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June 11, 2007

Are You Legally Prepared For a Crisis?

Professional rental property owners and managers need to know how to respond to a crisis before it happens. Timely and appropriate responses are necessary to lessen the landlord's liability risk. It is therefore prudent to have an action plan ready to be put in place when a "worst scenario" takes place on your property.

What would you do if a flood or earthquake damages the property and your residents are asking you for help? What if death occurred on the property? What is your legal obligation if someone is injured on the property? What if someone is committing a crime on the property, or using the property for illegal purposes? What if you have a tenant strike? This article will give you some ways of answering these difficult but important questions.

Preventive Law: The Action Plan

Preparing an action plan for potential crisis situations on your property is an important part of the practice of "preventive law." The art of practicing law is defined as the elimination of lawsuits or losses that otherwise would occur if you were not practicing "preventive law." This includes a good working knowledge of landlord/tenant and fair housing laws (or at least knowing where to get timely answers).

It also includes having management policies and procedures in place to ensure timely and uniform responses to challenging situations arising on the property. Practicing preventive law includes knowing how to effectively communicate and enforce community or house rules and terms of the lease, involving the use of psychological techniques to defuse hot tempers or difficult circumstances.

Preventive Law: Documentation

The final and most important aspect of practicing preventive law is documentation. Recording all important incidents and significant conversations thoroughly and timely are especially important when experiencing a crisis. Knowing how to properly react to the following challenges will keep you far away from potential liability and start you on your way towards the development of an action plan for crisis management.

Challenge Number One: Earthquake/Flood/Fire

Destruction of the leased premises caused by a natural disaster normally terminates the tenancy, and the tenant is not liable for future rent payments. However, residential landlords are not legally required to return pre-paid rent, even for the "unused" rent portion. This means that both the landlords' and tenants' obligations and rights under the lease cease to exist. Under most circumstances, the landlord is not liable for the tenant's moving expenses unless otherwise agreed to in the lease agreement.

What are the tenant's rights regarding the security deposit? Since the tenancy has been terminated, the landlord is required to account for the use of the deposit within twenty-one days from the date the unit is vacant. It would be difficult to justify deductions other than delinquent rent. Whatever the decision, it is important for the company to "speak with one voice" and have everyone aware of what the message to the press and your residents are going to be regarding moving expenses, unused prepaid rent and security deposit return.

If the premises were only partially destroyed, the court would first look to any relevant lease terms. Most leases state that if the premises cannot be restored within a certain amount of time, usually up to 30 days, the lease is terminated.

If an unknown third party completely or partially destroys the premises, such as in a fire, the same laws apply as they do in the case of destruction caused by natural disasters. However, if the person were the guest or invitee of the tenant, the tenant would normally be liable for the loss.

Challenge Number Two: Death of a Resident

The first step should always be to call the police once you discover there is a death of one of your residents on the property. Never enter the unit before the police arrive.

If there are no co-tenants, the death of the tenant terminates a month-to-month tenancy, but not a long-term lease. In the case of long-term leases, the estate of the decedent is liable for rent until the lease expires or the premises are re-let, whichever occurs first.

If the representative is slow in coming forward and the rent is delinquent, you may serve a three-day notice to pay rent or quit and if unpaid, proceed with court action for unlawful detainer. The notices would be required to be addressed to the legal representative of the decedent's estate. Also, California law requires the property owner or manager to notify prospective residents that a death occurred on the premises for three years following the date of death, unless the death was caused by AIDS.

If the tenancy is month-to-month and no other person residing in the unit, and if the police allow you to do so, you have the legal right to enter the property and retake possession of the rental unit. If there is personal property left behind, the executor or administrator of the estate is entitled to take them into his or her possession. You should request proper identification and photocopy the letters of testamentary or other appropriate estate documentation. If in doubt, consult an attorney before turning any property over.

If no one comes forward to claim the property, you may send notice of belief of abandonment of the personal possessions to the official representative of the decedent's estate and to anyone else you believe may claim title to the property. If no one claims the property after 18 days from the date of mailing the notice, you may dispose of the property if its total value is less than $300.00. If greater than $300.00, the property must be sold by auction through a public sale procedure.

Challenge Number Three: An injury Occurs on the Property

If someone is injured on the property as a result of the property owner or manager's negligence, the landlord is liable for the medical bills and pain and suffering. If the cause of the injury or damage was done intentionally or through the gross negligence of the owner or manager, punitive damages could also be awarded. Liability could also be found if the injured person's injuries were aggravated because of the negligent actions of the landlord following the initial injury.

As an example, so-called "slip and fall" cases are common on the residential rental property, but difficult to prove in most cases. However, if a reasonably prudent manager or property owner would have known about the crack and could have made timely repairs before the injury occurred, the landlord may be held liable.

Negligence is a legal term, which defines the "standard of care" that property managers must meet when managing their property. If a landlord fails to meet the required standard of care in the same or similar circumstances, he or she is liable for any foreseeable harm or loss. The standard of care in any given situation is determined by whatever a reasonably prudent property manager would have done in similar circumstances.

Challenge Number Four: Criminal Activity on the Property

As soon as a crime is committed on your property, you face legal risks as property owners and managers. Knowledge and foreseeability are the two key elements to landlord's liability for criminal acts on the property. Depending upon the nature of the crime and past criminal activity on the property, the landlord may have a duty to warn the residents and/or take reasonable steps to lessen the likelihood of criminal activity occurring on the premises such as trimming shrubs or putting up additional lighting. Again, ask yourself what reasonably prudent managers would do in this situation.

A landmark court decision is illustrative of the standard of care imposed on landlords regarding criminal activity on their property. A public housing project was plagued with drug dealers, and when the tenants asked the housing authority to do something, nothing was done. The drug dealers retaliated by burning down the complaining tenant's apartment and killing five members of his family. The court held against the landlord because the tenants were not warned about the difficulties they would encounter in simply entering and exiting their apartment.

In the event the tenant, his guest or invitee, causes the criminal activity, the resident is responsible for any loss or injury. However, the landlord is not completely off the hook. Failure to take steps to avoid future harm and protect the health and safety of the residents could lead to liability for future injuries or damage. Eviction procedures should be instituted and, in some cases, a warning to other residents of the dangerous propensity of a violent tenant or his or her guests should be given.

Landlords usually have several options when it comes to evicting a tenant who has or is threatening violence or criminal activity on the premises.
 
  • One option is to not renew the lease if it is fixed and the term is about to expire. An eviction based upon an expired lease does not require the type of proof that is necessary to prove nuisance activity on the property.
  • On the other hand, as an option, if the rental agreement is month-to-month, a thirty-day notice may be served without cause, unless the property is under rent control.
  • A third option for either fixed term or month-to-month agreements is to serve a three-day notice to quit based upon the commission of a nuisance on the property. Nuisance is legally defined as major and continuous disturbances or criminal activity on the property. It is an effective way to start an eviction, but the landlord must be ready to prove the nuisance activity to the satisfaction of the court if the tenant contests the matter. Police arrest records and testimony are normally sufficient to prove a nuisance exists on the premises. However, sometimes other residents are required to testify to prove the case in court.
Failure to evict or take other steps could also lead to the property owner is liable to neighboring property for lower property and rental values. In severe cases, the local city attorney, district attorney or State Attorney General could bring a civil or criminal action against the owner for failure to abate the nuisance activity on the property.

Summary Crisis management is preparing for the worst while hoping for the best. Ignoring potential disasters is not the way to be successful in property management. Creating and following a solid action plan in the unlikely event of a crisis will, at least, minimize your losses and, at best, avoid a legal disaster.

(Ted Kimball if the founding partner of the statewide law firm of Kimball, Tirey, and St. John, which specializes in real estate law and represents clients throughout California. Any questions regarding the content of this article should be directed to Mr. Kimball at 800-338-6039. https://www.kts-law.com/contact/)

The above discussion is general and should not be construed as individualized legal advice. Readers are cautioned to seek individualized legal assistance based on a detailed analysis of their particular facts and circumstances. If you have any questions regarding the above material or any other matter involving landlord-tenant issues, you may contact the Law Offices of Kimball, Tirey & St. John, 800-338-6039.

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