September 6, 2020

California Court Voids Arbitration Clause in Residential Lease

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Author: Staff

The California Civil Code regulates the types of terms that a residential lease can include, and states that public policy renders certain provisions void. A recent ruling by the California Court of Appeals, Second District in Williams v. 3620 W. 102nd Street, Inc. held that an arbitration clause in a residential lease is unenforceable based on public policy. California real estate investors considering investments in residential properties should be aware of how California law can affect their rights and limit the types of provisions they may include in lease agreements. This includes a legal requirement that residential tenants have access to the courts.

Williams v. 3620 W. 102nd Street, Inc.

Arbitration Clauses in Contracts

Arbitration is a type of alternative dispute resolution in which a neutral third party, the arbitrator, reviews the arguments and evidence of each side of a dispute. The arbitrator then makes a recommendation or ruling. If the parties agreed in advance to binding arbitration, then the arbitrator’s decision is final. Otherwise, the arbitrator’s ruling is more like a recommendation that neither party is obligated to accept.

The main benefits of arbitration are that the process tends to be much faster and less expensive than taking a case to trial. While a court might not have room on their docket for months or longer, an arbitrator could hear the case much sooner. This saves both parties time and the cost of protracted litigation.

August 22, 2019

Ongoing Requirements for Owners of California Apartment Buildings

by Bona Law PC

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Author: Staff

An apartment building can be a great investment for a California real estate investor, but it often requires a great deal of maintenance and attention. California law sets numerous standards and requirements for leased residential premises, particularly when a property includes multiple residences. These include ongoing responsibilities for maintenance and management of the property. Rather than duties owed to individual tenants, these are duties owed to all tenants as a group. Here, we offer a general overview for apartment building owners in California.

Minimum Standard of Habitability

A California landlord is bound by the implied warranty of habitability, which holds that a landlord, merely by offering an apartment for lease, is warranting that it is suitable for residential use. California law defines this duty in very general terms, requiring a landlord to “repair all deteriorations…occasioned by his want of ordinary care,” and to “put it into a condition fit for such occupation, and repair all subsequent dilapidations thereof.”

This implied warranty also means ensuring that the premises meet legal requirements under local building codes, state and federal laws regarding accessibility, and laws involving hazardous substances like lead paint. If a landlord fails to meet their obligations under this warranty, a tenant can get out of a lease by claiming constructive eviction.

October 22, 2018

Duties of a California Real Estate Property Manager

by Bona Law PC

Author: Staff

When considering an investment in California real estate, prospective investors should carefully consider how much of their time and attention the investment will require. Properties that generate rental income require management in order to ensure that the stream of rental income continues unabated. Investors who are willing and able to take on this responsibility may do so, but they should also consider retaining a property manager to handle the day-to-day operations. Property managers in California must have a real estate license to perform functions like soliciting tenants or negotiating and enforcing lease agreements. Otherwise, they are not required to have a specific license.

Types of Property Managers

July 19, 2018

What Disclosures Must a California Real Estate Investor Make When Selling an Apartment Building?

by Bona Law PC

Author: Staff

Buying real estate is a risky venture for investors, with buyers betting on the property increasing in value or producing a revenue stream through rental. Buyers also take various chances regarding unknown defects in the property’s title, or defects in the property itself. Researching potential defects is a critical part of any California real estate investment. California law requires sellers of certain types of real estate to make a variety of disclosures to buyers, in the interest of giving prospective buyers as much relevant information as possible. Most of these disclosure rules apply to residential real property. Some investment properties, such as rental houses, are subject to residential real estate disclosure requirements. The sale of an apartment building with more than four dwelling units, however, is not necessarily subject to those rules. It is, however, subject to other disclosure requirements, including known defects or hazards, particularly environmental hazards. California also requires disclosure of certain earthquake risks.

Residential vs. Commercial Property

Residential properties, defined as properties with one to four dwelling units, are subject to a substantial number of disclosure requirements in California. Residential rental properties can appear to fall into both categories, since they are residential for tenants, but commercial for owners. Rental houses, duplexes, and other small structures generally fall under the “residential” category. Sellers must follow the residential disclosure guidelines, even if the buyer is another investor. Larger apartment buildings, on the other hand, are not necessarily subject to those requirements.

Common Law Disclosure Requirements

A 1963 decision by a California appellate court, Lingsch v. Savage, establishes that sellers of commercial property have a duty to disclose any facts known to them that “materially affect[] the value or desirability of the property.” Failure to do so with the intention of inducing someone to purchase a property can result in civil liability for fraud.
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March 22, 2018

What California Real Estate Investors Should Know About Buying Apartment Buildings

by Bona Law PC

Author: Staff

Apartment buildings can be an excellent investment for California real estate investors. Factors like the size and style of the building, the type of units available, and of course, the location are all important. An apartment building owner can manage the property directly or delegate this role to a manager, but liability for breaches of a lease agreement, or for violations of California landlord-tenant law, will ultimately fall on the owner rather than the manager. California apartment building owners’ legal obligations include making accommodations for accessibility and, under a new law that applies to new construction, providing individual water meters or submetering for each unit. Real estate investors looking into apartment buildings should be aware of the financial risks and legal obligations.

What Is an “Apartment Building” Under California Law?