then need to gather the required 365,880 valid voter signatures in order to get on the November 2018 ballot.

Your Apartment Association of Greater Los Angeles and its allied rental housing associations have been able to defeat similar attacks against our industry at the State level many times before. However, this initiative and the bill proposed by Assembly Member Bloom are some of the most awful and egregious political threats to the rental housing industry in AAGLA’s 100-year history! We ask that each of our members be informed, attend Apartment Association meetings, write letters to your legislature, and actively help us to overcome the looming threat to our property rights. You need to care about Costa-Hawkins.
Together we can win!

Credit to AAGLA.com

Landlord to Pay $20,000 to Settle Pet Discrimination Case – by the Editors of Rental Housing Journal

Reprinted with permission from AOA.

The owner of several Reno, Nevada apartment complexes has agreed to pay $20,000 to settle allegations of  pet discrimination and Fair Housing Act violations involving requiring pet deposits from prospective tenants who require assistance animals, according to a release.The Silver State Fair Housing Council filed four complaints against the owner and manager of Silver Lake Apartments, Vale Townhomes, Oak Manor Apartments and Angel Street Apartments with the U.S. Department of Housing and Urban Development (HUD).  These complaints allege ERGS, Inc. and Silver Lake Apartments, LLC discriminated against prospective tenants who required assistance animals by requiring applicants who required support animals to pay a pet deposit fee.

Under the conciliation agreement, ERGS, Inc. will pay Silver State Fair Housing Council $20,500.  ERGS, Inc., and Silver Lake Apartments, LLC, will also adopt written policies that are consistent with the Fair Housing Act and provide fair housing training for all employees who interact with tenants or applicants. Kate Zook, executive director of the Silver State Fair Housing Council, told Rental Housing Journal that a woman with an emotional support animal had tried to apply at the apartments and was told they do not accept pets. The Silver State Fair Housing Council did follow-up testing on emotional support animals and rentals at the apartment complexes. She said they found, “People with emotional support animals were told they do not qualify as a service animal.”

The organization then filed the complaint against the owner and managers of the apartment complexes.

“I hate filing cases,” Zook said. But she said unfortunately sometimes it takes publicity about these issues to get people’s attention. “It is too bad. Somebody has been hurt in this.”

Both Fair Housing Act and Americans with Disabilities Act can apply in these situations.

In addition to the Fair Housing Act’s protections, HUD provided guidance in April 2013 reaffirming that housing providers must provide reasonable accommodations to people with disabilities who require assistance animals.  

Pet Discrimination and Disability

Disability is the most common basis of fair housing complaint filed with HUD and its partner agencies. Last year alone, HUD and its partners considered over 4,900 disability-related complaints, or more than 58 percent of all fair housing complaints that were filed.

HUD writes in the notice that, “An assistant animal is not a pet. It is an animal that works, provides assistance or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects of a person’s disability. Assistance animals perform many disability-related functions, including but not limited to, guiding individuals who are blind or have low vision, alerting individuals who are deaf or hard of hearing to sounds, providing protection or rescue assistance, pulling a wheelchair, fetching items, alerting persons to impending seizures, or providing emotional support to persons with disabilities who have a disability-related need for such support. For purposes of reasonable accommodation requests, neither the FHA nor Section 504 requires an assistance animal to be individually trained or certified.”

Housing providers are to evaluate a request for a reasonable accommodation to possess an assistance animal in a dwelling using the general principles applicable to all reasonable accommodation requests. After receiving such a request, the housing provider must consider the following:

  • Does the person seeking to use and live with the animal have a disability — i.e., a physical or

mental impairment that substantially limits one or more major life activities?

  • Does the person making the request have a disability-related need for an assistance animal?  In other words,

does the animal work, provide assistance, perform tasks or services for the benefit of a person with a disability,

  • or provide emotional support that alleviates one or more of  the identified symptoms of a person’s existing disability?

If the answer to those two questions is “yes,” then the housing provider is to modify or provide an exception to a “no pets” policy.

RentalHousingJournal.com, an interactive community of multifamliy investors, independent rental home owners, residential property management professionals and other rental housing & real estate professionals, is the most comprehensive source for news and information for the rental housing industry. This website features exclusive articles and blogs on real estate investing, apartment market trends, property management best practices, landlord tenant laws, apartment marketing, maintenance and more.  Reprinted with permission.

Don’t Let Your Estate Plan Be a Hazard for Your Family! – by Kenneth Ziskin, Attorney

Reprinted with permission from AOA.

My wife, Hinda, who helps me with planning for clients, and I  have been lucky enough to meet hundreds of wonderful apartment owners though the AOA seminars we have done throughout California.  The majority of them planned ahead years ago and build living trust based estate plans to protect their families.

Unfortunately, almost all the plans we reviewed (some just a few years old, and some decades old) have now become “HAZARDOUS TO FAMILY WEALTH.”

Many of these “hazards” result from changes in the tax environment which were not anticipated when plans were originally drafted.  Others result from changes in the family.  Many others just reflect the growth in family wealth, which is a “good problem” to have.  And, a few of the “hazards” are the result of “one size fits all” drafting which, without customized planning, rarely optimizes for “your” goals and unique situation.

The vast majority of our apartment owner clients had a net worth of only a few hundred thousand dollars when they started out.  So, it was hard for them to justify the cost of doing good planning and their main goal was probate avoidance.

However, today, the vast majority have built multi-million dollar portfolios, which DO justify the cost of careful, customized planning.

Changes in the Tax Environment

Most of the old (and, sometimes, not so old) plans we review for apartment owners focused on avoiding probate and making sure that estate tax exemptions were optimized.

But, major changes in estate/death taxes, income taxes and the effect of property taxes have now made it more important for most owners to focus on the income and property tax consequences of their estate plans.

  • First, the lifetime exemption (now, an exclusion) from estate and gift taxes grew from $600,000 in 1997 to $5.49 MILLION in 2017!  That means a married couple can now pass nearly $11 million to their heirs free of estate taxes.
  • Second, the estate and gift tax rate on wealth over the exemption actually fell from 55% to 40%.
  • Third, one spouse was finally allowed to leave his or her exemption to the other spouse (we all this “Portability”).
  • Fourth, the top Federal income tax rates rose from 35% in 2003 to 43.4% in Obama’s second term (including the “Net Investment Income Tax”).
  • Fifth, adding insult to injury, California increased its top rate from 9.3% to 13.3%.
  • Sixth, while property tax exemptions under Prop 13 did not change much, massive inflation in income property values made it important to preserve and maximize your ability to prevent reassessment when you die.

Combining all of these factors meant that most apartment owners, even after inflation, no longer needed to worry about estate and gift taxes.  Those who did need to worry (we think this is about 25-30% of our owner clients) faced less estate and gift tax exposure, both due to the increased exclusion from tax, and the reduced rates. 

Changes in the Family

Many old plans were written when owners’ children were still in school, or had not yet built their own families.  So, they gave little thought to how wealth should be left to maximize benefits for adult children and for grandchildren. Rarely was any effort made to protect the inheritance for generations from creditors and predators (i.e.potential ex-spouses!).  

Changes in Wealth

Very few old estate plans anticipated leaving as much wealth as our clients now expect to have.  In many cases, the amount of wealth could now, if not properly handled, change the life of heirs in a negative way, destroying incentives and motivations for heirs.

Lack of Customized Planning

Good estate plans need to be customized to meet your goals.  That requires your estate planning lawyer to help you understand your planning options, tease out your goals and desires, help you make important planning decisions and then take the time to draft customized documents to get results you want for your family.

Very few lawyers have the experience to do this while focusing on the special needs of California apartment owners.  Furthermore, even those who have the experience often price their services at a level that discourages them from spending the time with clients that is needed to do really good planning and draft custom documents.

However, given the larger estates that apartment owners now have or expect to have at life expectancy, good planning is now much more important than ever before.  Now, larger estate sizes, the benefits of good planning more than justify the cost.

Most Common “Hazards”

While we do see some well written trusts, most of the time we see some combination of the following hazardous features (as well as others which appear less often) in trusts and related estate plans that we review.

  • Trusts for married couples that mandate funding of a credit shelter, bypass, exemption or “B” trust.  This then prevents getting a second increase in income tax basis when the surviving spouse passes, and can cost millions in unnecessary capital gains taxes for your heirs.  With “portability” of your estate tax exclusion between spouses, this “old style” planning is no longer necessary to save estate taxes for most couples.
  • Failure to properly document that jointly owned property, (even in the trust) as community property so that both halves get a new, higher income tax basis when either spouse dies.
  • Failure to structure the trust so that the property tax exemption of the first spouse to die can be passed to children after the second spouse’s death.
  • Failure to structure property ownership in the trust to avoid reassessment even when the first spouse dies.
  • Failure to protect assets left for a surviving spouse from creditors.
  • Failure to protect the surviving spouse from undue influence that can redirect property away from your natural heirs.
  • Use of LLCs or partnerships to hold buildings in ways that cause unnecessary increases in property taxes on the first or second death.
  • Failure to provide enough flexibility in your trust regarding allocations of income and principal which can, in turn, lead to higher income taxes after your demise.

Sound Estate Planning Is Also About Opportunities to Better Benefit Your Heirs

We get great pleasure when we can help clients articulate not just what they will leave to heirs, but howthey will leave it in order to enhance the lives of their heirs.

In some cases, that means combining protection from creditors and predators, with provisions that will prevent heirs from misusing their inheritance before they develop enough maturity to manage it themselves.  None of our clients want their children or grandchildren to be “spoiled” by their inheritance, or to dissipate a substantial inheritance early in life and wind up impoverished in later years.

This almost always requires a lot of discussion with property owners about their goals and family.  Then, we teach them about some of the ways they can fulfill such goals.  Finally, we spend significant time doing custom drafting to reflect the decisions the owners made.  And, we follow that up with explanations of the drafting to make sure it reflects the owners’ desires.

Sometimes this includes provisions to encourage or mandate keeping some or all of the family real estate business together, either for a period of time or permanently.

It can also include provisions that help pass values about hard work, accomplishment, thrift or even community service to your heirs.

The fact is, the opportunities to benefit your heirs, protect them and pass values are only limited by your imagination.  We get great satisfaction from educating our owner clients about strategies that have worked for other clients (or not worked) in order to help them think about their planning choices 

Opportunities to Enhance Benefits During Your Life

Although most estate planning revolves around benefits for your heirs, it also provides strategies to help you live a better life yourself. This can include strategies to enable you to sell property without paying capital gains taxes.  One of those strategies is the Capital Gains Bypass Trust (“CGBT”).  We wrote about CGBTs in the July, 2016 issue.

For most owners, with properties valued at currently low cap rates, a CGBT can avoid current taxes on the sale of appreciated buildings (some of which can otherwise face income taxes of nearly 40%).  If can also substantially INCREASE currently spendable cash flow, obtain income tax deductions that can offset gains or income from other properties and give substantial financial and non-financial benefits to your heirs.

Just as important to many clients, the CGBT can enable them to get rid of the burdens of property management.

The upcoming seminar in Torrance will explore the CGBT strategy in greater detail, and include new material on how to use it even for properties that are encumbered with debt.  The seminar will include case studies to help pique your interest and understanding.

Make Your Estate Plan Work Well for Your Family

Making your estate plan work well begins with understanding the planning you have and your planning opportunities.  Generally, this should begin with having an experienced estate planning attorney who understands, and works regularly with, the problems and opportunities of apartment owners.

But the real key is good planning.  That is why my motto is: “If you fail to plan (well), plan to fail”.

The tax environment, your wealth, and your family have probably changed a great deal since you completed your planning.  The odds are high that your existing plan does not reflect your current goals for your wealth, nor does it avoid tax risks that changes in the law and your situation have produced.

In order to prevent your estate plan from being a HAZARD to you and your family, get your estate planning reviewed now by a lawyer who will help you articulate your goals, and then put your goals first in any planning you want done.  You will get peace of mind, and your heirs will gain substantial benefits.

To learn more, register to attend Ken Ziskin’s seminar on “Estate Planning for Apartment Owners”: 

These seminars will include coverage of the Trump proposals to change income taxes on apartment owners. Ken also offers FREE CONSULTATIONS FOR AOA MEMBERS. To register for one of these seminars, call (800) 827-4262 today! 

Kenneth Ziskin, an estate planning attorney, focuses on integrated estate planning for apartment owners to save income, property, gift and estate taxes.  He holds the coveted AV Preeminent peer reviewed rating for Ethical Standards and Legal Ability from Martindale-Hubbell, a perfect 10 out of 10 rating from legal website AVVO.Com, and is multiple winner of AVVO’s Client Choice Award. .  See Ken’s website at www.ZiskinLaw.com or call (818) 988-0949.  This article is general in nature and not intended as advice for clients.  Please get advice from counsel you retain for your own planning.

Disability Discrimination Issues and How to Handle the Needs of a Disabled Tenant who Requests a Service Pet or Comfort Pet as a Reasonable Accommodation.

How to prevent a “dog” of a case becoming a state or federal disability legal case against the landlord or property management company. 

Let’s start the discussion and analysis with a hypothetical fact pattern:

Tenant Victor wants to have a service dog in his apartment.  You are the resident manager of a mid sized apartment complex of 50 units.  Your property management company has a “no pet policy” in the apartment complex, with the exception of non-biting gold fish.   Victor appears to be the model of good health- he works out at the apartment complex fitness center every day.    You get a letter that Victor claims to have a disability that requires the need of a service pet.  Victor claims that the nature of disability is confidential.  In fact, he suffers from a psychological and emotional condition that has been diagnosed as “post Donald Trump Election stress disorder.”    He has been diagnosed by a psychiatrist with a mental illness that includes depression and stress over the election result, and suffers depression when he watches CNN, FOX, and CNBC.  The psychiatrist has diagnosed his condition as a disability that may last 4 years or 8 years depending on if Donald Trump gets reelected.  He suffered a recent strange unexpected relapse when he learned of President Obama’s speech fee which required Victor to have medication.   His neighbors, mostly registered republicans, are not fond of Victor.  He is hypersensitive to political news events and outcomes for both parties.  When he drinks tea from Starbucks he gets nervous because it reminds him of the Tea Party platform.

After speaking to Victor on the phone, he tells you that he desires to have a comfort animal in his apartment to calm his nerves, and the proposed pet is named “Vera.”  He sent you an email with a picture of Vera.   His proposed comfort animal, Vera, is a small German Sheppard with no history of dog biting and no history of loud barking.   He purchased the animal from a pet store in Berlin called Sheppardco.   The doggy was shipped in a crate from overseas to Victor’s doorstep.   Victor has taken the dog to obedient school and has made an effort to get the dog certified as a service animal to help him calm his frazzled nerves.

As a property manager, what issues should you be aware of   ??

Victor may have real disability if it can be shown with basic minimal documentation.    If the disability can be documented with a doctor’s note, you will have to allow him to have a pet like Vera even though it is a “no pet” apartment complex.    If you take a hard line and discriminate against Victor because of his alleged disability, you could be sued by Victor, or the state or federal government for disability discrimination.

What housing laws apply to this situationboth state and federal laws and regulations  ?? 

California State Housing Laws that Protect Disabled Persons

Individuals with physical and mental disabilities have the right under state law to rent, lease, or buy housing accommodations free from discrimination due to a disability.  (See Chapter 1 for definitions of disability; Cal. Civ. Code, ” 51, 54, subd.(b), and 54.1; Cal. Gov. Code, ” 12926, subds. (i) and (k), 12955 and 12955.3.)

Cal. Civil Code Section 54.1 states in pertinent part,

“(6) (A) It shall be deemed a denial of equal access to housing accommodations within the meaning of this subdivision for a person, firm, or corporation to refuse to lease or rent housing accommodations to an individual who is blind or visually impaired on the basis that the individual uses the services of a guide dog, an individual who is deaf or hard of hearing on the basis that the individual uses the services of a signal dog, or to an individual with any other disability on the basis that the individual uses the services of a service dog, or to refuse to permit such an individual who is blind or visually impaired to keep a guide dog, an individual who is deaf or hard of hearing to keep a signal dog, or an individual with any other disability to keep a service dog on the premises.”

(C) (i) As used in this subdivision, “guide dog” means a guide dog that was trained by a person licensed under Chapter 9.5 (commencing with Section 7200) of Division 3 of the Business and Professions Code or as defined in the regulations implementing Title III of the Americans with Disabilities Act of 1990 (Public Law 101-336).

(ii) As used in this subdivision, “signal dog” means a dog trained to alert an individual who is deaf or hard of hearing to intruders or sounds.

(iii) As used in this subdivision, “service dog” means a dog individually trained to the requirements of the individual with a disability, including, but not limited to, minimal protection work, rescue work, pulling a wheelchair, or fetching dropped items.

Federal Housing Laws that Protect Disabled Persons

Federal disability laws and regulations also apply to this situation.

The Fair Housing Act, 42 U.S.C. 3601 et seq., prohibits discrimination by direct providers of housing, such as landlords and real estate companies as well as other entities, such as municipalities, banks or other lending institutions and homeowners insurance companies whose discriminatory practices make housing unavailable to persons because of race or color, religion, sex, national origin, familial status, or disability.

The Fair Housing Act prohibits discrimination on the basis of disability in all types of housing transactions.   The Act defines persons with a disability to mean those individuals with mental or physical impairments that substantially limit one or more major life activities. The term mental or physical impairment may include conditions such as blindness, hearing impairment, mobility impairment, HIV infection, mental retardation, alcoholism, drug addiction, chronic fatigue, learning disability, head injury, and mental illness.  The term “major life activity” may include seeing, hearing, walking, breathing, performing manual tasks, caring for one’s self, learning, speaking, or working. The Fair Housing Act also protects persons who have a record of such an impairment, or are regarded as having such an impairment.

Current users of illegal controlled substances, persons convicted for illegal manufacture or distribution of a controlled substance, sex offenders, and juvenile offenders are not considered “disabled” under the Fair Housing Act, by virtue of that status.   The Fair Housing Act affords no protections to individuals with or without disabilities who present a direct threat to the persons or property of others.   Determining whether someone poses such a direct threat must be made on an individualized basis, however, and cannot be based on general assumptions or speculation about the nature of a disability.

42 U.S.C. Section 3604(f) states in pertinent part that “as made applicable by section 3603 of this title and except as exempted by sections 3603(b) and 3607 of this title, it shall be unlawful—

(1)   To discriminate in the sale or rental, or to otherwise make unavailable or deny, a dwelling to any buyer or renter because of a handicap of—

(A)   that buyer or renter,

(B)   a person residing in or intending to reside in that dwelling after it is so sold, rented, or made available; or

(C)   any person associated with that buyer or renter.

It shall be unlawful to

(2)   To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling, because of a handicap of—

(A)   that person; or

(B)   a person residing in or intending to reside in that dwelling after it is so sold, rented, or made available; or

(C)   any person associated with that person.

(3) For purposes of this subsection, discrimination includes—

(A)   a refusal to permit, at the expense of the handicapped person, reasonable modifications of existing premises occupied or to be occupied by such person if such modifications may be necessary to afford such person full enjoyment of the premises except that, in the case of a rental, the landlord may where it is reasonable to do so condition permission for a modification on the renter agreeing to restore the interior of the premises to the condition that existed before the modification, reasonable wear and tear excepted.

(B) a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling; or

Note that the language of the federal statute uses the term “handicap,”   Pursuant to 42 U.S. Code Section 3602 (h)

(h) “Handicap” means, with respect to a person—

(1)   a physical or mental impairment which substantially limits one or more of such person’s major life activities,

(2)    a record of having such an impairment, or

(3)   being regarded as having such an impairment . . . “

What is a “reasonable accommodation” for purposes of the Act that a landlord has to provide to a disabled person  ?

A “reasonable accommodation” is a change, exception, or adjustment to a rule, policy, practice, or service that may be necessary for a person with a disability to have an equal opportunity to use and enjoy a dwelling, including public and common use spaces.   Since rules, policies, practices, and services may have a different effect on persons with disabilities than on other persons, treating persons with disabilities exactly the same as others will sometimes deny them an equal opportunity to use and enjoy a dwelling.   The Act makes it unlawful to refuse to make reasonable accommodations to rules, policies, practices, or services when such accommodations may be necessary to afford persons with disabilities an equal opportunity to use and enjoy a dwelling.

To show that a requested accommodation may be necessary, there must be an identifiable relationship, or nexus, between the requested accommodation and the individual’s disability.

Are there any instances when a provider can deny a request for a reasonable accommodation without violating the Act  ?

Yes.   A housing provider can deny a request for a reasonable accommodation if the request was not made by or on behalf of a person with a disability or if there is no disability-related need for the accommodation.   In addition, a request for a reasonable accommodation may be denied if providing the accommodation is not reasonable – i.e., if it would impose an undue financial and administrative burden on the housing provider or it would fundamentally alter the nature of the provider’s operations.     The term is “reasonable accommodation,”  not “every accommodation.”

The determination of undue financial and administrative burden must be made on a case-by-case basis involving various factors, such as the cost of the requested accommodation, the financial resources of the provider, the benefits that the accommodation would provide to the requester, and the availability of alternative accommodations that would effectively meet the requester’s disability-related needs.

When a housing provider refuses a requested accommodation because it is not reasonable, the provider should discuss with the requester whether there is an alternative accommodation that would effectively address the requester’s disability-related needs without a fundamental alteration to the provider’s operations and without imposing an undue financial and administrative burden.   If an alternative accommodation would effectively meet the requester’s disability-related needs and is reasonable, the provider must grant it.

An interactive process in which the housing provider and the requester discuss the requester’s disability-related need for the requested accommodation and possible alternative accommodations is helpful to all concerned because it often results in an effective accommodation for the requester that does not pose an undue financial and administrative burden for the provider.

Can you request information and records about Victor’s claimed disability

If a disability is not obvious, what kinds of information may a housing provider request from the person with a disability in support of a requested accommodation  ?

This is a sensitive topic to be dealt with kit gloves.  A housing provider may not ordinarily inquire as to the nature and severity of an individual’s disability.   However, in response to a request for a reasonable accommodation, a housing provider may request reliable disability-related information that (1) is necessary to verify that the person meets the Act’s definition of disability (i.e., has a physical or mental impairment that substantially limits one or more major life activities),   (2) describes the needed accommodation, and (3) shows the relationship between the person’s disability and the need for the requested accommodation.   Depending on the individual’s circumstances, information verifying that the person meets the Act’s definition of disability can usually be provided by the individual himself or herself   (e.g., proof that an individual under 65 years of age receives Supplemental Security Income or Social Security Disability Insurance benefits or a credible statement by the individual).

A doctor or other medical professional, a peer support group, a non-medical service agency, or a reliable third party who is in a position to know about the individual’s disability may also provide verification of a disability.   In most cases, an individual’s medical records or detailed information about the nature of a person’s disability is not necessary for this inquiry.

Once a housing provider has established that a person meets the Act’s definition of disability, the provider’s request for documentation should seek only the information that is necessary to evaluate if the reasonable accommodation is needed because of a disability.   Such information must be kept confidential and must not be shared with other persons unless they need the information to make or assess a decision to grant or deny a reasonable accommodation request or unless disclosure is required by law (e.g., a court-issued subpoena requiring disclosure or a lawsuit is filed that puts the nature of the disability at issue.).    So, as a property management company and landlord, specific disability information should be kept confidential from other residents and should be kept “under seal,” or labeled “confidential” so to speak, in the property management office.   Use good professional judgment in keeping the file sealed and confidential.

In Victor’s case, it is important to obtain some basic information about the specific nature of the disability – this may be in the form of a doctor’s letter.  If you don’t know anything or understand about the nature of the disability then you cannot assist and accommodate the tenant to be in compliance with the law.    Some disabilities may be obvious- others are not.  A mental, psychological, or emotional disability condition may be the hardest to notice or fully understand without a medical opinion.  The tenant may not want to discuss the condition unless he or she must do so.    You should maintain limited confidentiality of the medical information if the tenants requests that you do so.   Also, if the tenant does not provide any documentation, the tenant may be claiming a disability fraudulently, just to get around a “no pet policy.”   The claim of a bogus disability is more common than you think, as some tenants may take liberties to get special privileges at the apartment complex.

Can you request information about Vera’s demeanor as a service pet   ? ?

It is a smart idea to do some investigation and ask the tenant to verify in writing whether the dog has any history of  biting, snapping,  or loud barking as to cause a nuisance to other tenants.   Has the dog itself been a victim of abuse ?    Has the pet had multiple owners or was ever abandoned ?    Ask the tenant if there were any issues with the dog at their prior residence, which may have been the city dog pound.    Has the dog been formally trained ? If a dog is properly trained and certified as a service dog, usually the dog is well behaved.   Don’t judge the dog based on the fact it is cute or adorable.   But you don’t get to know the dog’s personality until the dog stays at the property. You will learn a great deal about the personality of the dog after 30 days.   You should see and meet the pet to get an idea of the pet’s personality.

If a doctor has diagnosed Victor with a mental disability or handicap, can you enforce the no pet policy to stop Victor from housing Vera the doggy as a service animal or comfort animal   ?

No, you are required by law to allow the pet if the pet is not a knowingly dangerous or a nuisance to other residents.    Monitor the situation- you won’t know the pet’s personality until the pet has been tested in its new environment.

If you can verify Victor’s disability condition with some reasonable certainty, and don’t allow Victor to house Vera as a service dog, what can Victor do  ? 

Victor’s rights and remedies under California state law include, a person discriminated against on the grounds of disability pursuant to Cal Civil Code section 54.1 can ask the local district attorney, city attorney, the Department of Rehabilitation acting through the Attorney General, or the Attorney General to bring an action to enjoin the violation, civil penalties, damages, or to seek other remedies, or he or she may bring  his own private legal action. (Cal. Civ. Code 55 and 55.1.).  The prevailing party in the action shall be entitled to recover reasonable attorney’s fees.

An aggrieved person may commence a civil action in an appropriate court not later than two years after the occurrence or the termination of an alleged discriminatory housing practice, or the breach of a conciliation agreement entered into, whichever occurs last, to obtain appropriate relief with respect to the discriminatory housing practice or breach. The computation of the two-year period shall not include any time during which an administrative proceeding under this part was pending with respect to a complaint under this part based upon the discriminatory housing practice or breach. (Cal. Gov. Code, 12980 and 12989.1.)

Under the dual federal law track, Victor may either file a lawsuit or may file a complaint with U.S. Department of Housing and Urban Develeopment  (HUD), not later than one year after the discriminatory act has occurred and HUD may pursue legal remedies on his behalf. (42 U.S.C. Section 3610 and 3612.) Vera may also pursue an action through the Civil Rights division of the U.S. Department of Justice as a referral from HUD to file a complaint on behalf of the United States in federal court.

42 U.S. Code  3612 (p) provides attorney’s fees and costs for the prevailing party for a discrimination complaint filed with HUD, an administrative law judge,  or federal court.

This section provides, “ In any administrative proceeding brought under this section, or any court proceeding arising therefrom, or any civil action under this section, the administrative law judge or the court, as the case may be, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney’s fee and costs. The United States shall be liable for such fees and costs to the extent provided by section 504 of title 5 or by section 2412 of title 28.”

Just a word of comfort – even if you get sued by the government for a disability discrimination claim, the claim can be settled if the government is reasonable.   Most governmental offices want to settle cases with written settlement agreements, and not a lot of protracted litigation.  The government does not have unlimited resources, and may want your company to implement a better management policy with respect to tenants who claim disabilities.   However keep in mind, that plaintiffs can seek damages, penalties, and attorney’s fees and costs.

Should you charge Victor a pet fee for hosting Vera  ?

No.  Landlords may not require applicants or residents to pay a pet deposit for a service dog, psychiatric service dog, or support animal, even if they do so for other applicants or residents.

This is based on the policy statement contained in the Joint Statement of the Department of Housing and Urban Development and the Department of Justice Reasonable Accommodations under the Fair Housing Act.

 This is a strange rule because a service or comfort animal can destroy an apartment as much as a regular pet that is housed by a non-disabled tenant- shouldn’t the landlord be protected if the tenant moves out and the apartment has major damage from the pet ?    The law and authorities tend to view the pet fee as a discriminatory penalty.

If your real estate company approves Vera as a comfort or support animal, and  Vera starts snapping or biting other residents in the complex or barking loud in the complex, what can you do ?

Although you are making every effort to reasonably accommodate Victor with his pet request, Victor is not the only person that you should be concerned with at the apartment complex.   Other residents have rights of quiet enjoyment under their rental agreements.   If the Veras of the world are being a “nuisance,” and posing a risk of harm to others,  you should speak to the tenant about the issue, and you should follow up and send the tenant a letter requesting to get control of the dog.    The dog may need additional training or additional supervision.

Have positive and friendly communication channels with the tenant that is not adversarial.    If that does not work, and you have to put the hammer down, you can also send the tenant a three day notice to perform covenant or quit to request that the tenant control the animal.     If the tenant does not get control of the dog, or the tenant is snapping or biting, then you can call animal control authorities to file a complaint.

How can you prepare and train your employees and staff for these kinds of situations    ?   

The fact scenario presented about Victor and Vera is more common than you think.  Now you have a flavor for the issues and state and federal disability laws.  More and more tenants are trying to use the disability laws to obtain special accommodations.  Some requests are legitimate and lawful, and others are manipulative and fraudulent.    It is important to educate yourself on the issues so you are ready for this type of situation, and have a plan for dealing with it.

If your real estate company or property management company in Southern California needs counsel and additional in office training and administrative and legal support on the laws and regulations of disability and fair housing,  please contact LA Real Estate Law Group to schedule a training session in your office.  

The author of this article, Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters. The contact number is (818) 383-5759, and email is natebernstein44@gmail.com.   Nate Bernstein is a 22 year veteran Los Angeles real estate and business attorney and trial lawyer.   Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options.    He previously served as Vice President and In House trial counsel at Fidelity Title Insurance Company, a Fortune 500 company, and in house counsel at Denley Investment Management Company.      Nate Bernstein created http://www.laquiettitleattorney.com, a leading educational resource on quiet title real estate litigation.     Nate Bernstein is a local expert on real estate law and economic trends in the real estate and leasing market, business law, and bankruptcy law.    Nate has personally litigated more than 40 major real estate trials, and has settled more than 200 complex real estate and business cases.  

BASTA – A Year Later – By Grayce Long, Attorney

The bad news for landlords is that BASTA is still going strong and appears to be growing.  Recently, I was in the Downtown L.A. courthouse in Department 94, where all evictions are heard.  There was a calendar of 54 unlawful detainer cases and of those 54 cases, BASTA represented 15 of the defendants.   That means in almost one out of every four cases, BASTA represented the tenant!  That is outrageous.

I have spoken with the BASTA attorneys and asked them how they are getting so many clients and I questioned whether or not they advertised.  They said that they don’t need to advertise because now it is all word of mouth.  The word is out on the street and tenants are flocking to BASTA because they think that BASTA will get them a good deal and that they won’t owe any money to their landlord.

Over the past year, I have noticed that BASTA has expanded to different L.A. courts.  Not only do they appear in Lancaster and Los Angeles, but they also are going to Santa Monica, Long Beach, Pasadena and Norwalk.   How do you know if BASTA is on your case?   You will know when an answer has been filed on your eviction, as explained below.

Who ARE These Guys??

This article will attempt to explain who BASTA is, what their role is in an Unlawful Detainer Case, and what do you do when BASTA becomes involved.

BASTA when translated into English means “Stop” or “Enough”.  BASTA is one of the many tenant unlawful detainer defense firms who litigate unlawful detainers lawsuits for the tenant.

When you call BASTA and you get their answering machine, you are greeted with “If the landlord wants a fight … we will give them a fight”.  Sets the tone, right?

What they really should say to landlords is – “If you want to pay us $5,000.00 and waive all the rent owed, we will forgo a jury trial otherwise … we are going to make you spend lots of money to evict your tenant no matter what.”

If you haven’t read the article “How Superman of Renters, Daniel Bramzon revolutionized L.A.’s Eviction Defense Industry” published by L.A. Weekly in December 2014, I advise you to do so.  BASTA professes to be the champion of the poor however it is common knowledge that BASTA receives a large chunk of the money that landlords pay out to avoid a jury trial.

Why are jury trials allowed?  I can’t tell you how many times a client will ask me that question when they do not want a jury trial.  The answer is simple –  you don’t have a choice.  It is a constitutional right to have a trial by a jury of your peers.  BASTA takes this right to new heights by requesting a jury trial for every tenant.  Many of my clients ask me whether or not a provision in their lease waiving the right to jury trial will stand up in court.  Unfortunately, it will not help you.  The court has ruled that the provision is unconstitutional and that you cannot waive a constitutional right.

How Do You Know if BASTA is On Your Case?  

Usually, you find out that your case is a BASTA case when they file an answer checking every box on it.  The next step is the discovery process.  Here you find out that your tenant in most cases is complaining about the habitability of the unit.  Watch out for this!   BASTA usually will advise the tenant to call the Housing Inspector and complain to a governmental authority. Further, if you happen to be cited, BASTA will have the further audacity to advise the tenants to not allow you access to YOUR RENTAL UNIT to make repairs.

Normally, BASTA will send you a letter with their discovery requests, especially in non-rent controlled areas.  In that letter they will say that if you don’t wish to respond to the discovery and would like to settle the case,  you can pay the tenant anywhere from $3,500 – $5.000, waive all rent and allow the tenant 60-90 days to vacate.  It’s absurd!  What can you do as a landlord?  The answer is fight back.   Serve discovery on them and find their weaknesses and put them on the defensive. Take the deposition of the tenant and make them spend money.

Jury Trials

As stated above, whenever BASTA represents a tenant in an unlawful detainer case, they will request a jury trial. The tenant will have filed a Fee Waiver which allows them to litigate the case for free.  BASTA, who claims to represent indigent tenants, has their fees paid by grants that they receive from the Federal and State Government.

You are not so lucky. You have to pay the filing fees and your own attorney fees to reclaim your rental property.

BASTA normally will show up first day of the jury trial and the game playing begins.  They have so many cases that your attorney usually will only get 15-20 minutes in the morning to speak with them and the usual demand is $5,000.00 for non-rent control cases and $10,000 to $18,000.00 for rent controlled properties – simply to get your property back from a non-paying tenant. If you don’t agree to their proposition, the matter will be continued to a “firm” trial date.   The rationale of BASTA is if you don’t pay them their $5,000 you will have a 5 to 6 day jury trial.  It could last longer if the defendant is a non-English speaking defendant, because a trial with a Spanish language interpreter can last longer.

One BASTA attorney recently said to me, that he was “thrilled that BASTA has gotten so under the skin of the clients that they will make an irrational business decision.”  Under his theory it doesn’t make sense that a landlord should not pay them $5,000 and instead go through with the jury trial and pay their own attorney $8,000.00 to do the jury trial.

The worst part of the whole equation is that the judges in Los Angeles allow the game playing and cater to BASTA’s schedule.  If they are engaged in trial, their case will be continued to a “firm” date sometime a month later.  It doesn’t matter that one BASTA attorney is available, it is the schedule of the “specific” attorney assigned to the case.   I have often seen attorneys change during this process, which is totally unfair to landlords.  The end result is that you can expect to come back to court two or three times before your case either gets settled or is sent out to jury.

How to Avoid Paying BASTA

What is the best way to avoid paying BASTA, or any tenant litigation defense firm money, which is what they want?

  • Limit the attorney fees clause in your rental agreement to $500.00.  BASTA is focused on the big money cases for jury.  They love cases where there is an unlimited attorney fees clause.  [USE AOA’S RENTAL AGREEMENT – FORM 101].
  • Don’t back down and don’t pay them money.  If you pay them their extortion fee of $5,000.00 because you don’t want to fight a jury trial and hire an attorney to represent you, you are setting a bad precedent.   Further, BASTA will remember you and your property.  You can bet that on your next eviction BASTA will represent the tenant and will demand the same monies you paid on the other case.

Words to the Wise

  • If you are one of the unlucky landlords who has lost a case to BASTA and they have a judgment against you, run to the nearest post office and mail them a cashier’s check for the attorney’s fees that they received in the judgment.  If they don’t get their money right away, they will double the judgment in a month’s time for asset searches, abstracts and research and … it is all legal!
  • Whatever you do, do not represent yourself in an eviction if BASTA is on the other side.  They will outmaneuver you. Hire an attorney.

 

Attorney Helen Grayce Long is an attorney at Fast Eviction Service. She attended UC Berkeley and graduated with a bachelor of arts.  She then attended the University of San Francisco School of Law.  Grayce has been an attorney for 25 years and specializes in Real Estate Law.  She’s done landlord/tenant work throughout the state of California with an emphasis on Rent Control law.  For more information, call (800) 686-8686, email hglongatty@fastevict.com or visit www.fastevictionservice.com.

Reprinted with permission of AOA (Apartment Owners Association, Inc.) and the author.

Urgent Tax Alert for Apartment Owners with Larger Estates! Last Chance to Use Discounts to Save Estate and Gift Taxes? – By AOA Member and Estate Planning Attorney, Kenneth Ziskin

If you have, or expect to develop, a “taxable” estate (more than the estate and gift tax exclusion amounts which now protect nearly an $11 million estate for a married couple), newly Proposed IRS Regulations make it IMPERITIVE that you consider advanced estate tax planning NOWThe new Proposed Regulations, released in August, are designed to take away the ability to use many discount strategies that can eliminate (or substantially reduce) estate and gift taxes for those of you who would otherwise face these taxes.   

To beat the adverse effect of these regulations, you MUST complete transfers to your heirs or specialized trusts before these Regulations are finalized (probably around year-end).  The loss of these discounts could cost a family with $16 million in property that does not do proper advanced planning now as much as $2 million in unnecessary estate and/or gift taxes.  The loss would be far more costly to larger estates. 

In August, the IRS finally published the Proposed Regulations it has threatened since May, 2015.  These Proposed Regulations were designed to limit the use of discounts in family (and maybe other) transactions that sophisticated clients and estate planners had used to reduce estate and gift tax exposure.  We have helped owners do dozens of transactions to take advantage of these discounts to save millions, and expect to do many more before the Proposed Regulations limit their use.

The BAD NEWS is that these Proposed Regulations will preclude the effective use of discounting strategies that advanced estate planners have employed to help clients save billions of dollars in estate and gift taxes over the past few decades. As a result, millions of dollars of value that apartment owners want to pass to family members and other heirs will, instead, be confiscated by the estate and gift tax system.

However, the VERY GOOD NEWS (but ONLY for those who plan in time) is that the IRS proposes that these Regulations become effective 30 days AFTER Final Regulations are published in the Federal Register.

Since the Proposed Regulations contemplate allowing for a 90-day comment period and a public hearing on December 1, 2016, it is virtually impossible for them to become final before the end of this calendar year.  If Hillary Clinton is elected, the IRS may not finalize the Proposed Regulations until early in her administration.  However, if Donald Trump is the winner in November, we expect the IRS may seek to finalize the Proposed Regulations before the end of the Obama administration.

The deferred effective date gives us time to review the Proposed Regulations carefully in order to better understand the impact they will have on transactions after the effective date, and gives you a short period of time to commence planning to “beat the regs.”  I got an advanced copy of the Proposed Regulations and have already scheduled to participate in a conference call with other advanced estate planning colleagues regarding the Proposed Regulations.

The best strategies for taking advantage of discounting strategies before the Proposed Regulations become final will usually involve putting property into carefully structured LLCs or limited partnerships (or to restructure such entities to maximize tax and non-tax benefits) as soon as possible.  Then, apartment owners will want to transfer interests in these entities to Family Security Trusts, Grantor Retained Annuity Trusts, other irrevocable trusts or family members a few months later, but before year-end.  To do this in the best way, owners need to begin the process as soon as practical.

NOTE:  Some of you may have created Family Limited Partnerships or LLCs and retained most of the ownership thereof in anticipation of getting the benefit of discounts when they are transferred after your death.  Much, or all, of this benefit will be lost if you die after these Proposed Regulations become final.   

The only way to avoid the additional taxes these Proposed Regulations are intended to impose is to make completed gifts or transfers of interests in these entities BEFORE the effective date of the regulations.  When done with care by an experienced estate planning attorney specializing in advanced strategies, these gifts and other transfers can be structured to provide substantial income to the original property owners during their life, preserve parent-child property tax reassessment exemptions, retain control for such members, keep the ability to get a step-up in basis at death, and still to maximize wealth transfer to your chose heirs.  But, to maximize the ability to use the discounts, you need to start planning very soon, and then you need to complete transfers of entity interests before the Proposed Regulations are finalized.  These Proposed Regulations mean I need to adjust my Family Wealth Strategies motto to “If you fail to plan WELL and SOON, plan to FAIL!” 

Ken Ziskin is a member of AOA and focuses his practice on integrated estate planning to save income, property, gift and estate taxes for owners of apartments and other income properties.  He has served as an Adjunct Professor of Law at USC, is rated AV Preeminent by Martindale-Hubbell and a perfect 10 out of 10 on legal website www.AVVO.COM.  For more information on the impact which the Proposed Regulations would have on your estate, or to begin the planning process to “beat” the Regulations, contact Ken Ziskin at 818-988-0949, or email him at KenZiskin@Gmail.com  You can see real client reviews of Ken’s services at www.avvo.com/attorneys/91423-ca-kenneth-ziskin-151823.html or on Ken’s website at www.ZiskinLaw.com

Reprinted with permission of AOA (Apartment Owners Association, Inc.) and the author.

Legal Analysis of Quiet Title Claims for Apartment Owners and Deed of Trust Holders – By Nate Bernstein, Esq.

Often times we get calls from clients or colleagues who ask us to explain what a “quiet title” action is.  There is no need to be quiet and hush hush about quiet title actions – pun intended!   In fact a quiet title claim is very common claim and cause of action asserted under California real estate law.      This article is an overview of the quiet title claim process for property owners and real estate deed of trust lenders who may have a perceived or real problem with their right, title, and interest to real property in California. 

Everyone should get a “title check up.”  It is in the best interest of all investment property owners and deed of trust lenders to periodically obtain a copy of a preliminary title report from a reputable title company-  you may find items in the title profile for the subject property that are objectionable, fraudulent, or mistakes- these matters should be cleared up.  It is healthy to get a title check up- it leads to good title karma!!

If you are in the real estate investment ownership or real estate lending business, you know that having clear, marketable title to real property is an important component to valuable real estate ownership.   If your title is not clear, or has chain gaps- you cannot sell, refinance, or otherwise leverage your asset.

Clouds on title may impact an owner’s ability to sell or refinance property, and can impact a lender’s rights for title priority and to foreclose on real property.    Clouds on title or mistakes on title can also impact an owner’s ability to evict a tenant – the tenant may claim invalid title as an affirmative defense to an unlawful detainer lawsuit – that is the last thing you want when you are trying to evict a tenant!!

The law provides a remedy for fixing title problems.  Quiet title lawsuits are an important vehicle for deciding real estate title disputes and deed of trust priority disputes under California law.

Legal Procedures for Quiet Title Claims

When you have a dispute as to the state of the title for a residential real property or commercial real property, or an unfriendly person or entity is making a legal or equitable claim against the title, you can file a “quiet title” lawsuit in the Superior Court where the property is located to resolve the claim.   This may be done directly by the party or by the party’s title insurance carrier after a claim is made with the title insurance carrier.   Title insurance companies often times get involved in prosecuting, defending, and settling quiet title actions on behalf of property owners and lenders.   Title insurance companies sell title insurance products to purchasers and lenders.      When a title insured client makes a claim, filing a quiet title action is often times the method to fix a title problem on real property short of paying off the client’s claim or investment.  The goal is to obtain title “as insured” under the title insurance policy.

The quiet title claim can also be brought in conjunction with other claims, such as fraud, a claim for cancellation of an instrument, declaratory relief, injunctive relief, or even equitable subrogation.    Each case is fact sensitive.   In a declaratory relief action, for example, the court has the power to determine the ownership rights of the parties as to an interest in real property as of a certain date.  An opponent can also file a countersuit, also called a “cross-complaint.”   Today you are the plaintiff, but tomorrow you may be the defendant!

As another example, in a quiet title lawsuit, you can also litigate a claim relating to a fraudulently executed or fraudulently recorded deed of trust mortgage document.  That is why it is a good idea to get a title check up to see what is in your title profile.

An action to quiet title is a lawsuit filed to establish ownership of real property (land and buildings affixed to land). The plaintiff in a quiet title action seeks a court order or judgment that prevents the defendant from making any subsequent or conflicting claim to the property.    Quiet title actions are necessary because real estate may change hands often, or there may be a conveyance of a partial interest, and it is not always easy to determine who has title to the property.

In the arena of quiet title litigation, the Court will determine the state of the title as of a particular date, and has the power to “clear title,” remove “the cloud on title,” or make an equitable decision, and, hopefully, resolve the dispute.   Title disputes can be adjudicated in an orderly manner without infighting between neighbors or shouting matches.   By law, in California, juries do not decide quiet title actions- these actions are decided by judges in bench trials.   Thus, there is no right to a jury trial for a quiet title action under California law.  Do you really want 12 jurors with no legal training deciding who owns your apartment building?

Applicable Laws

Under the laws of the most states in the United States, the law of quiet title is governed by state statutes and the case law authorities that interpret the state statutes.    Generally speaking, the law of quiet title in California is governed by California Code of Civil Procedure 760.010-760.060, and the case law interpreting these sections.      Also, underlying substantive laws, may apply as well- such as fraud, or breach of contract, the laws of recording and conveyances,  or the laws of probate.

When quiet title lawsuit is filed, the plaintiff is required to record a lis pendens at the County recorder’s office.    The term “lis pendens” is a Latin term for “action pending.”  The lis pendens provides notice in the title profile of a particular property that a lawsuit is pending, and that any subsequent grantee, subsequent purchaser, assignee, or lender, takes title subject to the claim.   Generally, a lender will not make a loan secured by a title that is subject to a “lis pendens” recording.  For the basic statutory procedural requirements for handling a lis pendens, please review California Code of Civil Procedure 405-405.24.

The quiet title action is important, if an owner or secured lender wants to determine that he or she has superior rights to the title of a particular parcel of real property in comparison to other claimants or potential claimants.  Secured real estate lenders often seek to establish title profile priority for its deed of trust by filing a quiet title action and adding a claim for declaratory relief.    Establishing a clear and marketable title is also crucial for receiving future financing, or for making a marketable future transfer by deed, trust, or will.     It is also an important foundation to have clear title if you start an eviction lawsuit- also known as an unlawful detainer action.   If title is not clear, how can the person complete an eviction with confidence?     Possession follows rights to clear title!

Quiet Title Actions are “Fact Specific” –  

Most Actions Settle But Some Proceed to Trial 

In reality, most quiet title lawsuits and related claims are settled after the case is filed and prior to trial.   Cases sometimes settle in mediation, at a settlement conference, or through professional communication and compromise between the parties and their attorneys.   If quiet title cases don’t settle “out of court,” these claims are decided by judges in bench trials every day.  So you need to be prepared to try your case if the case does not settle.

Other times, when the defendant fails to defend the action, a default is filed and the plaintiff has to prove up the default with live testimony in Court.   Because of the intricacies of the court process, parties should retain experienced counsel to represent their interests in a quiet title action.

This article is a capsule overview, and each quiet title claim should be treated specifically to address the specific facts and circumstances of the situation.   Questions should be directed to Los Angeles Real Estate Law Group at (818) 383-5759.  

Nate Bernstein

Nate Bernstein, Esq., is the Managing Counsel of LA Real Estate Law Group, and a member of the State Bar of California and his practice concentrates in the areas of complex real estate litigation, commercial litigation, employment law, and bankruptcy matters.  He is a 22 year veteran Los Angeles real estate and business attorney and trial lawyer.   Mr. Bernstein also has expertise on bankruptcy law, the federal bankruptcy court system, creditor’s rights and debtor’s bankruptcy options and created www.laquiettitleattorney.com a leading educational resource on quiet title real estate litigation.   For more information, call (818) 383-5759, or email natebernstein44@gmail.com

Reprinted with permission of AOA (Apartment Owners Association, Inc.) and the author.

 

Service Dogs and Support Animals: Here is What You Need to Know! – By Dale Alberstone, Esq.

Reprinted with permission of AOA (Apartment Owners Association, Inc.) and the author.

Flying home on American Airlines this past July on a six hour leg from Boston to Los Angeles, the woman seated next to me placed her small Poodle on the airplane’s cabin floor just in front of her feet.  After I made a few comments to her about how cute her puppy was (although it could have used a good bath), she volunteered that “Foxy” was a “service dog.”  While the lawyer in me tended not to believe that, I refrained from inquiring, “Oh really?!  What type of service does your dog perform?”

Instead, I asked her what the airline’s policy was relative to a service dog.  She replied that that if Foxy is a service dog, he could fly for free.  I then asked if American required her to show any documentation establishing that Foxy was, indeed, a service animal.  She replied, “No,” and then presented a subtle grin.

That incident has inspired me to write this month’s column so as to brief landlords and management companies as to when they must allow a dog or other animal to reside in an apartment unit.  Stated in a slightly different manner, my discussion this month addresses the circumstances by which a housing provider may enforce a “no pets” policy in a lease so as to bar the tenant or applicant from bringing in a dog, cat, pig or other four-legged creature.

That law is complex and is separately legislated by both the State of California and the Federal government, but I will clarify it as best I can.

In general, there are three types of animals in issue, namely: service animals, support animals and pets.  True service animals and true support animals are not pets.

A service animal is a dog that is trained to perform services for a person with a disability, such as guiding a blind person, alerting a deaf person to an imminent hazard, fetching dropped items, opening doors, ringing doorbells, pulling a wheelchair, activating elevator buttons, steadying a person while walking, helping a person up after a fall, and assisting someone who is having a seizure.

As defined in the federal American with Disabilities Act (“ADA”), a service animal in the context of public accommodations is defined as “Dogs individually trained to do work or perform tasks for people with disabilities.”  Common examples are guide dogs and signal dogs, which assist with sight or hearing impairments.

Under the ADA and California law, in addition to dogs, a miniature horse (which typically weighs under 100 pounds) may also qualify as a service animal for an individual with a disability if the equine has been specifically trained to perform tasks or work for the benefit of the individual’s disability.  But AOA members typically do not encounter horses, so I will not further discuss them.

A support animal (sometimes referred to as a social animal, therapy animal, companion animal, emotional support animal, and assistant animal) is an animal used to assist with therapy goals, such as animals which help alleviate emotional or social symptoms of anxiety, depression, stress and difficulties regarding social interactions.  Support animals are not specially trained.  Their presence merely improves a tenant’s inability to otherwise live independently and fully use their living environment.

In either case, the service dog or support animal must accommodate a person with a disability.  That means that the tenant (or rental applicant) must have a physical or mental impairment that limits (or in some cases “substantially” limits) one or more major life activities, or has a record of such an impairment, or is regarded as having an impairment.

Pets are domesticated animals which are kept for pleasure rather than utility.

Notwithstanding a “no pet” provision in a lease or rental agreement, a tenant with a disability who has a physical or mental impairment that limits (or in some cases “substantially” limits) one or more major life activities or has a record of an impairment, is allowed to have a service dog or support animal live in that resident’s apartment unit.  Both Federal and State law trump and nullify any lease provision to the contrary.

  1. Is your dog a service animal?  If so, is your dog required because of a disability you have?  If so, what work or tasks has your animal been trained to perform?
  2. Is your dog (or other animal) a support animal? If so, do you have a disability that limits one or more of your major life activities?  If so, does the disability create a need for you to have your dog (or other animal) live with you?

Bear in mind, however, the housing provider may not inquire of the tenant or applicant about the nature of the disability.  The theory is that the disability is confidential and such an inquiry might impermissibly embarrass the resident.

If the tenant or applicant who does not have an obvious disability (or a disability already known to the housing provider), requests that an animal be allowed to live in the apartment unit either as a service or support animal, the lessor may require the resident to provide documentation from a physician, psychologist or other qualified health provider that he/she has a disability and that the disability creates a need for him/her to have a service dog or support animal.

Both California law and federal law independently govern the right of a tenant to have a service dog or support animal in rental housing accommodations.  While there are differing nuances between the laws of the state and federal governments, one significant difference is that California’s definition of a disability is broader than federal law because the disability in California need only “limit a major life activity.”  It need not “substantially” limit a major life activity.  A “major life activity” includes a person’s physical, mental or social activities.

On the other hand, the Federal Housing Amendments Act of 1988 requires that the disability “substantially” limit one or more major life activities.

With respect to rental housing units in California that AOA members own or manage, they should follow the more restrictive California law which prevents them, as the landlord or management company, from excluding such an animal if the tenant’s disability merely limits (without consideration of whether it “substantially” limits) one or more of the resident’s major life activities.

If the tenant or rental applicant does not have any type of disability (as I have explained it above), then a “no animal” provision in a lease would prevent the tenant or applicant from bringing his/her dog or other animal into her unit.

Similarly, if the animal is a pet (because it does not fall within the definition of either a service dog or a support animal), then the “no animal” provision in the rental agreement may be enforced.

Finally, a housing provider may prevent a service dog or support animal from living in an apartment if (1) the animal will damage the property or is a danger to other tenants, and (2) no reasonable accommodation can be made for the tenant which would avoid those problems.

Concluding Remarks

When authoring this article, I telephoned a customer service representative of American Airlines to inquire about its policy of allowing a dog to accompany a passenger during flight.

The spokeswoman advised that if the passenger notified the airline in advance of the flight that he/she would be bringing on board a service dog, American would allow it if either (1) the passenger provided American with a written note from a healthcare professional that the dog is a service dog for the individual, or (2) the dog wears a harness and the harness is appropriately marked with a tag or placard saying “Service Dog.”

On the other hand, the representative informed me that if the dog was for emotional support, the passenger would be required to provide a letter from a healthcare provider that the comfort animal was necessary for the mental or emotional stability of the passenger.

Fortunately, in the context of service dogs, landlords and management companies are not compelled to allow canines to live in a unit merely because the tenant outfits the animal with a harness and a “Service Dog” placard.

Perhaps some of the disparate treatment of service dogs versus support animals has to do with criminal penalties.  In California, it is a misdemeanor (and thereby theoretically self-policing), punishable by 6 months of incarceration or a $1,000 fine, for an owner to tag and represent that a dog is a service dog when knowing it is not.  No such similar criminal act is committed by falsely claiming an animal is a support animal.

Finally, bear in mind that only certain limited questions can be asked of the tenant, as discussed above, and a written memorandum or letter signed by an appropriate healthcare professional can be required if the person’s disability is not apparent or otherwise known to the lessor or management company.

Dale Alberstone is a prominent litigation and transactional real estate attorney who has specialized in real property law for the past 39 years.  He has been appointed to periodically serve as a judge pro tem of the Los Angeles Superior Court and is a former arbitrator for the American Arbitration Association.  He also testifies as an expert witness for and against other attorneys who have been accused of legal malpractice.

Mr. Alberstone has been awarded an AV rating from Martindale-Hubbell.  An AV rating reflects an attorney who has reached the heights of professional excellence and is recognized for the highest levels of skill and integrity. You may Google “Dale S. Alberstone” for further background.          

The foregoing article was authored on August 1, 2016.  It is intended as a general overview of the law and may not apply to the reader’s particular case.  Readers are cautioned to consult an advisor of their own selection with respect to any particular situation.

Questions of a general nature are warmly invited.  Address correspondence to Dale S. Alberstone, Esq., ALBERSTONE & ALBERSTONE, 1900 Avenue of the Stars, Suite 650, Los Angeles, California 90067.  Phone:  (310) 277-7300.

New Senate and Assembly Bills that Impact Property Owners, Housing Availability and Affordability – By Joe Washburn

Reprinted with permission of AOA (Apartment Owners Association, Inc.)

AB 2819 – Hides Tenant Defaults Indefinitely

Requires unlawful detainer proceedings to be hidden permanently unless the property owner prevails on a default judgment, summary judgment, trial, or stipulations by all parties.  Allows rent cheats to hide their bad actions and perpetrate harm on other property owners by keeping the unlawful detainer proceedings hidden from public view.

AB 2003 – Neutralizes Tenant Delay Tactics

Once an unlawful detainer has been served, this requires the venue for trial to be the court most proximal to the property involved.  Grants the landlord immediate access to the property if the tenant filed a claim of inhabitability.  AB 2003 is not positive for small property owners.

AB 2502 – Rent Controlled Inclusionary Housing

Increases the cost and reduces the supply of housing by authorizing local governments as a condition of development, to impose a costly and inflexible price-controlled inclusionary housing requirement.  In so doing, AB 2502 legislatively repeals an established court decision upholding developers’ ability to set initial rent rates for new dwelling units.  Also, it undermines existing Cost-Hawkins protections by allowing local governments to impose mandatory inclusionary zoning, (i.e. rent control) on newly constructed rental housing without any consideration for the economic viability of the project.

SB 1053 – Forces Owners to Accept Section 8 Housing Vouchers.
Legislation died in Committee on March 27th. 

SB 1150 – Increases Risk and Cost of Residential Loans

This allows a party not on the mortgage to interfere with a lawful foreclosure.  It also establishes new, lopsided, private rights of action with draconian penalties, injunctive relief and attorney’s fees only for the prevailing successor in interest.  If passed into law, SB 1150 would probably the foreclosure process by additional months, if not years, if a property is involved in probate following a borrower’s death.

Joe Washburn is a SPOSFI member.  Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News.  For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org  or call (415) 647-2419.