Can I Say No to Pot in My Apartments When it is Legal in my State? – by John Triplett

With permission from AOA (Apartment Owners Association)

California just became the world’s largest legal marijuana market. When pot is legal in a state, what issues does this present to property managers and landlords of rental properties? Property managers are often confused and seeking to better understand how to handle the issues of legal marijuana and medical marijuana when it comes to tenants and rental housing in their states.

Laws are changing all the time in many states, just as California did on January 1, 2018, as voters approve different levels of permission when it comes to marijuana. This leaves property managers trying to figure out what should be in their leases around the issue.

You may be able to ban smoking, but do you really know what your tenants are eating or growing in their apartments? Do you really want to know if they are good paying tenants?

Rental Housing Journal did a recent interview with Seattle, Washington attorney Bret Sachter, an expert in tracking the progression and transformation of marijuana laws, to discuss some common questions property managers have about marijuana and tenants.

“I’ve been asked this a lot,” Sachter said, “but it does not come up as often as you might think. The overarching issue here is that, with few exceptions, people can do what they want to protect their property, even if the prohibited behavior is not illegal. You can prohibit smoking, prohibit pets, but with marijuana it’s much easier because it is federally illegal. So you can pretty much prohibit it if you want to no matter what, even medical marijuana,” Sachter said.

4 Questions About Pot, Tenants and Apartment Leases

Sachter says in terms of Fair Housing issues, and the U.S. Department of Housing and Urban Development (HUD) it is a situation where HUD wants it in the lease that marijuana is illegal but enforcement is another issue, he said. It is not so much that HUD wants landlords to evict over marijuana, but that you have something in the lease language that allows for eviction in the instance of marijuana use on the property. “So it is pretty clear as far as HUD is concerned,” he said. Here are his answers to four questions on pot and apartments.

  1. 1.     Tenants With a Disability and Medical Marijuana

Question: If a tenant comes in and says I have a disability, here is a note from my doctor, I use medical marijuana, which is legal in this state, and I want to rent your apartment. Can a landlord prohibit that?

Answer: “A landlord can absolutely prohibit that because marijuana is illegal under federal law.” The landlord can say, “I understand our state allows medical marijuana but it is still a Schedule 1 drug and I prohibit it on my premises.”

  1. 2.     Marijuana is Legal in My State – But What Does the Lease Say?

Question: What if a tenant says marijuana is legal and they should be allowed to use it?

Answer: “If your lease prohibits smoking and prohibits use of illegal drugs, then the legality of marijuana at the state level is irrelevant because under federal law marijuana is illegal. If your lease does not have those types of clauses, you should talk to an attorney in your state or city to find the best solution for your lease.” There is no law about reasonable accommodation for marijuana users, federal laws do not require it. As far as the federal government is concerned it is not ok.

“One thing I would say, and it is important, I would encourage landlords just to make everything clear,” in the leases, he said. “Clarify in a lease that you must abide by all laws both state and federal.” That is the case in residential. He said it can be different in commercial.

“But in residential it is not as tricky, and I am speaking very generally here,” Sachter said. “The states may have their own thing going on with legal marijuana laws, but it is still federally illegal. Make it crystal clear in your leases is my best advice,” he said. “How can you attract tenants in a state where it is legal yet protect the owners of the property? You cannot have it both ways.”

“I know in Seattle there are Airbnb bed and breakfasts that specifically market themselves accordingly, as part of marijuana tourism to come and stay in our place where it is legal.” But if a property manager doesn’t want that going on, then they have to be up front in the lease.

“If your tenant is Airbnbing to a tenant who is then using marijuana – well if you can’t catch them you cannot do anything about it. You have to prove they are doing this.  They are going to be using marijuana regardless of what the lease says.”

  1. 3.     What if the Tenant Using Marijuana is a Well-Paying, Good Tenant?

“Landlords can certainly put a no-waiver clause in the lease. If I say, ‘Here is a list of prohibited things’ and if you do these prohibited things in the lease, you are subject to eviction,” he said.

“However, any time I waive any of these things does not constitute an overall waiver. It basically means you should not ever do it again,” he said. “Just because you get away with it once, does not mean you get away with it every time,” Sachter said.

  1. 4.     Can I say ‘no pot in my apartment

“Usually if you say, ‘No pot in my apartment’ and you find a tenant using marijuana and you haul them into court, more than likely the judge is going to say, ‘Have you stopped?’ to the tenant and ‘Are you going to do it again?’ and the tenant is going to say ‘No.”  And then judge will say, ‘Ok, dismissed.”

To put a more legalistic term on it, usually a court will be in favor of “allowing the tenant to cure the defect,” rather than evict for most things like that, Sachter said.

Technically, in Washington, a landlord would serve a 10-Day notice to comply or vacate with the terms of the lease.  This process, therefore, gives the tenant a chance to “cure” the violation before the landlord can evict. Check your local state laws on this.

 

What One Experienced Property Manager Says About Pot

Sam Driver, Product Director for Buildium.com, and an experienced property manager, said as far as marijuana use in apartments, due to the newness of the legislation, the federal laws that supersede state and county laws, and liability concerns, it is not a topic that comes up a lot – yet.

“Generally, the safest solution is to choose the most conservative path-impose a no-smoking policy, which can in some cased cover outside areas, and a crime provision that includes local, state and federal laws. In many states, there are setbacks from doors, and it is particularly important if the building is a place of work which a multi-unit apartment building certainly is. So your lease should contain a provision explicitly banning smoking and illegal activity. Because the feds still outlaw it, this should be sufficient,” Driver said.

“This of course only covers the smoking angle. If a resident consumes it in another way, you’d likely never know,” he said.

 

Growing Marijuana Could Put a Power Load on Your Apartments

“As for growing, that’s less clear. But in general, unless the electrical system is designed for it, the loads grow lights put on the apartment unit could be excessive. I’d consider a reasonable use clause that specifies all high load equipment, including lights, air conditioners and any kind of pump be approved by you.

“This would put you in a position to take action if they are putting too much load, without specifically calling out the use of the equipment. Pumps are a good area for monitoring, because of the intermittent load, they trip breakers, and anyone who is using a hydroponic system would need several,” Driver said.

 

What if I Want to Market My Apartment to Marijuana Users?

“If, however, you wanted to roll the dice and market to this crowd assuming your state laws allow it, remember that the federal laws would cover any bank deposits from proceeds,” Driver said.

“In this case, you’d be able to do it, assuming no federal intervention, in compliance with local laws. No insurer would provide EO&E (errors and omissions excepted) insurance to you, and you wouldn’t be able to deposit any funds into a federally-accredited bank. So you’d have to self-insure, and run an entirely cash business, but you could do it, risking only federal enforcement.

“The big question is, ‘Would the premium rents be worth the risk of forfeiture?’ If you run afoul of the federal drug laws, the asset seizure possibility is a huge risk. You could lose the building.
“If you’re managing other owners’ properties, then you’d be risking their assets even if you used different leases, unless you kept fully separate books, bank accounts, and co-mingled nothing. So I’d say it would be all-or-nothing,” he said.

“The timing is tricky, too. Leases contain a provision that stipulates that the contract is in force in a specific jurisdiction. If they change the laws rendering your lease out of compliance, what happens during the remaining time of the lease? Is it invalidated? Or does the contract remain in force until it expires? “Good questions for your lawyer,” Driver said.

Rich Triplett is a writer for the RentalHousingJournal.com which is an interactive community of multifamliy investors, independent rental home owners, residential property management professionals and other rental housing and real estate professionals. It is the most comprehensive source for news and information for the rental housing industry. Their 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.  

10 Ways to Express Resident Appreciation – by Trish Harris

With permission from the Apartment Owner’s Association (AOA)

In the multifamily industry, we often think of apartment community residents in the collective.  However, these communities comprise of individuals with diverse lives, unique personalities and a broad range of hopes and dreams – just as any other group of people does.  When we think of our residents in this way, we can better consider the impact appreciation can have on them and their lives.

The truth is that we all desire and sometimes even need to be appreciated, to be recognized, to know that we matter.  It’s a part of the human condition to want that warm and fuzzy feeling we have when we know somebody cares!  In fact, an important part of community building is expressing and encouraging gratitude and appreciation.  So what can property managers and owners do to endure their residents feel that way?

We’ve compiled a list of ideas and strategies designed to help get your creative juices flowing, but first, how about adopting an attitude of gratitude?

Designate a Yearly Resident Appreciation Week

Find a time of the year that is not crowded with commitments and plan a unique act of appreciation for each day that week in honor of your residents.  Sample activities for your week:

  • Snack bag giveaways to residents
  • A small plant and note left at each resident’s door
  • A fair for the children with bouncy house, cotton candy, donkey rides
  • A Saturday or Sunday afternoon cookout with outdoor family games
  • After-school candy throw with employees tossing hard candies
  • Morning coffee and doughnut stations at the apartment community exits
  • A local band performance on a weekend night

Pay Attention to Their Needs

Ensure the staff recognizes and accommodates any special needs of residents

Conduct Monthly Birthday Parties

Designate a particular day and time (i.e. the first Sunday at 4 p.m.) for residents to gather for cake in honor of all resident birthdays during that month.  Present a birthday card to each honoree.  Mail cards to those unable to be present.  For some residents, your card may be the only recognition of their birthday.

Honor Their Passions and Diversity

Survey your residents to find out their hearts’ desires and design events featuring their unique talents and interests.  For example, have an art show showcasing crafts and works that residents have crated.  Ask each artist to share his/her story to post to your website or include in your newsletter.

Say “Thank You” in a Personal Note

When a resident does something kind for the staff, write a personal, handwritten note of appreciation.

Enlist Their Participation

Generously publicize all events for your apartment community so that no resident will be left out of the loop.  Make everyone feel included and welcomed.

Plan Calendar Celebrations

At the beginning of the year, flag special days, (Valentine’s Day, Martin Luther King Day, Groundhog Day, etc.) and brainstorm with staff tactics the management team can put in place to commemorate these days for the residents.

Cater to the Kids

If you really want to do something nice for someone, pay attention to their children!  Invite the kids to participate in such fun and simple activities as sidewalk chalk drawing, outdoor games, pet shows and noise parades, (i.e. banging on pans, blowing horns, singing.)

Little Things Mean a Lot

Remember how important the little things are in creating a caring and appreciative culture.  Look your residents in the eye.  Speak with compassion and be alert to little things that you can do to make them feel that they matter.

Smile with an Attitude of Gratitude

A good attitude is contagious.  So are smiles!  Make friendly greetings a mandate for your employees and staff as a part of your commitment to serving your community.

Los Angeles City Rent Stabilization – Reminders and Updates – by Patricia A. Harris

Hopefully, if you own apartments in the City of Los Angeles and are under the L.A. Rent Stabilization Ordinance, you have already paid your building’s registration fees of $24.51 per unit which was due by February 29, 2017.  Serving a timely notice, you may collect one half of those fees from your tenants.  Note:  You used to collect this fee in the month of June, but for 2017, it has been changed to August. 

Collect $12.25 Registration Fees in AUGUST

The Los Angeles Rent Stabilization Division allows owners to pass-through one half of these fees ($12.25) with a 30-day notice, collectible in the month of August only.  That means you MUST serve the notice of the one time annual rent increase (found on the following page) in the month of July in order to collect this annual fee from your tenants.  AOA recommends you serve the notice on July 1st to collect this fee along with the rent due on August 1st.

IMPORTANT NOTE:  The notice of the one-time annual charge must be accompanied with a copy of your Rent Stabilization registration certificate to show that you paid the fees.

Code-Enforcement Pass-Through Fees

The SCEP fee of $43.32 per unit charge for the Housing Department’s code-enforcement inspection fee may also be passed through to your tenants.  This fee, however, must be amortized over a 12 month period and is collectible at a monthly rate of $3.61.  A 30-Day Notice of Change of Terms of Tenancy must be served to each tenant after you pay your bill before you can collect this fee.  That means with proper service, you can legally raise your rents (as long as you paid your bill!), $3.61 per month. Every little bit helps!  Your tenant may elect to pay this fee all at once, however they will not be awarded a refund should they move before the end of the year.  Also, if your building IS NOT under rent control, you may request and collect the fee in its entirety after serving the 30 day notice.

Other Los Angeles Rent Stabilization Updates

  • SECURITY DEPOSIT INTEREST:  Please note that the required 2017 interest that must be paid on security deposits for units in L.A. City is 0.12 percent. A landlord may pay tenants the actual rate of interest earned if security deposits are kept in a separate account by providing a copy of the bank statement showing the actual interest rate earned for the year.
  • ALLOWABLE ANNUAL RENT INCREASE:  The Los Angeles Rent Control’s annual rent increase is currently 3% through June 30, 2017.  As of this printing, the July 2017 rental increase percent was not yet determined but we were told it will most likely remain the same.  The actual amount should be made available to us in June. 

Via https://www.aoausa.com/

New For 2017 – LA’s Rent Registry

Due to a recent amendment to Chapter XV of the Los Angeles Municipal Code, beginning in January 2017, the City will collect rent rates for all units subject to the Rent Stabilization Ordinance (RSO). Previously, landlords were only required to pay the annual registration fee and provide an emergency contact. The Los Angeles City Council enacted the City’s Rent Registry Program (Ordinance #184529) effective October 4, 2016. This ordinance provides that, in addition to paying the annual registration fee, landlords must also provide the rent amount for every rental unit subject to the RSO by the last day of February of each year. Registration is complete only when all outstanding registration fees have been paid and all required rental amount and tenancy information, including emergency contact information, is provided.

All necessary information and will be included in the materials mailed by HCIDLA with the annual RSO/SCEP bill. The 2017 annual RSO/SCEP bill will now include a two-page double-sided Rent Registry form. An online Rent Registry Portal has also been created at registerLArent.org to provide Landlords a more effective and efficient means to ensure accuracy and avoid any mailing delays. The Rent Registry Portal includes an online downloadable excel template, which will be especially helpful for owners and managers of larger properties. This template can be downloaded and, once information has been entered, the information entered on the template can be uploaded automatically to the online rent registry portal. Landlords who pay their annual registration and submit their completed Rent Registry form online will receive their Annual Statement of Registration (Certificate) within minutes of online submission. Much of the information entered in 2017 will be automatically saved for registration in future years.

The RSO allows a landlord to pass-through 50% of the registration fee to the tenant as a lump sum surcharge. Beginning in 2017, this fee will be eligible to be collected in the month of August due to the recent amendment in the RSO (in prior years, surcharge could only be collected in the month of June). Registration Statements (Certificates) issued in 2017 will be valid from May 1, 2017 to July 31, 2018. Subsequently, the Registration Statements will be effective from July 1st to June 30th of each year, reflecting a fiscal calendar year.

The Rent Registry Program will build a historical data of rent trends for the City’s rent-stabilized housing stock and deter unlawful rent increases while simultaneously assisting new or prospective landlords who may inherit or buy property through foreclosure or from property owners who fail to provide rent records or tenant estoppels upon the sale of occupied rent-stabilized properties.

The Los Angeles Housing + Community Investment Department (HCIDLA) is working to make this new program as easy as possible for landlords. Workshops will be offered throughout the month of January to assist landlords in understanding and complying with this new requirement. Additionally, a “Drop-In” session is available on the first Tuesday of the month from 2:00 to 4:00 by calling (213) 928-9075 to request an appointment. To learn more about the new Rent Registry Program, please visit registerLArent.Org or call (866) 557-(7368).

Reprinted with permission of AAGLA (Apartment Association of Greater Los Angeles)
AAGLA EXPO APRIL 19, 2017, FREE REGISTRATION AAGLAexpo.com

Help Protect Your Building From Sewage Backups And Overflows – by Greg Martin

Most homes in the Bay Area were built decades ago and still have their original pipes that connect the home to the sewer line in the street. Over time, these Private Sewer Laterals (PSL), crack which allows your sewage to seep out into the ground around your home.  It also allows rain water that has absorbed into the earth to seep into the sewer system. If your private sewer lateral is cracked, winter storms can fill your pipes with water, tree roots and mud. Those things can clog your pipe and, farther down the line, can lead to sewage spills into the San Francisco Bay, polluting our ocean.

A private sewer lateral (PSL) is the pipe that carries waste from the plumbing in a home or business to the sanitary sewer main, usually located in the street. It consists of two sections: an upper lateral, which connects the building cleanout to the curbside cleanout, and a lower lateral, which connects the curbside cleanout to the sewer main. Property owners are responsible for maintaining the entire PSL, except in Alameda and Albany where that responsibility is for the upper lateral only.

sewer1

Backups can also occur in your sewer lateral due to washing and flushing items that don’t belong down the drain. Items like fats, oils and grease (FOG) and products labelled “disposable” or “flushable,” wipes, household cleaning and personal hygiene products should never be flushed. Often those non-flushable items get tangled with hair and debris, creating massive sewer backups or creating a clog or blockage in your plumbing system. An overflowing toilet can ruin a home in an instant. What can be flushed? Only three things: poo, pee and toilet paper. All other items should be disposed of in the trash.

In 2009, the United States Environmental Protection Agency (EPA) and the California Regional Water Quality Control Board ordered the East Bay Municipal Utility District (EBMUD), the six cities that make up the greater Bay Area and one sewer district to fix old, cracked sanitary sewer pipes. Many pipes are in need of repair to prevent the infiltration of rainwater, which can overwhelm wastewater treatment facilities and lead to the release of partially treated wastewater into the Bay. The EPA’s mandate compelled EBMUD and its partners to phase in a Regional Private Sewer Lateral (PSL) Ordinance beginning in 2011. Affected property owners must obtain a certificate from EBMUD certifying that all of their PSLs are leak-free. So by law, you now must prove your sewer line is leak-free when you sell or remodel your building or when you change the size of the water meter. But if you’ve had to call a plumber to come unclog your drains, that might mean your pipe is cracked and fixing it now could save you the inconvenience and, in the long-run, money on plumbers.

Visit www.ebmud.com/wastewater/private-sewer-laterals for more information on certifying that your sewer line is leak free and or call a Sewer Specialist who can run a camera to assess the buildings sewer lateral condition. Help protect the San Francisco Bay!  Fix your sewer laterals today!

Greg Martin is with Streamline Plumbing and can be reached at  510-481-0380 or www.streamlineplumbingco.com.

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

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.

City is Sued for Attempting Unjustified Snooping on Rental Property – by Meriem Hubbard and Wencong Fa, Attorneys-at-Law

In a legal case that should interest rental property owners statewide, the City of Highland in San Bernardino County is being sued for trying to arm-twist landlords and tenants into allowing warrantless inspections of their homes.

In other words, the city is trying to coerce property owners and tenants into surrendering a fundamental constitutional protection: the Fourth Amendment’s guarantee that government officials cannot search private property unless they first obtain a warrant.

To be sure, the plaintiffs in this case –  property owner Karl Trautwein and the tenants in one of the homes he owns – have nothing at all to hide.  An investor with a number of homes around Southern California, Karl takes pride in maintaining all his properties to a high standard and keeping tenants satisfied.

What Karl and the tenants who are joining in the lawsuit resent is Highland’s attack on their fundamental privacy and property rights.

Indeed, in a sign of the importance of the case, they are represented by Sacramento-based Pacific Legal Foundation, the nation’s leading legal watchdog for property rights and individual liberty. Donor-supported PLF represents these plaintiffs free of charge, as with all its clients.

Karl and his tenants are victims of local government’s plan for a sweeping regime of unjustified rental-property inspections throughout the city – and its heavy-handed strategy for imposing this agenda on owners and renters.

Instead of simply responding where there have been complaints about code violations, the city adopted the goal of aggressively inspecting all 4,800 rentals within city limits, whether or not there have been complaints.

To cut corners in this overwhelming task, officials are attempting to evade the constitutional requirement to seek administrative warrants for inspections. Instead of going to a court and showing cause to receive permission to inspect inside a home, the city is attempting to bully property owners and tenants into allowing inspectors in without a warrant.

Karl and his tenants have been subjected to bullying because they would not agree to let inspectors into their home.  There have been no complaints about the property and the city has offered no evidence that it has any problems.  So Karl and his tenants object to a baseless, uncalled-for, open-ended intrusion by government bureaucrats.

City officials didn’t respond to this refusal by seeking a warrant – because there were no grounds for one.  Instead, the city resorted to threats and coercion.  Karl was charged a “re-inspection fee” and was told that his rental license would not be renewed if he continued to refuse to allow a warrantless entry.

This pressure tactic is what the law calls an “unconstitutional condition” — i.e., Karl’s rental license is being held hostage unless he agrees to the condition that he and his tenants waive their Fourth Amendment rights.  As the lawsuit points out, government cannot confront anyone with a false choice of this kind, which coerces them out of constitutional freedoms.

With its crusade to inspect all rental properties, even those like mine without any tenant complaints, the city is wasting its resources and harassing law-abiding people,” said Karl.“Ironically, this is the kind of regulatory overkill that can reduce the supply of rental housing by causing conscientious and hard-working property owners to decide it’s not worth it.”

“There is no freedom without property rights and the privacy they protect,” he noted.  “Privacy means no one can come inside your residence unless you invite them in.  Cities have no business forcing their way into people’s homes.  The Constitution provides a way for government to enter a home — by convincing a judge to issue a warrant based on probable cause.  Highland wants to avoid the inconvenience of that constitutional requirement.”

“Violating the privacy rights of my residents without probable cause is as unnecessary as it is wrong,” he continued.  “The city should not be violating their privacy for no good reason, and it can’t be permitted to go snooping without a warrant.”

Filed in U.S. District Court for the Central District of California, the case is Trautwein v. City of Highland, et al.  More information, including the complaint, an explanatory blog post, a podcast, and a video statement, is available Pacific Legal Foundation’s website:  www.pacificlegal.org

Meriem Hubbard is a Principal Attorney with Pacific Legal Foundation and Wencong Fa is a Staff Attorney with the foundation.  They represent Karl Trautwein and his tenants in challenging Highland’s attempt to coerce them out of their Fourth Amendment rights. Donor-supported Pacific Legal Foundation www.pacificlegal.org is the leading watchdog organization that litigates for limited government, property rights, individual rights, and free enterprise, in courts nationwide. PLF represents all clients free of charge.  For more information, visit http://www.pacificlegal.org.

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.

When renting property to relatives, know the tax rules by Ray Martin

Renting a residence to someone you’re related to can take many forms. Sometimes parents with kids in college consider buying an investment property near the school so they can rent it to their student and friends. Others buy a vacation home and rent it back to their parents and siblings.

If you own a second home or a rental property, it’s tempting to rent it to a relative. After all, your relations can make great tenants because you know them, and they’re likely to take good care of the property.

However, doing so isn’t without risks, including adverse tax consequences. For example, you could wind up having to claim the rent you receive as income but not be allowed to claim deductions for the costs associated with the maintenance and care of the property.

That’s because unless you’re careful, when renting to relatives the property can be classified as a personal residence, not as a rental. If this happens, you’ll lose some valuable tax deductions. For information about these deductions and rules, see IRS Publication 527, Residential Rental Property.

To avoid this situation, here’s what you need to do:

If you rent a house or apartment to your child, parent or other relative, and they use it as their primary and personal residence, you must charge a fair-market rent. To prove the rent rate is fair, you can get information from places where similar properties are listed for rent, such as Craigslist. You can also get a rental appraisal from an independent appraiser or a realtor.

Don’t make gifts to your relatives that are designed to help them pay the rent. This can backfire because the net amount of rent charged (the rent, less the gift you make) can wind up below fair-market rent and disqualify the property as a rental.

The tax law does allow you to charge a relative a slightly lower rent based on what’s known as the good-tenant-discount. A discount of up to 20 percent has been allowed, but tax advisers generally recommend using a 10 percent discount because it’s easier to justify.

And even if you charge a fair-market rent to your relative, you can still unintentionally convert a rental property into a personal residence if your relative doesn’t use the property as their primary residence. So if you rent a condo in Arizona to your siblings who use it for only two months while they maintain their primary residence in Michigan, the condo would be classified as your second home, not a rental property.

If the home you’re renting is your second home or a vacation home, you also need to be aware of how this affects it as a rental to relatives. Regardless of what you charge for rent, their use equals your personal use. Their use goes against your 14 days of rental use, or 10 percent of rental days, when rental income is tax-free.

In short, here are the five things you need to do to make sure you can continue to claim rental property deductions:

  1. Charge and receive a fair-market rent.
  2. Have proof that the rent you charge is fair-market rent.
  3. If you rent to a relative, make sure the property is their principal residence.
  4. Avoid making gifts to help the relative avoid the fair-market rent.
  5. If you give a good-tenant-discount, use a reasonable discount such as 10 percent.

If you follow these rules, you should be in the clear about claiming valuable tax deductions for the rental property.

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