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2007-12-07 12:16:00

New Laws, Legislation and Legal Trends for 2008

Good risk management programs and decisions by property managers and owners can improve their bottom line. Familiarity with new laws, legislation, industry trends and the risks and benefits of those trends are a necessary part of a good risk management program. This article discusses some of the more important new laws, legislation and legal trends property managers and owners face in 2008.

Class Action Suits

A significant legal concern in 2008 is the continued proliferation of unfair business practice and class action lawsuits brought against residential and commercial landlords. Law firms representing tenants have targeted residential landlords and property managers for alleged unfair or unlawful business practice claims.

California law allows an individual attorney representing only one tenant, to file suit on behalf of a class of tenants who have also been subject to the alleged unfair or unlawful practice. Even if the practice in question has a nominal effect on any individual tenant's finances, the cases can be lucrative for plaintiffs' attorneys who may be awarded attorneys fees to be paid by the defendants they sue.

Insurance may not cover the claim because it is a restitution case, not a damage claim. In other words, the claim is that the landlord or property manager should never have received the payment in the first place, and, according to the language of the statute, they must "disgorge their ill-gotten gain".

The statute of limitations for an unfair business practice is generally four years. This means that if lawsuit was filed for alleged illegal late charges, the property owner or manager may be ordered to return every late fee collected from every tenant for the last four years.

What are some of the current and recent subjects of class action lawsuits? The most recent concern RUBS, which stands for ratio utility billing systems. This is where residents are billed for water and sewer charges without sub-meters measuring the exact amount of water being used. There is nothing in the law that specifically prohibits RUBS, but plaintiff attorneys have found it ripe for claims, either as a concept itself, or failure to properly disclose the fact that utilities are being billed in this manner, or how it is being calculated.

Late fees, credit reporting, collection practices, application fees, Proposition 65, security deposit accounting, ADA and fair housing violations have all been the subject of class action lawsuits. In addition, application fees and unlawful detainer searches in the tenant screening process have recently been the subject of these suits.

Many of these suits are initiated because the landlord is using out-dated leases, either because they recently took over management of a property who did not have valid leases, or used an out-of-date form. Conducting an annual review of your lease or at least using a current industry standard form is the best way to ensure that your lease language is current with California and Federal law.

New Immigration Status Law

New laws based upon legislation have been sparse ever since California elected a Republican governor to deal with California's Democratic legislature. Since Governor Schwarzenegger is a strong supporter of business and property rights, most anti-property and anti-business bills that pass through the legislature are vetoed. As a result, in 2007, the only significant piece of landlord/tenant legislation that signed was a bill dealing with landlords and illegal immigrants. AB 976 prohibits cities and counties from passing laws requiring landlords to inquire about the citizenship or immigration status of current or prospective tenants, or requiring landlords to report the status to legal authorities.

LEGAL TRENDS

Smoking

What are some of the legal trends we are seeing in California that will continue in 2008? Anti-smoking legislation is continuing to gain momentum, especially in local government. For instance, the most comprehensive anti-smoking legislation to date was passed in 2007 in the City of El Cajon. It prohibits smoking in public if the smoker is within 20 feet of another person, including common areas of apartment communities.

Liability

Landlord liability for injuries that occur on their property continued to expand in 2007 and is likely to continue in 2008. For instance, a 2007 appellate decision narrowed the trivial defect doctrine which allows judges to decide cases of slip and fall rather than have them go to a jury. This doctrine provides that if a judge rules that the defect did not, as a matter of law, create a substantial risk of injury, the case is over.

In this case, the court decided that the injured tenant was not entitled to her day in court when she slipped on a recessed drain, because, as a matter of law, the defect was trivial. The appellate court reversed the decision and said that so long as there were experts on both sides arguing whether or not the defect was trivial, the case should go to a jury.

In another 2007 appellate court ruling, a tenant sued her landlord for habitability claims. Because the tenant could not bathe as frequently as she would like, worried about rodents harassing her children, and avoided certain rooms which were unusually cold, the court found that she could, not only just be awarded actual damages, but damages for emotional distress as well.

Another example of expanded landlord liability for injuries occurring on their property is the case where a landlord was found liable when his tenant shot a visiting guest of another tenant with a shotgun, even though the landlord had advised the tenant to call the police during a previous incident when the violent tenant made threatening gestures. The court said the landlord should have called the police as well.

There was some good news involving landlord liability in 2007. The California Supreme Court reversed an appellate court's prior decision holding a landlord liable for gang violence simply because the landlord knew or should have known that one of their tenants was a member of a gang. The court reasoned that to allow this to stand would encourage arbitrary housing discrimination and place landlords in an untenable situation.

Attorney's Fees

In 2007, there were two significant cases involving an award of attorney's fees in landlord v. tenant lawsuits. In the first case, the appellate court upheld an attorney's fees award against a landlord for over $413,000, even though the attorney representing the tenant was pro bono. The damages to the defendants awarded for wrongful eviction were $120,000, and the work the attorney's performed benefited other tenants who were not entitled to attorney's fees.

In another 2007 case, the court held that, even though the landlord dismissed an unlawful detainer action against the tenant based upon the tenant wrongfully holding over on an expired lease, the tenant could nonetheless be awarded his attorney's fees. Before this case was decided, attorney's fees were not awarded to either party if the case was dismissed and did not result in a judgment.

Some final recommendations to help avoid being sued in 2008:

  1. Have your leases reviewed regularly, at least once per year,
  2. Establish a formal procedure for handling fair housing complaints and disability accommodations, and
  3. Have a legal compliance review done for the property on an annual basis

Kimball, Tirey & St. John can defend property owners or managers who are sued. However, at Kimball, Tirey & St. John, we also recognize the value of preventing legal problems before they ever develop. We offer several preventative law resources to assist you. 

  • Kimball, Tirey & St. John's Residential Preventative Law Handbook can assist property owners and managers with their residential properties. We also offer a version for commercial properties. Our handbooks are a valuable resource for residential landlords and property managers in California, providing information about pre-tenancy, tenancy, evictions, post-tenancy, and the latest updates on state codes and laws. Copies can be ordered for $24.95 per book by calling Curtis Weldon at (619)234-1690.
  • "Kimball, Tirey & St. John offers classes on numerous legal subjects geared to the needs of residential owners and managers, and can be provided at your designated location. These courses help landlords and property managers comply with today's complex landlord-tenant, fair housing, and other laws. Seminar schedules are available online at http://www.kts-law.com/seminars/ or contact Curtis Weldon at (619)234-1690. 
  • Kimball, Tirey & St. John offers fair housing publications including the California Fair Housing Encyclopedia, Establishing Your Rental Criteria and the Disability Forms packet. They can be ordered online.
  • Many articles useful to property owners and managers can be found at our website at http://www.kts-law.com/resource_library/.
  • Kimball, Tirey and St. John has information packages available for purchase dealing with either complex or newly emerging issues. Designed to help property owners and managers make good risk management decisions, each information packages include a letter describing the issue, and applicable law. If there are areas of uncertainty relating to the issue and applicable laws, information is provided about the areas of uncertainty, available options, and the risks associated with each option. Information packages currently available include: 
  • Arbitration provisions in residential leases. 
  • Contests, drawings, prizes, lotteries and sweepstakes. Real estate agents, property managers or property owners who are considering using prizes as marketing tools (whether in connection with property leasing, property sales, or otherwise) should be aware of legal restrictions.
  • Investigative Consumer Reporting Agencies Act ("ICRA"). California property owners and managers who obtain criminal background checks or eviction history reports from third party providers should be familiar with ICRA. Information is provided about ICRA obligations. Three forms are included - a notice to be provided to the applicant when a report is ordered, a cover letter to transmit the report if the applicant requests a copy, and a notice of adverse action that can be provided if the application is denied based on information in the report.
  • Privacy laws. Privacy laws in California are extensive. The information package provides information about California's privacy laws and the obligations of companies doing business in California with California residents. The information package is not a stand alone privacy policy to be inserted into a company handbook; it provides information about how to create a privacy policy, and information about recommended practices. 
  • Renter's insurance programs. Renter's insurance issues and risks are outlined and a renter's insurance addendum form is provided.
  • Security cameras. Information is provided about the issues that can arise with security camera use, and guidelines are provided to reduce risk. Suggested language for leases and signs to help reduce risk to property owners and managers is provided.
  • Utility cost recovery from residents. Information is provided identifying and discussing issues, restrictions, areas of uncertainty, risks, and available options. A sample utility addendum is provided. A sample utility addendum, designed to help reduce risk to property owners and managers, is included in this information package.
  • Kimball, Tirey & St. John can review lease documents to ensure compliance with existing laws. We recommend that your lease be reviewed annually. Contact Jamie Sternberg at (619)744-0863 if you are interested in having lease documents reviewed.

(Kimball, Tirey & St. John LLP is a full service real estate law firm representing residential and commercial property owners and managers. This article is for general information purposes only. Before acting be sure to receive legal advice from our office. If you have questions about this article, please contact Ted Kimball at (800) 338-6039. For past articles on other related topics, and a list of our offices, please consult the resource library section of thisweb site.)

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