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.

New bed bug disclosure law goes into effect soon By Gideon Kramer, SPOSFI News Editor

With permission from the SPOSFI (Small Property Owners of San Francisco)

May 19, 2017

Effective July 1, Assembly Bill 551 will place new obligations on all California residential landlords and tenants regarding the disclosure and treatment and control of bed bugs. In brief:

  • A landlord is prohibited from showing or renting a unit if bed bugs are known to exist.
  • Tenants must cooperate in the investigation and eradication of bed bugs in their unit, surrounding units, or common areas.
  • Landlords must include a statutory bed bug notice as an addendum to the lease for all new tenants. All existing tenants needn’t be noticed until January 1, 2018. This notice must provide information regarding bed bug identification, behavior, and biology as well as the landlord’s and tenant’s obligations in the event a bed bug infestation is discovered.

Our June issue of SPOSFI News will include a more detailed discussion of the new law, and why it pays to be very vigilant when it comes to bed bugs.

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.

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.