All Forum Posts by: Jeff D.

Since one purpose of this forum is to share what we learn, it's appearing that our original approach is correct so far: 

The deposit will not be denied the victim. But there's nothing that says it must be paid early, before lease end.  So our plan is to wait until the end of the lease and to not withhold anything because of the victim's exit status. 

While we have compassion for the victim, we are not going to refund paid rent to the victim.  It is paid in advance and we have no way to know who paid what.  If the victim or the law teaches otherwise, then we'll deal with it, with compassion and in compliance with the law (which is poorly written)

Key is to establish the victim's legitimate status as 'off the lease' and then ensure the alleged perpetrator is notified of the responsibility to pay all the rent for the remainder of the lease.  We will be on alert for a 3-day quit notice and will hold no leniency on such.  

There is still some grey area as to the '14 days after notification' and refunding the victim once the unit is leased, and we'll cross that bridge if needed.  It could be that the remaining tenant pays the rent as agreed and ends the lease amicably.  One can hope.  If not, we'll file as the law permits to recover damages.  

Our co-tenants split up at month 8 of a one-year California residential lease, with one claiming to be the victim of domestic abuse.   

The victim has moved out and exited the lease early, citing California Civil Code 1946.7, and is requesting all the deposit back early as well as a refund on most recent rent paid.

The alleged perpetrator remains in the home and will not communicate.  The lease did not include jointly and several language. 

We interpret CA Code 1946.7 that the victim is indeed released from the lease.   For us that raises two questions: 

What happens to the deposit?

The victim is requesting a refund of the entire deposit.   What we read in the Code is, "...a landlord shall not, due to the termination, require a tenant who terminates a lease or rental agreement pursuant to this section to forfeit any security deposit money or advance rent paid"

If we were to refund the deposit to the victim at this point, we will have no deposit on the lease, and the co-tenant might make a claim for the deposit if the lease is ends as agreed.  We don't want to get mixed up in their financial affairs ("I paid all of the deposit" etc,")  And we'd like to be covered as much as possible as we predict, but don't know that, there could be significant damage/costs and unpaid rent at the end of the lease. 

Our default action is to not send the entire deposit to the victim, but instead issue a single check (if any is to be returned) in both of their names upon conclusion of the lease as agreed.  Not sure who to mail it to if they are not communicating, but our default action is to mail it to the victim. 

What happens to the rent paid for the current month?

The victim is requesting that the rent paid for the current month is refunded.  Rent is paid in advance.  

We interpret CA Code 1946.7 that the victim is indeed excused from the lease and need not pay rent 14 days after giving notice to the landlord.  In this case, notification occurred five days after rent for the month was paid. 

Does the Code call for 'refunds' of rent, and if so, to who?  And if so, does that mean that we give some (roughly half)  of the advance rent back to the victim?  Or to the alleged perpetrator and the victim, split 50/50? 

And the Code doesn't make any mention of where the burden of the remaining lease falls.  It appears the burden falls on the landlord to convince the alleged perpetrator to agree to take on the full responsibility of the remaining lease.  And failing that, the landlord must bear the costs of removing the alleged perpetrator (assuming rent is not paid) repair any damages, and start all over again.   

My opinion is that It appears that the perpetrator can gain the most from this law.  We could foresee claims of being owed half of any refund to the victim. Unless we are misinterpreting. 

Have any of you gone through this and how do you interpret CA Code 1946.7?

I have a buyer for my California acreage (that includes a large RV) and we agree on basic terms.  We'd like to hire someone to guide us through the transaction so it represents on paper, and to the title company, what we intended.  

Is that a real estate attorney? 

I can't easily find realtors by the hour.  

Must I list with a listing agent (they are asking 8%) even though seller and buyer agree on terms? 

I've bought and/or sold over a dozen homes the traditional way.  This time, I plan to carry a note and could also use advice to write it up safely for both parties. 

Who should I hire for this?  

Thanks!

P.S. The property is in Oroville, California.  It's roughly a $230K transaction with the RV representing about $30K of that. 

In California we have three rentals, our primary dwelling, and one vacant lot.  We are considering diversifying into property elsewhere via Delaware Statutory Trust.  Here are the parameters we're using in the decision.

• We are modeling that property values and rental income in California could continue as is, or could drop based on legislation and supply/demand.  Our risk model has us 'surviving' with some loss with as much as a 40% reduction in value/rental income with a recovery of property value in two years (sort of like 2009-2011), and recovery of half that reduction in rental income. This isn't a prediction.  It's what we are modeling for in a plausible worst case.  It could be worse than that, it could be fine.  
• It seems plausible that future legislation, say over 10 years,  will impose restrictions that impact value/income (e.g., forcing Section 8, elimination of Prop 13) on owners of N properties, with N being four or five as was proposed in the most recent propositions.  Note that is properties, and not rental properties. 

• Of our three rentals, we are seeing return on cash of 22%, 13%, and 6% and we DO rely on that income. 
• Our prediction for other states, such as New Mexico, Idaho, is that it is much less likely they will see the same reductions in value/rental income in the same period as California will.  We observe most wise investors we are acquainted with, who had much higher return on cash than us, exiting some (or all) their properties in California. 

• We predict a likely return on cash of 6-8% in a Delaware Statutory Trust, and understand the potential additional tax burden depending on where the properties are. 

With that model, we are still deciding to keep our holdings in California as they are. The income of a DST seems not as good as the predicted income from the current investments in California - even if legislation/supply cuts our income over the next 10 years.

What might we need to include in our model that's missing? 

-Jeff

A neighbor wants to buy our California rental property in the city of Watsonville. We just signed up a new family for a one-year lease.  The potential buyer says they will "assume" the lease for its term.   

If we do sell, does this require the tenant to sign a new lease?  

One concern is that if they don't sign a new lease (or refuse), and the new owner breaks some provision of the lease or a landlord tenant law, we might be liable. 

If it matters, the lease is between the tenants and our business name (a fictitious business name, not a registered corp or an LLC), but signed by us.

Thanks for any wisdom. 

One of the best wisdom I heard is to invest in your knowledge enough that you know a good deal when you see it.  IT took me decades of buying houses, and a lot of reading to finally 'get it' and know, with little doubt what is a good deal and what isn't. And that only applies to my local region!  Put me in another city and it doesn't apply.   Hope that helps a bit.  -Jeff 

Useful interpretations so far.  

Another one that seems vague is .."person who owns no more than two residential dwelling or housing units"

Does that include our own primary residence? 

I would assume 'yes' unless there is clarification otherwise. 

Would that include unimproved land? 

I assume 'no' unless there is more clarification. 

And what of our property that had a home, well, septic, etc that burned last month, uninsured, to the ground for a total loss.  Included?  Likely not. 

And several have raised the question of enforcement.  Like code enforcement, I predict that a complaint is the trigger for investigation.  Perhaps by local housing authority, or small claims?  Not sure.  

Polls suggest it will get defeated in a few days. But I do wonder how such vague language can make it into a proposed bill, burdening home providers and courts with interpretation. 

-Jeff