California Property - Tenants Gave Notice

[Dave Newgass]

Hello,

I have a piece of property I inherited in March.  When I advised the current tenants I was the new landlord, I tried to put their mind at ease and let them know everything will remain the same as it is and if I ever decided to sell, they would have first right of refusal.  I think they spooked as now they have just served me with a 30-day notice to move as they now have a house in escrow.

They told me they will be out of the house by August 20th and asked if I wanted them to pay pro-rated rent for the month up until the 20th or if I would just like to keep a portion of the deposit to cover the pro-rated amount.  This is where my questions arise and I need some help with how to handle this legally.

My initial thought is that they still pay a full month's rent and that I would refund them back a pro-rated amount based on the day they hand the keys in.  Then, after inspection give them back their deposit, subject to the state of the house.

The reason I am thinking this (rightly or wrongly) is that just because a house is in escrow doesn't mean they will be ready to move out on a specific date even with all good intention on their end.  Also, it could fall out of escrow.  

Is it legal to do what I am proposing?

Also, they did mention the carpets will need to be cleaned.  What can I debit from their deposit in order to make the house to where it can be ready to move into?

On a side note as well, my step-father who gifted me the house rented to these tenants for 5 years at a rate that is under the current market.  It should be getting $300 more per month.  The most I can raise the rent on the current tenants is about $100.  Even though they have given notice, can I serve them with a rent increase just in case their house falls out of escrow and they have to continue to live there?  I'll be putting the house on the market regardless but thought if I can get another $100 per month over a few months, that would be nice.

Thanks for the help and advice!

Cheers,

Dave

[Kyle J.]

Here's how I would handle all of this.  

First, on the issue of the pro-rated rent, when I have tenants give me notice that they're moving out mid-month, I only charge up to the date they expect to stay.  For example, suppose I had a tenant living in a property that was a $1,000/mo rent tell me they're moving out the second Saturday in September (9/12).  I would calculate the daily rent @ $33.33/day ($1,000/mo divided by 30 days = $33.33) and tell them that on the 1st of September to pay me $399.96 rent for September ($33.33/day X 12 days).  

If they move out on that day, great.  Everything is good.  However, let's say they ended up taking a couple days longer than expected and they actually moved out the following Monday (9/14).  In that case, I'd simply charge them for two extra days rent at the daily rate ($33.33) and deduct that total amount ($66.66) when I itemized and returned their security deposit.  It happens, and it's not a big deal.

That, in my opinion, is the best way to do it.  They're not going to want to pay for a full month and then let you reimburse them the days they didn't stay because they know they're not staying a full month and who wants to pay for something they know they're not going to use?  

Conversely, you should not allow them to not pay this partial last month and just have it be deducted from their security deposit for a couple reasons.  One, that might not leave anything left in their security deposit to cover actual damages to the property.  And two, if their escrow does end up getting delayed, or worse - cancelled, you now have no rent collected.  So just do not do that.  (Most leases actually have a clause that says tenants are not to use their security deposit as their last month's rent, so check for that in the event you get any pushback from the tenants.)

As for charging to clean the carpets, that's sort of a grey area.  On one hand, the California landlord-tenant handbook (and the law) states that "A landlord may properly deduct from the departing tenant’s security deposit to make the rental
unit as clean as it was when the tenant moved in."  However, before making any deductions, you'll need to ask yourself, are the carpets dirty just as a result of normal wear and tear?  (If so, I don't personally charge for that, especially if the tenant's been in the property for five years.)   

Something else to consider is, especially since this house was gift to you, do you even have documentation (e.g. move-in checklist, photos, video, etc) of the condition of the house/carpets when they moved in to compare it to how it is now?  In my opinion, without that, you couldn't justify charging them even if you wanted to (at least not if they contested it).

Lastly, I'll address your question about raising the rents.  Personally, I wouldn't bother.  They're moving and you're selling it, so there's really no point.  We don't even have enough information to say for certain whether you can raise the rents, or - if you can - by how much.  Since you're in California and these tenants have lived in the property over 12 months, it's possible that the new statewide rent cap law (AB1482) could apply.  (There are exemptions, but again, we don't know enough to say if any could apply.)  It would depend on a variety of factors, such as: what type of property this is (single family or multi family), how old it is (older or newer than 15 years), how title is held (personal name or corporation), what percentage of rent $100 equates to (since rent increases are now capped by this new law unless it falls under an exemption), and even what city you live in (since there could be local rent control), etc etc etc.  

To me, that's just too much hassle to worry about all that for tenants who are moving out, and for a property you've already said you're selling.  Especially for a hundred bucks.