QUESTION: We represent Buyers who are in the process of acquiring a home that has more bedrooms than they need. They asked whether or not they could rent out some of the rooms if they resided in the Property and what laws would apply. Knowing that Broker Risk Management always recommends that clients asking questions about landlord-tenant issues should be referred to a local Landlord-Tenant attorney, we gave that advice to the Buyers.
We were shocked when their attorney said that by renting out any rooms in their single-family home, they would be subject to the local rent control and just cause eviction requirements. Aren’t single family homes exempt from rent control under the Costa-Hawkins Rental Housing Act? How could this attorney have made such a mistake?
ANSWER: The advice provided by the qualified local Landlord-Tenant attorney is correct. A recent Appellate Decision, Owens v. City of Oakland Housing, Residential Rent and Relocation Board (filed May 29, 2020 in Division 3, First District California Court of Appeal) has redefined what constitutes a “dwelling unit” that is subject to local rent control and just cause eviction laws.
Mr. Owens was the owner of a single-family home in which he resided, but he also rented out a couple of the bedrooms to other people. A dispute arose with one of the tenants who claimed that Owens needed to comply with the local rent control rules. Although the Costa-Hawkins Rental Housing Act generally excludes single-family homes and condominiums from the imposition of local rent control laws, the Appellate Court held that when an owner rents out specific rooms to tenants for their exclusive use, the owner is converting a single-unit dwelling into a multi-unit dwelling and thus the Property is subject to the local rent control laws.
The Owens decision could make it far more difficult to increase rent and/or to terminate the tenancy when separate rooms in a single-family home are being rented out regardless of the type of agreement between the parties.
The best advice to give any client who is contemplating renting out a room in their home for any reason (e.g., to help cover household expenses or to provide a friend or relative with housing) is to urge that client to discuss their planned use with a qualified local Landlord-Tenant attorney before agreeing to rent out any space to anyone so that the client will better understand the potential risks of creating such relationships.
PRACTICE TIPS
- Due to the ever-changing state and local landlord-tenant laws, real estate Agents should not provide any advice on this topic except to recommend that the clients consult with a qualified local Landlord-Tenant attorney.
- Agents should refrain from providing any rental documentation of any kind to clients unless it has been made very clear to the client that providing the forms is not a substitute for the clients obtaining proper legal advice; when transmitting rental documents to clients, Agents should state the following:
“The attached standard forms should not be used unless you have first discussed all of the relevant landlord-tenant issues that may impact you and/or the Property with your own qualified local Landlord-Tenant Attorney.”
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2020 06/12/2020