A candid conversation with Berkeley landlords and real estate practitioners

Recently, we had the privilege of talking with our friends who own rental properties at the Berkeley Property Owners Association. You can download the slides here and the thumbnail version follows.

 

On what the future holds for Berkeley

Two competing measures are vying for the November ballot. We strongly prefer the Renters Relief & Homeowners Protection Act, an initiative put forth by a coalition of property owners that has garnered enough votes to qualify for the November ballot.

Read more about the measure here »

Conversely, a cohort of tenants’ activists have authored the Berkeley Tenant Protection and Right to Organize Act, a measure that would create a legally enforceable right to organize tenant unions and expand rent control and eviction protections.

You can read more about the misguided ballot initiative here.»

However, this more onerous ballot measure has failed to gain traction, is not gathering enough signatures, and may not qualify for the ballot this year. Stay tuned.

 

On the formation of tenant unions

There is a movement to encourage tenants to organize in their buildings in the same way employees organize at work and take to the picket line. Housing providers will have to recognize these tenant unions and engage with them in good faith.

From our experience in San Francisco, we find this to be an added administrative task that is cumbersome and expensive. If a tenant association or union (whatever term you like) is formed, understand that the landlord merely has to have a periodic dialogue with the group but does not have to capitulate to unreasonable demands.

 

On rent increases

However negligible Berkeley’s annual rent increase is at 1.9%, we recommend that owners follow through with this rhythmic increase, not only to increase cash flow but to demonstrate compliance with the law and that the landlord or their agent is knowledgeable and runs a tight ship.

 

On owners complying with obligations

Housing providers have a host of responsibilities, whether it is registering the rental unit, keeping it in a habitable condition and responding to notices of violations, paying interest on a security deposit, serving proper notices, and other must-dos.

Often, our firm is unable to properly assist when there are core obligations that owners have neglected. There is no shortage of tenant attorneys who will find mistakes like a heat-seeking missile and elongate a dispute.

 

On Owner move-in and Relative move-in evictions

With school employees and minor children in the household, owners have a limited window of time to take advantage of an OMI/RMI because requisite notices must expire before school is back in session. Unlike clear-cut eviction cases like nonpayment of rent, there are numerous procedural requirements to follow in no-fault evictions.

 

On tenant buyout agreements

We understand that the value of a voluntary vacancy is huge, and tenant surrender of possession agreements when properly negotiated with full transparency and proper notices served, are vehicles to effectuate vacancies. More than “cash for keys,” the outgoing tenant agrees to waive any legal claims that may arise from the tenancy. For example, the former tenant would be prevented from later alleging that a respiratory condition developed because of a mold infestation.

Payout amounts to usher the tenant out of the unit vary wildly. It can be as low as a rent waiver and a return of the security deposit or can be a windfall six-figure payment. Our office can facilitate discussions and evaluate the upside potential of a voluntary vacancy along with the many procedural hurdles to overcome.

While Berkeley tenants have 30 days to rescind the agreement, our hard-won experience has shown that few tenants have a change of heart when they are psychologically locked into the agreement. Giving cash upfront goes a long way to give tenants the mindset of moving out; our strong preference is compliance, not enforcement.

 

On Berkeley’s burgeoning student population

By and large, students do not have a lot of money. We like their parents to be guarantors not only because they are on the hook if rent isn’t paid; the guarantor can also provide a stern warning if there is objectionable behavior in and around the rental unit.

When there are instances of damage or partying, the landlord can remind the parents that the guarantor is financially responsible for any havoc their partygoing children wreck.

Housing providers have always faced swapping of roommates, but this is especially endemic among students. In this game of musical chairs, the owner may not know who is living on the premises. Yet now with students going home for the summer break, we have amplified concerns that the unit is being sublet in violation of the lease. We’ve said many times and in many venues that owners need to be the eyes and ears of their properties, and let’s put an asterisk as Berkeley students pack up and leave. If owners encounter any strangers, we’ll need to determine what the legal relationship is and act accordingly.

With an exodus of students, there will be plenty of trash and unwanted items left behind, and it is not finders' keepers. When students abandon personal property, there is a protocol to follow. Fortunately, the City was prophetic in establishing ways to properly dispose of junk.

 

On new security deposit rules

Effective July 1, 2024, housing providers throughout California can only demand one month’s rent, although there are exemptions carved out for certain small landlords.

 

On making formal requests to cease certain behaviors deemed a nuisance

For years, we have been distributing a chart of the carefully choreographed steps of the eviction process. San Francisco, Oakland, and Berkeley have added a kink. A warning letter to cease certain behavior must be first sent before the traditional 3-day notice to cure or quit is served.

Contact our office to evaluate the severity of the underlying nuisance. When there is egregious conduct, we may be able to transition the threatening, problematic tenant out without having to wait. Often, we encounter behavior that is not curable.

 

On tenants with a housing voucher who have dubious credit

For those of you with Section 8 applicants and other subsidies, we cannot are prevented from looking into their credit history. We can only ascertain whether they can pay their portion of the rent. As an easy example, if the rent is $1,000, the government pays $800, we’ll need to put a finger on whether the tenant can pay the balance of $200. Are they gainfully employed, receive governmental benefits, have sufficient savings, or have other means to pay the rent?

 

On housing discrimination

We are aware of many housing providers who violate fair housing laws. This is manifested in poorly crafted rental listing ads, and it’s also evident when a landlord or their agent answers the phone and summarily denies Section 8 tenancies.

We are also aware of enterprising attorneys who are salivating at the opportunity to sue landlords who run afoul of fair housing laws. In particular, there is a serial “shakedown” artist in the East Bay who is making a good living threatening lawsuits when landlords or their agents summarily deny rental applicants with a housing voucher in hand.

 

Parting thoughts

Until recently, Berkeley has been considered the home of the most onerous landlord-tenant rules.

With a barrage of new ordinances, Oakland is arguably beginning to look like it is supplanting Berkeley and earning the title of the most complicated regulatory regime anywhere, but suffice it to say that rental property owners in Berkeley are subjected to maddening rules and minefields to navigate around.

Of course, Bornstein Law will help you stay compliant, cauterize risk, and optimize your Berkeley investment properties in an environment that has become increasingly hostile to landlords.