Section 8 - Inherited tenants way below market rent

[Tyler Last]

Hey all! We bought a property in August and it's got three units (two in the front are attached are by one wall, and the back unit stands alone). The two front units are Section 8. We're sort of in a pickle with one of the units. 

Here's the pertinent info (and yes, we're trying to engage an attorney but they all seem to be booked up in San Diego):

- Property has changed hands a couple times in the last few years, so paperwork/leases etc are a complete disaster

- Tenant is currently of the opinion that his lease doesn't actually hold him to anything (ex: he clogged his shower and sink drain, we had a plumber fix it, he claims "I'm section 8, I don't pay for anything" and then got hostile and incoherent via email + voicemail about it when we sent him the invoice)

- His old lease had no mention of it being a non-smoking unit, so he's smoked for years in it and the damage to the unit is going to require a complete gutting. 

- He's currently well below market rent for the property, but last owner was a big company and they maxed out his rent increase at 10% last March 2021. We can't seem to get a straight answer on whether or not we're subject to a rent cap... we own the property personally, not a business/LLC etc. Can we raise rent again?

- The paperwork we received from the sale of the property indicated that tenants are responsible for a portion % of the utilities bill... which he obviously has issue with because "I'm section 8, I don't pay for anything". The utility bill for August was $800, and September was $900... Which we can't collect apparently because Section 8 doesn't allow percentages. So we need to request a "rent increase" with S8 to cover utilities, but can we do that if we're maxed out with the rent cap laws? 

If you've read this far, bless you. Hah! 

He's on a month to month lease–can we create a new lease, with new non smoking provisions, indicate that he's now responsible for x dollars for utilities ON TOP of rent...? and just go from there with whether or not he decides to sign on?

We'd honestly just like him out, without having to pay for him to leave (either by eviction or by "no fault just cause" rules) and to start fresh with a tenant that WE screen and gives us a chance to rehab the unit.

Are we SOL? 

Thank you for your time!

[Dan H.]

@Tyler Last your triplex is rent controlled (AB1482) unless it is less than 15 years old.  You cannot add utilities if they are not already included.  The rent control maximum increase is 5% plus cpi capped at 10%.  if the last rent increase was March 2021 (over a year ago), you can raise the rent 10%.   If you raise rent 10%, you cannot raise the rent for a year.  

In addition AB1482 indicates there cannot be substantial change of lease terms.  This implies if tenant has been allowed to smoke in the unit, you cannot now make the unit a non-smoking unit. you also cannot make the tenant responsible for utilities if they are not currently responsible for utilities (technically it may be possible but you would need to lower the rent increase in effect making it not advantageous).

AB1482 does provide some means for no fault lease termination.  Two common no fault causes are to move family into the unit or a rehab extensive enough that tenant cannot occupy the unit through the rehab.  No fault termination requires the LL to pay the tenant one month’s rent.  I recommend this to always be paid when tenant has vacated the unit and never be done via forgiving the last month’s rent.  This recommendation is to protect against the tenant not vacating when they were supposed to and requiring an eviction.  In this case the tenant would get an additional free month.  

I do not know much about section 8, but believe I answered the questions related to rent control.  

I do not know if I would say you are SOL, but your options are limited but you have some options.  Do you have family that can move into the unit for a year?   Does the unit need a new kitchen of bathroom?

Good luck