2011 CALIFORNIA PROPERTY MANAGER'S UNLAWFUL DETAINER HANDBOOK

Transcription

1 2011 CALIFORNIA PROPERTY MANAGER'S UNLAWFUL DETAINER HANDBOOK G. EMMETT RAITT, JR., ESQ. HEWITT WOLENSKY LLP 4041 MacArthur Blvd., Suite 300 Newport Beach, California (949) (949) (Direct Line) FAX (949)

2 TABLE OF CONTENTS ABOUT THE FIRM 1 INTRODUCTION FUNDAMENTAL DUTIES OF THE PROPERTY MANAGER MONETARY DEFAULTS NON-MONETARY DEFAULTS HOLDOVERS WHAT SHOULD THE PROPERTY MANAGER DO WHEN A TENANT GOES BAD? NOTICE TO PAY RENT OR QUIT [FORMS, p. ] NOTICE TO PERFORM COVENANT OR QUIT [FORMS, p. ] SERVICE OF NOTICES TENANT PAYS! TENANT VACATES TENANT FAILS TO PAY OR VACATE UNLAWFUL DETAINER ACTION SERVICE OF THE UNLAWFUL DETAINER COMPLAINT TENANT'S RESPONSE 15 NO RESPONSE SETTLEMENT MOTION TO QUASH AND OTHER MOTIONS ANSWER ENFORCEMENT OF JUDGMENT DISPOSING OF THE TENANT'S PROPERTY DISPOSITION OF TENANT'S SECURITY DEPOSIT BANKRUPTCY UNLAWFUL DETAINER FACT SHEET UNLAWFUL DETAINER STATUS California Property Manager s Unlawful Detainer Handbook i 2011 Hewitt Wolensky LLP

3 FORM LETTER - NONPAYMENT OF RENT FORM LETTER UNDERPAYMENT OF RENT DEMANDED IN NOTICE FORM LETTER -- ABANDONMENT NOTICE OF NSF CHECK NOTICE TO PAY RENT OR QUIT NOTICE TO PERFORM COVENANT OR QUIT NOTICE OF BELIEF OF ABANDONMENT NOTICE OF TERMINATION OF TENANCY NOTICE OF RIGHT TO RECLAIM ABANDONED PERSONAL PROPERTY CONTINUED POSSESSION AGREEMENT DEFERRED RENTAL AGREEMENT ASSIGNMENT OF LEASE CONSENT TO SUBLEASE LANDLORD'S SUBORDINATION AGREEMENT PROMISSORY NOTE TIME LINES California Property Manager s Unlawful Detainer Handbook ii 2011 Hewitt Wolensky LLP

4 ABOUT THE FIRM Hewitt Wolensky LLP offers trial-tested experience, full-spectrum case management and high-level legal services at reasonable prices. The partnership was formed in 2009 to provide first-rate legal talent while leveraging the agility and cost-efficiencies of a boutique firm. Deep with large firm experience, our team can respond quickly to client needs and provide sophisticated legal services on a personal level. Our clients include some of the nation s premiere businesses, including Fortune 100 and Fortune 500 companies in entertainment, real estate, insurance and the medical and automotive industries. Specialties include product liability and commercial litigation, regulatory compliance and product recall counseling, mass tort litigation and risk management, landlord tenant litigation, employment litigation, real estate and media and government relations. Hewitt Wolensky builds long-term client relationships based on honesty, integrity and excellence. We offer forward-looking strategies, nuanced legal advice and an energetic team of attorneys working efficiently to deliver results. G. Emmett Raitt, Jr. s practice includes real estate, business, employment and insurance litigation, with an emphasis on commercial and industrial landlord-tenant matters, including lease drafting and negotiation, breach of lease actions, unlawful detainer (eviction) actions, ADA litigation, and other landlord-tenant disputes, construction litigation, partnership and corporate disputes, real estate broker negligence and breach of fiduciary duty claims. During his 35 years in practice, Emmett has tried more than 20 civil jury trials, and hundreds of court trials. He frequently serves as a Temporary Judge in the Orange County Superior Court, and is actively involved in presiding over mediations and arbitrations involving business and real estate disputes. Emmett also has significant appellate experience, successfully acting as lead appellate counsel on numerous cases. Emmett can be reached at geraitt@hewittwolensky.com and on his direct line [(949) ] California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

5 PROPERTY MANAGER'S UNLAWFUL DETAINER HANDBOOK 1 INTRODUCTION For many property managers, sending a matter "to legal" is the equivalent of launching it into a black hole. You often don't know what will happen, and more importantly, you don't know what should happen. This Handbook is designed to answer some of those questions. In particular, this Handbook will attempt to: 1.1 Explain what happens in the legal process when the landlord attempts to reacquire property after a tenant defaults. 1.2 Provide suggestions as to what a property manager should do when a tenant "goes bad" 1.3 Provide suggestions as to what a property manager should not do when a tenant "goes bad" 1.4 Provide suggestions as to what information a property manager should obtain to improve the chances of collecting against a defaulting tenant. 1.5 Explain how a tenant's bankruptcy affects the process. This Handbook is intended as a practical summary of the unlawful detainer process; however, because each case and each tenant is different, the recommendations made may not apply to all cases, and the form documents which accompany it should not be used without first consulting with your counsel. 2 FUNDAMENTAL DUTIES OF THE PROPERTY MANAGER 2.1 THE PROPERTY MANAGER MUST HAVE A CLEAR UNDERSTANDING OF THE OWNER'S GOALS AND INTENTIONS WITH REGARD TO THE PROPERTY Property management is a service business, and the needs and desires of the owner should be the manager's primary focus. The failure to communicate and understand those needs is a primary cause of friction between the owner and manager. If the owner wants tenants aggressively pursued, the manager should know that and follow the desires of the owner. If the owner, for business reasons, prefers having non-paying tenants in the center so that it will look busy, that is what the manager should do. 2.2 THE PROPERTY MANAGER MUST COMMUNICATE WITH THE TENANT AND THE OWNER 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

6 2.3 THE PROPERTY MANAGER MUST DOCUMENT HIS OR HER FILE Many problems are created when the tenant claims the tenant was told something by the manager, and there is nothing in the file to refute it. (iii) If the tenant has requested a modification to the lease, confirm it in writing, and confirm the landlord s position in writing. If you agree to defer payments, confirm it in writing. If the tenant claims the tenant was given assurances regarding his lease which are not contained in the lease and the tenant is wrong, document that in writing. If the lease has been personally guaranteed, ensure that the guarantor is aware of the modification and has consented to it in writing. Unless the guaranty has been properly drafted, a modification of the underlying agreement can act to release the guarantor. Even if you believe the guaranty is adequate, have the guarantor approve any modification to the lease or its terms. 3 MONETARY DEFAULTS 3.1 Occurs when the tenant fails to pay: Base Rent. Percentage Rent. 3.2 Recovery of monetary defaults in an unlawful detainer action other than base rent and percentage rent depends upon the existence of an "additional rent" provision in the lease. If a commercial lease identifies other monetary charges incurred under the lease as "additional rent", those charges can be included in a Notice to Pay Rent or Quit and recovered in an eviction proceeding. Canal-Randolph Anaheim, Inc. vs. Moore, 78 Cal. App. 3d 477 (1978). Thus CAM charges, late charges, etc., can be recovered in a Notice to Pay Rent or Quit. No need to send separate Notice to Perform Covenant or Quit. However, if there is no provision for "additional rent" under the commercial lease, any monetary defaults other than base rent and percentage rent must be contained in a Notice to Perform Covenant or Quit California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

7 3.3 Late Charges. (c) Generally proper if not construed as a penalty. In a commercial lease, a late charge clause is valid "...unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made." [Civil Code 1671]. In a residential lease, the provision is void "... except that the parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage." [Civil Code 1671(d)]. 4 NON-MONETARY DEFAULTS 4.1 A non-monetary default is any breach of the lease by a tenant other than the failure to pay rent. 4.2 Examples: Violation of the use restriction. Unauthorized sublease or assignment [FORMS, p. 45]. If the lease is signed after 1983: a. A lease executed after 1983 can absolutely prohibit any transfer, with or without consent [Civil Code ]; b. If the lease does permit sublease or assignment: i. It can also set forth express standards or conditions for such transfer [Civil Code ], ii. iii. However, if the lease does not set forth express standards or conditions, a "reasonableness" condition will be implied. The tenant has the burden of proof to establish that the landlord acted unreasonably by denying the transfer [Civil Code ]. For the lease is executed prior to 1983, and requires landlord to consent to any sublease or assignment, but gives no standard, consent may be unreasonably withheld. (c) (d) The tenant s failure to maintain or repair the premises. The tenant s failure to reimburse the security deposit in the event the landlord is required to use all or a portion of it during the term of the tenancy California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

8 4.3 Default will not lie for a "trivial" breach. Example: Unlawful detainer action will not lie against a tenant who leased property to operate a dry cleaning business but then commenced a shoe and hand bag repair service [Fragomeno vs. Insurance Company of the West, 207 Cal. App. 822 (1989). A breach will not be considered "trivial" if the breach is intentional. 5 HOLDOVERS 5.1 Occurs when the tenant stays in possession after the lease term expires. Many commercial leases contain a holdover provision increasing the rent in the event the tenant holds over. Danger: Accepting rent after the lease term expires creates a new month-to-month tenancy and requires notice prior to eviction. 5.2 Although no notice is required prior to beginning the unlawful detainer proceeding if the lease term has expired [Code Civ. Proc. 1161(1)], better practice is to send tenant notice so that there is no confusion, and tenant cannot claim the tenant was misled [FORMS, p. 37]. 6 WHAT SHOULD THE PROPERTY MANAGER DO WHEN A TENANT GOES BAD? 6.1 CONTACT THE OWNER to find out what it wants you to do. 6.2 Talk to the tenant. Remind them of their obligation under the lease, and find out what the problem is. 6.3 Send letters to the tenant to either: confirm the payment agreement reached during your discussion; or to informally demand performance [FORMS, p. 27]. 6.4 Send statutory eviction notices only when you are prepared to go forward with the eviction. Tenants will react as they have been trained to react. If the tenant does not comply with the notice, and you fail to follow through on it, the tenant will learn that it need not take your notices seriously and will convey that to other tenants. 7 NOTICE TO PAY RENT OR QUIT [FORMS, p. 31] 7.1 Statutory time period: three days [Code Civ. Proc. 1161(2)]. 7.2 The statutory time period is often modified in a commercial lease to three business days, five days, ten days or even to delete the notice requirement entirely. However, even if the lease provides for no notice, three days 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

9 statutory notice must be given before proceeding with an unlawful detainer action. 7.3 When should the notice be served? The best time to serve the Notice to Pay Rent or Quit is immediately after rent falls due, or at the latest, immediately after the "grace period" expires. (iii) (iv) Generally there is no grace period in a commercial lease; rent is due when rent is due. There is no requirement that the landlord wait until the late charge accrues before serving the Notice. Serving the notice shortly after the rent becomes due is good training for the tenant. It lets the tenant know that the landlord expects rental payments to be made in full and on time. Early service of the Notice Improves the chances of getting the rent paid. Waiting to serve the Notice until the end of the month is never a good idea. Daily damages for the unlawful detention of the premises (which are not considered rent) do not begin to accrue until after the Notice expires. Rather than serving the Notice at the end of the month, the landlord is better off waiting until early in the following month to serve the Notice so that it covers both months. (c) The worst time is three or four months after the default. By then the tenant is in such a hole that it is often too late for the tenant to recover. 7.4 What must be included in the notice to pay rent or quit? The Notice must include: The amount due, which can include: a. Estimated unpaid base rent. b. An estimation of percentage rent, if applicable. c. Other monetary defaults (i.e., CAM charges, insurance reimbursements, late fees, etc.) if the commercial lease defines them as additional rent. One of the following: a. The name, telephone number, and address of the 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

10 person to whom the rent payment must be made,... and, if payment may be made personally, the usual days and hours that person will be available to receive the payment... ; or b. The number of an account in a financial institution into which the rental payment may be made, and the name and street address of the institution (provided that the institution is located within five miles of the rental property); or c. If an electronic funds transfer procedure has been previously established, that payment may be made pursuant to that procedure. Code of Civil Procedure 1161(2) Caution: The Notice can only include rent that came due during the prior year. Code of Civil Procedure 1161(2). (iii) The Notice cannot include unpaid rent or other charges that go back more than a year. Although inclusion of unpaid rent going back more than one year will not invalidate the Notice, the landlord will not be able to collect unpaid rent over a year old in the subsequent unlawful detainer action. Levitz Furniture Co. v. Wingtip Communications (2001) 86 Cal. App. 4th 1035, Unpaid rent over a year old can only be collected in a separate civil suit for breach of lease. 7.5 The Notice should make it clear that the amount demanded is an estimate even if you are absolutely certain that the amounts stated are accurate. (c) Understating the rent due is never fatal to an eviction action Cavanaugh vs. High (1960) 182 Cal. App. 2d 714. Overstating the amount of rent due in a residential lease invalidates the Notice and is an absolute defense to the subsequent unlawful detainer action. Ernst Enterprises, Inc., vs. Sun Valley Gasoline, Inc., (1983) 139 Cal. App. 3d 355. For a commercial lease, Code of Civil Procedure provides that if the amount stated in the notice is clearly identified as an estimate, the eviction can proceed even if the amount claimed is not in fact correct if the amount claimed in the notice was reasonably estimated. What constitutes a "reasonable estimate"? a. Subsection (e) creates a presumption that an estimate is reasonable if it "...was no more than 20% more or less than the amount determined [upon the trial or other judicial determination] to be due." 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

11 b. However, if the rent due is contingent upon information primarily within the knowledge of one party to the lease (such as the income generated by the tenant s business in order to determine percentage rent) and that information has not been furnished to, or has not accurately been furnished to, the other party, the court shall consider that fact in determining the reasonableness of the amount of rent claimed in the Notice or tendered by the tenant. Another potential problem exists because also provides that: "If (1) upon receipt of such a notice claiming an amount identified by the notice as an estimate, the tenant tenders to the landlord within the time for payment required by the notice, the amount which the tenant has reasonably estimated to be due and (2) if at trial it is determined that the amount of rent then due is the amount tendered by the tenant or a lesser amount, the tenant shall be deemed the prevailing party for all purposes." [Emphasis added.] a. The landlord thus has a difficult decision to make when a tenant tenders less than the amount demanded in the notice. i. In an unlawful detainer action the tenant will be found the prevailing party if it is later determined at trial that the amount tendered by the tenant was correct, or exceeded the amount due, without regard to whether the landlord accepted or rejected the tender, ii. In that event the tenant will be able to recover its costs of suit and, under the standard lease, reasonable attorneys fees as well. b. Therefore, the landlord must always carefully evaluate any tender made by the tenant before going forward with the action for unlawful detainer. 8 NOTICE TO PERFORM COVENANT OR QUIT [FORMS, p. 33] 8.1 Statutory time period: three days. Code Civ. Proc. 1161(3). 8.2 Often changed in a commercial lease to five, ten or even 30 calendar days or business days. 8.3 Applies to non-monetary defaults, as well as to monetary defaults (other than base rent) when the lease does not contain an "additional rent" provision. 9 SERVICE OF NOTICES 9.1 How must the Notice be served? There are three statutory methods of service: 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

12 (iii) Personal service -- handing the notice to the tenant personally. Substituted service -- handing the notice to a responsible person at the tenant s business and then mailing the Notice to the tenant at the premises. There is no requirement that the landlord exercise due diligence to serve the tenant personally before accomplishing substituted service. Nourafchan v. Miner (1985) 169 Cal. App. 3d 746, 751. "Nail and mail" -- affixing the Notice to the premises and then mailing it to the tenant at the premises. "Nail and mail" is only appropriate if the landlord has used due diligence to personally serve or effect a substituted service of the Notice, and those efforts have been unsuccessful. The method of service of notices can be, and often is, changed In a commercial lease. (iii) For example, a commercial lease often permits service of Notices by certified mail, registered mail, or even regular mail, or other means. All are valid and must be followed if required by the terms of the lease. It is imperative that the property manager review the lease before serving the Notice to make sure that it is served in the manner required by the lease, since the commercial lease takes priority over the statutory methods. [Culver Center Partners East #1, L.P. vs. Baja Fresh Westlake Village, Inc. (2010) 185 Cal. App. 4th 744, ] A commercial lease may also authorize service of a Notice by or other electronic means. However, in order to be enforceable, the lease must specify a particular address or fax number at which electronic service may be made. [Culver Center Partners East #1, L.P. vs. Baja Fresh Westlake Village, Inc. (2010) 185 Cal. App. 4th 744.] (c) (d) Tenant's actual receipt of notice is not required, as long as the Notice is properly served. Notice should name, and be served on, the tenant along with all known subtenants and all other occupants. if the tenant is using a fictitious business name, include the fictitious business name in the notice, i.e., Bob Jones, individually and dba Bob s Donuts. It is important to review the terms of the lease, and in particular any specially-prepared addenda or amendments, to determine whether the lease requires that the Notice be served on any other party. a. Many franchisors require that Notice also be served on their corporate headquarters or corporate counsel in the 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

13 event the franchisee defaults on its obligations under the lease. b. If the tenant is a subsidiary of a larger organization, Notice may also need to be served on the organization s primary business location. c. Failure to serve all those persons or entities that the lease requires be served with the Notice will invalidate the Notice. (e) There is no requirement of "due diligence" before resorting to substituted service or "nail and mail". Nourafchan vs. Miner (1985) 169 Cal. App. 3d 746, When is the Notice effective? If the Notice is personally served or served by substituted service, the Notice is effective on the day served and expires the first working day after the expiration of the Notice period. Lamanna vs. Vognar (1993) 17 Cal. App.4th Supp. 4. Service by "nail and mail" is also effective on the day the Notice is mailed, even if the tenant does not receive it until later. Walters vs. Meyers (1990) 226 Cal. App. 3d Supp. 15, TENANT PAYS! 10.1 Full payment: another problem solved! 10.2 Partial payment. In a residential lease, the landlord's acceptance of a payment less than the amount demanded in the Notice amounts to a waiver of the prior breach and invalidates the Notice to pay rent or quit. Jones v. Maria (1920) 48 Cal. App. 171, 173. The same result might apply even if the tender was made and accepted after the unlawful detainer action was commenced. The issue, however, was always one of fact -- whether the landlord intended to waive the tenant's breach by its acceptance of the deficient rental payment. In a commercial lease, Code Civ. Proc now provides that the landlord may serve the Notice, accept a tender of less than the amount of rent claimed, and still "...commence and pursue an action under this chapter to recover the difference between the amount demanded in that notice and the payment actually received, and this shall be specified in the complaint. " Section (c) also allows the landlord to accept a partial payment after the action is commenced without waiving any of the landlord s rights to proceed with the unlawful detainer 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

14 action. a. At trial, the landlord can amend its complaint to reflect the partial payment without prior leave of court, without the need for any subsequent pleading by the tenant, and without delaying the unlawful detainer action. b. However, this applies only if the landlord provides actual notice to the tenant that acceptance of the partial rent payment does not constitute a waiver of any rights, including any right the landlord may have to recover possession of the premises. Thus the property manager should always advise the tenant in writing when a partial payment is received that it does not constitute a waiver of landlord's right to proceed with the unlawful detainer action, unless the landlord in fact intends not to proceed with that action. 11 TENANT VACATES 11.1 If the tenant turns in the keys, send a letter confirming the abandonment [FORMS, p. 29, 41] If tenant does not turn in the keys, the better practice is to send a Notice of Belief of Abandonment [FORMS, p. 35]. It is Important to serve the Notice of Belief of Abandonment to all last known addresses of the tenant (including the premises), as well as on all those whom the landlord reasonably believes may have an interest in the personal property. The No Notice of Belief of Abandonment is effective: 15 days after personal service; or 18 days after service by mail. (c) The Notice of Belief of Abandonment can only be served if: Landlord believes the tenant has abandoned the premises; and Rent has been unpaid for more than 14 days. 12 TENANT FAILS TO PAY OR VACATE 12.1 Contact counsel to prepare unlawful detainer action. Unless instructed to the contrary by the landlord, do not delay in getting the action started. A delay will convince the tenant that you're not serious. A delay will adversely affect measure and amount of damages 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

15 the landlord may eventually recover. Information to provide counsel: (iii) (iv) (v) The lease and all amendments. The Notice and proof of service. All correspondence relating to the default(s) Ledger/account information. Tenant identifying information. a. The following information regarding the tenant greatly increases your chances of recovery: i. Social Security Number. ii. iii. iv. Driver's license number. Residence address. Bank Account information. b. How do you get it? i. This information should be part of your pre-lease screening. ii. If not, ask the tenant to provide the information as part of a "tenant census report". 13 UNLAWFUL DETAINER ACTION 13.1 The object of the unlawful detainer action is to recover possession of the premises. Rent, although important, is considered secondary to possession In addition to possession, the landlord can recover: Past due rent as stated in the Notice. Damages: Daily rental value of the premises from the time the Notice expires until time of judgment. This is not considered rent, but damages for the unlawful detention of the premises. Adler vs. Elphick (1986) 184 Cal. App. 3d 642, 649; Haig vs. Hogan (1947) 82 Cal. App. 2d 876, 878. A statutory penalty of up to $ if malice is shown [Code of Civil Procedure 1174]. (c) Attorney's fees and costs, if the written lease so provides California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

16 13.3 The complaint must always be verified, that is, signed under oath by the landlord, its authorized agent or the attorney (if the landlord resides outside of the county in which the attorney maintains his or her office) Interim relief is available: Appointment of a receiver to take control of the tenant s property [Code Civ. Proc. 546(6)]. An attachment, which creates a lien against the tenant s real or personal property to assure that the landlord will actually get paid. 14 SERVICE OF THE UNLAWFUL DETAINER COMPLAINT 14.1 The Tenant must respond within 5 days from service Types of service: (c) Personal service is effective immediately, and the tenant has five days thereafter to respond. Substituted service is effective after 10 days. As a result the tenant has fifteen days from substituted service to respond. "Nail and mail". Unlike nail and mail of the Notice, nail and mail of the summons and complaint can only be accomplished with court approval, and then only if the landlord establishes an inability to serve the complaint by any other method. Effective 10 days after posting and mailing. TENANT'S RESPONSE 15 NO RESPONSE 15.1 A Request to Enter Default should be prepared and filed as soon as possible after the tenant s response was due. May be filed the day after the answer was due. What can you seek? Writ of possession only. a. When only possession is sought, the default can be entered quickly. b. Requesting rent and damages at the same time slows things up. Writ of possession, plus accrued rent, damages, attorneys fees and costs California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

17 a. Requesting damages will significantly delay issuance of the writ and recovery of possession. b. Better practice is to seek judgment for possession only, and then seek entry of judgment for monetary damages later. 16 SETTLEMENT 16.1 Can happen at any time -- even up to the day of the lockout Possible methods: Continued Possession Agreement [FORMS, p. 29, 41] For use when the tenant: a. Has already defaulted; b. Desires to remain in the premises; c. The tenant desires to cure the default over time; and d. The landlord is willing to let the tenant do so. Should be prepared and/or reviewed by counsel before using. Deferred Rental Agreement [FORMS, p. 43] For use when tenant: a. Is not in default but can no longer pay his rent; b. Landlord and tenant both want the tenant to remain in the premises; and c. The landlord is willing to accept reduced rent over time. Should be prepared and/or reviewed by counsel before using. (c) Promissory note [FORMS, p. 51] Dangerous because you cannot evict the tenant based on a failure to pay the amounts called for in the promissory note; your only remedy is a regular civil action. Not recommended if the tenant remains in possession of the Premises, because the same result can be obtained using other methods California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

18 (d) Stipulation for Entry of Judgment A very effective settlement method, since it provides fro the entry of judgment against the tenant if the tenant fails to make the payments required under the agreement after the landlord serves the tenant with a Notice of Default under the terms of the Stipulation. The Stipulation for Entry of Judgment can only be used: a. If the action is already on file; and b. The tenant has appeared in the action, or gives the landlord an answer to be filed, along with the filing fee. (e) Confession of Judgment is rarely, if ever, used because it requires counsel for the tenant to make certain representations that counsel normally will not make. 17 MOTION TO QUASH AND OTHER MOTIONS 17.1 Motions are usually filed as a delaying tactic in order to give the tenant more time to vacate, and are often set for hearing much farther out than they are required to be. This requires additional work by counsel for the landlord to keep the unlawful detainer on track Typical Motions: Motion to Quash Service of Summons Attacks service of the complaint on the grounds that: a. Service was improper because it was served in a manner not authorized by the lease, or not served in a manner required by the lease; or b. Materially defective form of summons, i.e., a regular 30 day civil summons was used rather than the special 5 day unlawful detainer summons; or c. The claim is not in fact for unlawful detainer because the underlying notice was improper, i.e., a three day notice was served when the lease requires a five day notice. Motion must be heard between 3 and 7 days after it is filed. a. If the motion is denied, the tenant's answer is due 5 days after service of notice of ruling. b. If the motion is granted, the complaint, and possibly the underlying notice, must be re-served California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

19 Demurrer. Rarely seen -- even rarer to see it properly used in an unlawful detainer action. In unlawful detainer action, demurrer only attacks the subject matter jurisdiction of court. a. In a regular civil action, a demurrer normally attacks the validity of cause of action. b. Not so in unlawful detainer work -- that is done through the motion to quash. (c) Motion to strike generally used when the verification is missing or improper. 18 ANSWER 18.1 If the tenant answers, he or she can raise any number of affirmative defenses Proper defenses in a commercial lease action include: (c) Waiver, change or cancellation of the Notice. That the Notice was served to discriminate against the tenant in violation of the Constitution of the United States or California. The landlord accepted rent from the tenant for a period of time after the Notice expired What is not a proper defense to a commercial unlawful detainer action. (c) Breach of the implied covenant of habitability is not a defense to a commercial detainer complaint. Muro v. Superior Court (1986) 184 Cal. App. 3d 1089, Failure of the landlord to meet its repair obligations under the lease is not a defense to a commercial unlawful detainer action. Schulman v. Vera (1980) 108 Cal. App. 3d 552, 558. As a result, the tenant cannot defend a commercial unlawful detainer action by contending that it was not obligated to pay its rent because it was required to make repairs that the landlord should have made under the lease. 19 PROCEEDING TO TRIAL 19.1 Once the tenant has answered, a Memorandum to Set Case for Trial should be filed immediately. The Memorandum advises the court that the matter can be set for trial California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

20 The trial must occur within 20 days of the filing of the Memorandum to Set Discovery can be conducted. (c) The responding party (whether tenant or landlord) must respond to the discovery within five days. Forms for discovery, including form interrogatories specifically designed for use in unlawful detainer actions, are provided by the Judicial Council. However, because discovery will almost always delay the landlord s recovery of possession, and will rarely, if ever, provide the landlord with any information the landlord does not already have, is rarely useful or necessary The landlord should consider authorizing a Motion for Summary Judgment. The motion can be heard on 5 days notice on written declaration. Advantages: (iii) If successful, avoids trial. Determines action fast. Usually successful Trial. (c) Trial must occur within 20 days after the Memorandum to Set is filed. Live testimony is required. A jury trial is possible unless jury has been waived in the lease Judgment is normally obtained for: (c) (d) Possession. Rent. Damages. Attorneys fees and costs. 20 ENFORCEMENT OF JUDGMENT 20.1 An Application for Writ of Possession should be submitted to the court, along with the Writ of Possession and the Sheriff s Instructions, as soon as possible after judgment is obtained The Writ of Possession is usually issued and served by the Sheriff 5 to California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

21 days after the default is entered or the judgment obtained. Once issued, the Writ is then posted on the premises by the Sheriff. The lock out occurs (or should occur) 5 days later After possession is obtained, the landlord can have judgment entered on the default, and/or have a writ of execution and abstract of judgment issued on the money judgment Caution: If the landlord allows the tenant to remain on the premises after judgment is entered and possession returned to the landlord, the landlord may be liable to anyone injured on the premises, since the landlord then has an enhanced duty to inspect. Stone vs. Center Trust Retail Properties, Inc. (2008) 163 Cal. App. 4th 608, DISPOSING OF THE TENANT'S PROPERTY 21.1 After the landlord obtains possession (whether by eviction, the tenant s abandonment, or the tenant s return of the keys), the landlord must inventory the tenant's personal property, and properly dispose of it If the tenant was evicted by the Sheriff, the eviction notice contained the required language concerning the disposition of the tenant's personal property, and no further notice from the landlord is required If the tenant abandoned the premises prior to the eviction, the landlord must prepare a Notice of Right to Reclaim Abandoned Personal Property [FORMS, p.?]. (c) The Notice must be prepared after the landlord recovers possession, and must list the personal property remaining on the premises. The inventory should be attached to the Notice. The Notice is effective: 15 days after personal service; or 18 days after service by mail. (d) If not reclaimed, landlord must dispose of the personal property in the manner required by the code. The proper method depends on whether the tenancy was residential or commercial In a residential tenancy: a. If the value of all of the personal property is under $300, it can be disposed of by the landlord in any manner the landlord sees fit. b. If the value of all the personal property is over $300, the personal property must be auctioned off and the proceeds delivered to the County after deduction of the 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

22 reasonable storage costs and costs of sale. In a commercial tenancy: a. If the value of all of the personal property is under $750 or $1 per square foot of the premises, whichever is lower, the personal property can be retained by the landlord or disposed of in any manner it sees fit. b. If the value of all the personal property is over $750 or $1 per square foot of the premises, whichever is lower, the personal property must be sold at public sale by competitive bidding in the manner described in Civil Code and the proceeds delivered to the County after deduction of the reasonable storage costs and costs of sale. 22 DISPOSITION OF TENANT'S SECURITY DEPOSIT 22.1 Any security deposit paid by the tenant can only be used... to remedy tenant defaults in the payment of rent, to repair damages to the premises caused by the tenant, or to clean the premises upon termination of the tenancy... Civil Code (c) How and when the deposit must be returned to the tenant after the landlord recovers possession of the premises depends on the provisions contained in the commercial lease, the amount of the deposit, and the use the landlord intends to make of the security deposit. If the amount of the security deposit... equals no more than one month's rent plus a deposit amount clearly described as the payment of the last month's rent..., and the landlord s claim against the security deposit is only for a default in the payment of rent (i.e., not for repairs or cleaning), then the balance of the deposit after deduction of past-due rent must be returned to the tenant... at a time as may be mutually agreed upon by landlord and tenant, but in no event later than 30 days from the date the landlord receives possession of the premises. Civil Code (c)(1); emphasis added. If the amount of the security deposit... exceeds the amount of one month's rent plus a deposit amount clearly described as the payment of the last month's rent..., and the landlord s claim against the security deposit is only for a default in the payment of rent (i.e., not for repairs or cleaning),... then any remaining portion of the payment or deposit in excess of an amount equal to one month's rent shall be returned to the tenant no later than two weeks after the date the landlord receives possession of the premises, with the remainder to be returned or accounted for within 30 days from the date the landlord receives possession of the premises. Civil Code (c)(2); emphasis added. (c) Without regard to the amount of the deposit, if the landlord s claim... includes amounts reasonably necessary to repair damages to the premises caused by the tenant or to clean the premises, then any 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

23 remaining portion of the payment or deposit shall be returned to the tenant at a time as may be mutually agreed upon by landlord and tenant, but in no event later than 30 days from the date the landlord receives possession of the premises. Civil Code (c)(3) No part of the security deposit may be retained by the landlord to compensate the landlord for anticipated future lost rent caused by the tenant s vacation of the premises. 250 L.L.C. vs. PhotoPoint Corp. (2005) 131 Cal. App. 4th BANKRUPTCY 23.1 Despite what the lease says, the filing of bankruptcy does not terminate the lease, nor does it deprive the tenant of right to possession. [11 USC 365(e)] Types of bankruptcies: (c) Chapter 7 is a liquidating bankruptcy that may be invoked by individuals, corporations or partnerships. The purpose is to appoint a trustee to collect all of the debtor s assets, liquidate them, and use the proceeds to pay the claims of unsecured creditors. Chapter 13 is a wage earner plan available to individuals only. The purpose is for the debtor to present a plan to creditors to pay them a portion of their debts over a brief period of time. Chapter 11 is a reorganization in which the bankrupt intends to emerge with its debts rearranged and a new business plan. It is available to individuals, partnerships or corporations Automatic stay [11 USC 365] Filing of bankruptcy by the debtor automatically stays any action against the tenant to enforce the unexpired lease or repossess the premises. Effect: (iii) Stops the unlawful detainer action in its tracks until relief from the stay is obtained. The landlord cannot offset the security deposit against unpaid rent while the bankruptcy is pending. Violation of stay can result in the landlord s liability to the tenant for damages, including costs and attorney s fees. (c) Exceptions: There is no stay as to an expired commercial lease. In a residential lease, there is no stay if the unlawful detainer judgment was obtained prior to filing [In re Smith, 105 BR 50, 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

24 53 (BK CD CA 1989)]; This, however, is not true as to commercial leases [In re Acorn Investments, 8 BR 506 (BK SD CA 1981)] Trustee's Right to Assume or Reject the Lease. (c) The trustee in bankruptcy may exercise its right to assume or reject the lease at any time within 60 Days of the filing of the bankruptcy. The time period may be extended by motion or stipulation and court order. A terminated Lease cannot be assumed. The lease is terminated if the notice to pay rent or quit requested termination; and The bankruptcy petition was filed after the Notice expired, without regard to whether the landlord actually obtained a judgment for unlawful detainer prior to the filing of the bankruptcy [In re Windmill Farms, Inc., 841 F.2d 1467 (9th Cir. 1988).] (d) (e) If the lease is rejected, the landlord is entitled to immediate possession. If the lease is assumed: (iii) The lease is in full force. Post-petition rent must be paid timely, or relief from the stay can be granted. Pre-petition rent is an unsecured claim. (f) Note, however, that even if the lease is assumed initially by the trustee, the plan filed by the debtor in a Chapter 11 or Chapter 13 may specify that the lease will be deemed rejected Motion for Relief from Automatic Stay. Can be filed at any time. The Motion will be granted if: The landlord is not "adequately protected", i.e., paid; or The debtor has no equity in the premises and the premises is not necessary for the tenant s effective reorganization. a. As a result, relief from the automatic stay is much more likely to be granted in a liquidating Chapter 7 bankruptcy than in a Chapter 11 or 13 reorganization bankruptcy California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

25 b. Relief is rarely granted in Chapter 11 or Chapter 13 prior to the time the trustee makes a determination about whether to assume or reject the lease, unless the lease cannot be assumed by the trustee as a result of its termination prior to the filing of the bankruptcy. (c) If the Motion for Relief is granted, the bankruptcy court loses control, and the unlawful detainer action can proceed in state court Landlord s claim in the bankruptcy court. As long as the tenant-bankrupt is using the premises during the pendency of the bankruptcy, the landlord is entitled to file a priority claim for administrative rent. Limitations on Landlord's right to damages in the bankruptcy preceding: The landlord cannot claim the full amount of future rent in the bankruptcy proceeding. Instead, the landlord is limited to: a. Unpaid rent; plus b. Future rent, without acceleration, for the greater of one year, or 15%, but not more than three years, of the remaining term, following the earlier of: i. the date the bankruptcy petition was filed, or ii. the date the landlord recovered possession of the premises. 11 USCS 502(6) California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

26 UNLAWFUL DETAINER FACT SHEET Tenant(s) Name(s): Property Address: Landlord's Name: Landlord's Capacity: Corporation Limited Partnership General Partnership Individual State in which Landlord formed: California Other: Lease Date: Commencement Date: Copy of Lease included? Yes No All amendments or addenda to Lease included? Yes Lease previously assigned? Yes No Assignments included? Yes No Paragraph of Lease calls for three five other: days Notice of default in payment of rent. Notice to Pay Rent or Quit served on Copy of Notice included? Yes No Copy of Tenants' Lease Application included? Yes No If not, does a Lease Application exist? Yes No 2011 California Property Manager s Unlawful Detainer Handbook Hewitt Wolensky LLP

27 Tenant(s) principal officers, agents or representatives: 1. Name: Social Security Number: Driver's License Number: Last known address: 2. Name: Social Security Number: Driver's License Number: Last known address: 3. Name: Social Security Number: Driver's License Number: Last known address: 2011 Hewitt Wolensky LLP Landlord-Tenant Forms 23 CONSULT WITH COUNSEL BEFORE USING

28 UNLAWFUL DETAINER STATUS Project: Estimated Cost: Tenant: Approved by Address: Approved on: BK filed Claim Filed P. Mgr. Amount of Claim Responsible Attorney: Revised Amount ACTION DATE COMMENTS Notice Served: Personal Certified Mail Reg. Mail Notice Expired: File Delivered: Complaint Received: Complaint Approved: Complaint Filed: Complaint Served: Response Filed: Default Requested: Default Entered: Default Judgment (Possession Only): 2011 Hewitt Wolensky LLP Landlord-Tenant Forms 24 CONSULT WITH COUNSEL BEFORE USING

29 Writ of Possession: Judgment Entered: Writ Issued: Writ Posted: Trial Date: Eviction Completed: Asset Rpt. Ordered: Asset Rpt. Reviewed: File Closed: File Converted: GENERAL COMMENTS: 2011 Hewitt Wolensky LLP Landlord-Tenant Forms 25 CONSULT WITH COUNSEL BEFORE USING

30 FORM LETTER - NONPAYMENT OF RENT (Date) (Tenant's Name) (Tenant's Address) Re: (Address of Premises) Dear (Tenant's Name): (Landlord's Name) has not received your rent payment for the month of (Month and Year) in the sum of (Amount of Delinquent Rent). Please send that payment to our office by (Deadline Date). If you fail to do so, we will take whatever action is necessary to protect our interest including, but not limited to, serving a notice to pay rent or quit and filing a lawsuit to recover possession of the premises, rent, attorneys fees and costs. If you have paid the amount demanded, please disregard this notice, and we thank you for your payment. Please call me if you have any questions. Very truly yours, (Landlord's Name) By: (Property Management Company) By: (Property Manager's Name) Its: (Title) 2011 Hewitt Wolensky LLP Landlord-Tenant Forms 26 CONSULT WITH COUNSEL BEFORE USING

31 FORM LETTER UNDERPAYMENT OF RENT DEMANDED IN NOTICE (Tenant's Name) (Tenant's Address) (Date) Re: (Address of Premises) Dear (Tenant's Name): This will acknowledge delivery of the following checks to (Landlord's name): (Itemize date and amounts of checks received) Pursuant to the provisions of Code of Civil Procedure Section , the receipt of these amounts shall not affect the right of (Landlord's name) to proceed with an action for unlawful detainer in the event the remaining amounts set forth in the Notice to Pay Rent or Quit served on your client on (Date notice served) are not in fact received by (Landlord's name) on or before (Date notice expires). Please give this matter your prompt attention. (Landlord's Name) By: (Property Management Company) By: (Property Manager's Name) Its: (Title) 2011 Hewitt Wolensky LLP Landlord-Tenant Forms 27 CONSULT WITH COUNSEL BEFORE USING

32 FORM LETTER -- ABANDONMENT (Date) (Tenant's Name) (Tenant's Address) Re: (Address of Premises) Dear (Tenant's Name): This letter confirms our understanding regarding the lease dated (Date of Lease) ("the Lease") between (Landlord's Name) ("Landlord") and (Tenant's Name) ("Tenant") covering certain real property commonly known as (Address of Property) ("the Subject Property"): 1. Tenant has vacated the Subject Property with no intent of retaking possession or of claiming a right to possess the Subject Property at a later date. Landlord. 2. Tenant has returned a key and possession of the Subject Property to 3. Landlord intends to market and attempt to relet the Subject Property, and will use its best efforts to do so. 4. Landlord's acceptance of the key and possession of the Subject Property and its efforts to market and relet the Subject Property shall not constitute a surrender, lease termination or waiver of Landlord's right to hold Tenants and any other appropriate party liable for all past, present and/or future obligations arising under the Lease. If you do not intend to abandon and vacate the Subject Property, please contact me by 5:00 p.m. on (Deadline Date). If I do not hear from you by that time and date, I will assume that the content of this letter is accurate and will proceed accordingly. Please call me if you have any questions. Very truly yours, (Landlord's Name) By: (Property Management Company) By: (Property Manager's Name) Its: (Title) 2011 Hewitt Wolensky LLP Landlord-Tenant Forms 28 CONSULT WITH COUNSEL BEFORE USING

33 NOTICE OF NSF CHECK TO: (Tenant's Name) (Tenant's Address) (Landlord) is the payee of a check you wrote for $(Amount of check) a copy of which is enclosed. The check was not paid because no such account exists or there were insufficient funds in your account. If you fail to pay the full amount of the check in cash within 30 days after this Notice is mailed, you could be sued and held responsible to pay at least all of the following, pursuant to Civil Code Section 1719: 1. The amount of the check. 2. Damages of at least $ or, if higher, three times the amount of the check up to $1, The cost of mailing this Notice. 4. Attorneys fees and court costs under the terms of your lease. Please direct your cash, cashier's check or money order to (Landlord's name and address). Dated: (Date) (Landlord's Name) By: (Property Management Company) By: (Property Manager's Name) Its: (Title) 2011 Hewitt Wolensky LLP Landlord-Tenant Forms 29 CONSULT WITH COUNSEL BEFORE USING