IN FOCUS
Master Tenants in San Francisco and the power struggle to gain control

Economist, historian, and social theorist Thomas Sowell once said that "when we hear about rent control or gun control, we may think about rent or guns but the word that really matters is control."

Make no mistake, master tenants wield considerable control over their units, and that was one of the main points quite literally driven home in an intriguing SFGate article by Tessa McLean that we came across.

Read the article: Having a 'master tenant may be the only affordable way to rent in SF. It also comes with a lot of risks.

As a springboard for the piece, the author posed the provocative question to those tenants in the Twittersphere who had any nightmare experiences with master tenants.

 

 

Several people replied with their tales of horror with master tenants, and we were surprised not to hear of harrowing experiences shared by master tenants dealing with nightmare subtenants. We recall that in the distant past, the now-closed SFCurbed did a similar exercise by asking tenants to report shocking stories of landlord abuse, and it backfired. Instead, it invited shocking stories of landlords who rent to undesirable tenants.

The reality is, there are good landlords and bad landlords. There are good tenants and bad tenants. By extension, there are both good and bad master tenants and subtenants. Nobody should be painted with a broad brush.

The law relating to San Francisco roommate living arrangements is complex and while we are hard-pressed to do a treatise here, we can impart some initial thoughts that come to mind.

 

When the Master Tenant flies the coop

With the guidance of Bornstein Law, the landlord can serve what's called a 6.14 Notice on each subtenant within a reasonable time informing them that the landlord recognizes that person as a mere “occupant” and can impose a rent increase up to the market value when the last original occupant vacates the unit.

We see this quite a bit, especially with the nomadic lifestyle of working remotely. Tenants move to escape the high costs of living in the city. When they do, rents can typically be raised to the market rate.

 

A cardinal sin is accepting rent paid directly by a subtenant

A subtenant has no relationship with the landlord but instead pays rent to another tenant. Yet whenever money exchanges hands between the subtenant and the landlord, a tenancy is inadvertently created, and who was once a subtenant is now afforded full protections under San Francisco's Rent Ordinance. As a word of caution to Landlords, if a remaining occupant receives a 6.14 notice after he or she paid rent, they may file a petition against the rent increase and argue at the San Francisco Rent Board that they gained co-tenant status and therefore cannot be subject to a rent increase. The rules involving the 6.14 notice are very tricky and require legal advice to navigate their application to specific situations.

Noni Richen, President of the Small Owners of San Francisco Insitute, stresses the importance of keeping all residents on the same page. As the owner of a 4-unit building in the Filmore, she says that over the years, there were renters who wanted to welcome in new subtenants. "One thing that I always did when a new person was added was to sit down with the tenant and sub-tenant with a 6.14 notice in hand. When we were signing, I announced to the subtenant, 'The tenant is now your landlord. He pays us $X dollars of rent and is not allowed to charge you more than a proportional fraction of that amount. If you have a dispute about that amount, I cannot become involved,'" Richen shares.

 

Landlords cannot wear blinders

We often advise landlords or their agents to be the eyes and ears of their properties at all times.  There has always been a fluid nature of people moving in and out and this game of musical chairs can reach a point where the landlord does not even know who is living in their property.

Yet the pandemic created much more shuffling of occupants. Because of stay-at-home orders and the economic consequences of COVID, living alone was not an option for many people. They moved in with family, friends, and random housemates. Once the pandemic became endemic and we returned to a semi-state of normalcy, there was an "unbundling" of households. People went their separate ways.

Landlords and property managers need to know who is living in their units and some personal sleuthing may be in order. Yet we urge some caution because tenants have the right to the quiet enjoyment of their homes and expect a degree of privacy - the landlord cannot show up unannounced except in limited circumstances.

 

Read our earlier article: When can a landlord enter a rental unit?

 

Handling the "runaway tenant"

When the owner or property manager suspects that the tenant has left like a thief in the night, certain protocols must be followed. A notice of abandonment should be served.

Remember the saying from grade school, "finders keepers, losers weepers?" This doesn't apply when there is reason to believe the tenant has vacated the premises without notice. Bornstein Law can guide you along on how to determine whether the acts of a tenant amount to an abandonment of the premises. If the landlord takes matters into his or her own hands and wrongfully takes possession of the premises without seeking legal advice, he may be liable for damages for wrongful eviction of the tenant.  We can also advise you on how to legally dispose of personal belongings left behind in accordance with state law.

 

We've only scratched the surface here

One of the consequences of a free society is that people can come and go. With this transient nature of tenants, rental relationships can evolve. Master tenants. Co-tenants. Subtenants. Guests. Enter Airbnb and other short-term rentals, boarding houses, co-living arrangements, in-law units, people living in commercial space, etc. Rental relationships can get quite convoluted.

When there is anarchy, Bornstein Law helps landlords gain control.