By Modifying the Lease, Landlord Gave Tenant an Out

Question: I have a problem with a tenant who moved out before his 12-month lease expired. Because the tenant was from Germany, we agreed that the lease could be broken with a 90-day notice if he had to return to Germany. We signed the lease Oct. 1 and everything was fine until March 1, when the tenant gave me the 90-day notice that he would be vacating and returning to Germany as of June 1.

In late April, I went to a local real estate broker and discussed the situation. She advised me to send the tenant a letter telling him that he was responsible for the advertising and broker’s commission and any portion of time that the unit was unrented until expiration of the lease Sept. 30.

I sent the tenant a letter to this effect. The tenant responded by letter saying that he would not agree to any of the proposed charges, that he would not even pay the June rent, which he said I should deduct it from his security deposit. He also stated that he expected his full security deposit back because he would leave the unit in good condition.

When he vacated May 12, the place was in deplorable condition, and I spent nearly $900 repairing the damages. Can I sue the tenant for nonpayment of rent from May 1 through May 12, the rent until I re-rent the unit, the costs of the advertising and broker’s commission and the damages?

Attorney Ted Smith replies:

Yours is a special case. First, the good news: All damages and cleaning costs caused by the tenant can be charged to him. The security deposit can be used for these costs. If there were damages in excess of the deposit, you can take your tenant to court for the difference.

Now let’s take a look at the lease. You had a lease for one year, but you did something special. You gave him the right to cancel with a 90-day notice. When he gave you the notice on March 1, that terminated his rental responsibilities under the lease, effective June 1. Even though he vacated May 12, I believe you could charge him for all of May’s rent.

Only those advertising expenses you incurred before June 1 could be charged to your tenant. After that, you let him off the hook with the 90-day notice.

Attorney Steven R. Kellman replies:

The tenant owes no rent for June. The 90-day notice of March 1 terminated the rent obligation as of May 31. The rent is owed for May unless the place was re-rented before the end of May.

I disagree with Smith. There would be no advertising or broker costs owing because there was no breach of the lease. The tenant moved within the 90 days.

It is true that the $900 could be charged if the damages were beyond ordinary wear and tear. Also, the tenant should not have used the security deposit as last month’s rent. Many tenants fear the landlord will keep their deposits, so they simply don’t pay the last month’s rent, opting to use the deposit for that time. Though this may seem logical, the practice is not permitted under the law.

Property manager Robert Griswold replies:

I agree with Kellman. Once you allowed the cancellation clause, you modified the agreement. The tenant merely exercised the rights you gave him under this lease, and his actions did not cause you any additional expense that you could not or did not anticipate when you agreed to those terms.

Simply put, the tenant does not owe any rent beyond May 31 and does not owe you for any advertising or broker’s commissions. These are your costs exclusively.

The information given to you by the local real estate broker is wrong. Be wary of real estate brokers offering tenant-landlord legal advice, particularly if they do not specialize in property management. Also, all rental property owners should have good tenant-landlord attorneys available for consultation.

Special Rules for Day-Care Operation

Q: I am the owner of a single-family rental home. The tenant has a month-to-month rental agreement. I recently received a Family Child Care Home Property Owner/Landlord Notification form from the community care licensing division of the Department of Social Services of California. The notification states that the tenant at my property will be operating a licensed family child-care home and that I am “prohibited by law from imposing any direct or indirect restrictions on, or prohibitions against, the tenant’s operation of the family child-care home on the rental property.”

My insurance company is now canceling my policy because the company does not insure homes in which family child care is provided by tenants. I will incur greater insurance premiums by switching to another company, so can I pass this additional premium onto the tenant? I also anticipate greater wear and tear to the property. Can I increase the security deposit?

Smith replies:

California’s Health and Safety Code Section 1597.40 authorizes day-care homes lease provisions to the contrary under certain situations. Effective Jan. 1, 1997, amendments to this law required that the day-care provider give written notice of the intention to commence operation within 30 days.

The landlord is allowed to increase the resident’s security deposit to the maximum allowed by law. For example, in an unfurnished apartment, twice the monthly rent would be allowed as a security deposit before starting the day-care service.

Other regulations apply. The day-care provider must be licensed by the state, and the Department of Social Services must inspect the premises and make sure the provider meets certain criteria before the business is approved.

Because you are required to comply with the law and accept the day-care home under these conditions, you could take your case to the insurance company for not increasing the premium and not canceling the policy. The day-care provider is responsible for the children and must ensure that everyone complies with all reasonable rules and regulations of the rental property relating to health and safety.

Property Managers Must Hold License

Q: I work for a government agency as a housing management assistant in another state, and I am planning to move to California soon. Do I need to have a real estate license in California to work as a property manager?

Griswold replies:

In virtually all instances you must have a California real estate license to be a property manager in California. The California Department of Real Estate requires that all property managers have active real estate salesperson’s or broker’s licenses unless they qualify for the limited exemption allowed for resident managers and rental hostesses.

Under certain circumstances, an unlicensed person employed by and under the direct supervision and control of a licensed real estate broker may perform limited management or leasing functions for residential apartments.

As defined in the California Business and Professions Code Section 10131.01, these activities are strictly limited to: (a) showing rental units and common areas to prospective tenants; (b) providing or accepting pre-printed rental applications or responding to inquiries from a prospective tenant concerning the completion of the application; (c) accepting deposits or fees for credit checks or administrative costs and accepting security deposits and rents; (d) providing information about rental rates and other terms and provisions of a lease or rental agreement, as set out in a schedule provided by the employing broker; and (e) accepting signed leases and rental agreements from prospective tenants.

The Department of Real Estate considers property management to be a licensed activity, and there are serious implications not only for the individual but also for the firm or owner failing to comply exactly with the above requirements.

Also, the exemption for a leasing agent has been interpreted by the department to cover only leasing agents employed at a single location. Thus, a leasing agent who covers multiple properties should be licensed. And it is well established by the department that property managers who live off-site must hold real estate licenses.

When a Small Claims Judgment Is Appealed

Q: We recently took our former landlord to Small Claims Court to recover a large deposit that was wrongfully kept. We won the case, but now our landlord has appealed the judgment and we must appear in Superior Court. We cannot afford an attorney. What should we do?

Smith replies:

Generally, only the defendant may appeal a Small Claims Court judgment. The plaintiff (the party who first filed) cannot appeal the judge’s decision on the claim.

At the appeal hearing, the Superior Court will rehear all of the claims in the case. The jurisdictional limit of the Small Claims Court and the same informal hearing procedures apply.

Even though attorneys may represent the parties at this point, it is still an informal process, as it is in Small Claims Court. If the other side has an attorney, the Superior Court judge will make sure you are treated fairly.

Just as in Small Claims Court, you should be prepared to present your side of the case.

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This column is written by property manager Robert Griswold, host of “Real Estate Today!” (KSDO-AM [1130], 10 a.m. to noon Saturdays), and attorneys Steven R. Kellman, director of the Tenants’ Legal Center, and Ted Smith, principal in a law firm representing landlords.

If you have a question, send it to Rental Roundtable, Real Estate section, L.A. Times, Times Mirror Square, L.A., CA 90053. Or you may e-mail them at rgriswold.latimes@retodayradio.com. Questions should be brief and to the point and cannot be answered individually.