What to do when dealing with family?

Question

After the passing of a family member I inherited a property. The spouse was still living there and the property was under a prenuptial agreement. As we took over the property we had the spouse stay for an agreed 820 a month. This made us take a loss of 300 per month. After a year of this agreement we talked about an increase but they never increased the rent. We later issued a letter for 30 notice of increase to 900 from 820 and also a due date of the 5th. We also in the letter describe that we will be going to a written agreement. What we got back was a rent check for less than 820 telling us the old date was the 10th and that they pro rated the amount. Also they went on to describe that we can't increase more than 3% or regional CPI whichever is greater in a 12 month as a maximum. We are in northern California in a non rent controlled county, city. I'm wondering what to do in this situation because we want them to stay if they want but need the rent to be closer to what we have going out each month. Like properties in the area rent a house of that size for 1200-1300 per month. Some advise on how to move forward with this or how to respond to the letter.

Thanks for reading and thanks in advance for replies.

Ramon Mota · Answer

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Thanks Marcia

I do want to do what's best for everyone involved and also have reviewed local law to see if what I was doing was legal. To answer that question about the per month loss is 344 per month. Tax, insurance, and mortgage is 344 higher than 820 so we are not looking to even make any money per month just to loose less.

Katie L. · Answer

@Ramon Mota

Not entirely sure what your relative is referring to or the relationships between you all and whatnot, but you may want to read up on the new rent control bill, AB 1482.  Perhaps that is what your relative is referring to?  It isn't law yet as the Governor hasn't signed it into law quite yet, but he has publicly announced that he will.    If so, the bill exempts single family homes.  However, it requires disclosure language on leases for single family homes for leases that begin or renew after July 1, 2020.  This article goes into some of the new disclosures: https://www.mmpph.com/wp-conte...  You may want to have a frank conversation with the relative and come to an understanding of what is going on and the feelings involved, or you may want to hire an attorney to look into it.  Attorneys can get costly very quickly though, so be sure you are willing to spend a few thousand dollars on it.

*The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.  This post does not create an attorney-client or CPA-client relationship.

Ramon Mota · Answer

I don't see anything on line about elderly having any additional protection unless it was designated housing for the elderly. This person may be considered elderly but is still of working age with gainful employment. I know it would be imposable to pay higher rent if one was just on SSI.

Jaysen Medhurst · Answer

@Ramon Mota, I know CA has some nutty rent laws, the 3% rent cap might have something to do with elderly protections. I'd talk with a lawyer to make sure you really understand the law and if it applies.

Once you have your answer, I'd have the lawyer write up a quick letter clarifying the law and then show that to your relative. Nicely explain that the rent's going up and you don't want to engage your lawyer again...but you will if need be.

This could get really sticky, man. Might be best to just sell and be done.

Marcia Maynard · Answer

So sorry for your loss.It's never easy losing a loved one. Take into consideration your relationship to the deceased and their spouse.Clarify your values, roles, and goals.Time to sit down and work out a win-win.Anything's negotiable.It appears to me you haven't fully explored your new role as landlord. All parties will benefit by a written agreement, which should have been put in place as soon as you acquired the property. But first, become familiar with landlord-tenant law for your jurisdiction. Get the guidance you need to learn your new role or procure the services of a qualified property manager. The latter may be your best bet, since this involves family... not only the widow/widower but other family members who may have an interest in how you proceed. It sounds like you value the relationship, so be sure to seek to understand and listen well.I would agree to a due date of the 10th if that is what works well for the tenant and it didn't cause a problem for me. I would negotiate the rent and establish a M2M (month to month) rental agreement. I would be more flexible, since this is someone whose home you just happened to inherit, who used to be married to your loved one, and I'd aim for the greater good. You speak of a $300 loss.... is that based on real loss to you, or just the amount short of what you could rent the house for on the open market? That makes a difference. This is one situation where it doesn't appear to be all about business and investments, but rather taking care of the needs of family too.