September 6, 2020

California Court Voids Arbitration Clause in Residential Lease

Arbitration-in-California-Lease-300x200

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.

December 22, 2019

New California Rent Control Law Caps Rent Increases, Limits Landlords’ Authority to Evict Tenants

by Bona Law PC

California-rental-control-law-300x196

Author: Staff

The cost of housing is rising in many parts of California. Real estate investors view this as good news, of course, because higher property values and higher rent often mean greater returns on investments. The state government is seeking to balance property owners’ and tenants’ interests. It is hard to dispute that rising housing costs often outpace people’s earning capacities. Whether California’s new “rent control” law is the right way to address the problem, however, is likely to remain a contentious issue for some time. The new law caps annual rent increases and establishes additional standards for evictions. Prospective California real estate investors should be aware of how the new law could affect them.

What Is Rent Control?

The term “rent control” refers to laws that limit landlords’ authority to raise the rent and evict tenants in various situations. In California, rent control laws have existed for some time at the city and county levels in Los Angeles, the Bay Area, and the Sacramento area. California’s new law, which will go into effect at the beginning of 2020, is the first such law to apply statewide.

New York City probably has the most well-known rent control law in the country. Television shows set in Manhattan often cite “rent control” to explain characters’ improbably-large apartment. Rent control laws can range from fixed ceilings on rent, with no further increases; to limits on how much a landlord may increase the rent from one time period to another. Most jurisdictions have laws that establish eviction procedures. Rent control laws may add further limitations on landlords’ authority to evict tenants.

August 22, 2019

Ongoing Requirements for Owners of California Apartment Buildings

by Bona Law PC

Apartment-Building-300x199

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.

January 19, 2019

Anatomy of a Commercial Real Estate Transaction for California Real Estate Investors

by Bona Law PC

Commercial-Property-300x200

Author: Staff

When it comes to choosing an investment property in California, real estate investors have a vast array of options. They can purchase a single-family dwelling and rent it to a tenant, or renovate it and flip it. They can purchase a multi-family dwelling or an apartment building for rental purposes. Commercial real estate offers even more possibilities, such as buying an existing office or retail building, renovating a commercial building, or purchasing raw land to develop from the ground up. Commercial investments often carry greater possibilities for revenue and profit, but they also often involve more risk, and more up-front work. The following is a general overview of the steps in a commercial real estate transaction. This hypothetical transaction involves the purchase of a property with the intention of renovating or developing it for commercial use.

Step 1: Find a Property and Build Your Team

Before you look at a single property, you should identify your goals and make a plan. Do you want to purchase a property that you can sell at a short-term profit, or do you intend to derive income from the property through rent payments? How much risk can you take on? How much time, effort, and capital are you willing and/or able to invest? Do you have investment partners? Are you putting together a real-estate syndicate? Do you need investment partners to contribute money or expertise? And so forth.

Next, you should visit many properties. Whether a property is “right” for you depends on your investment goals and your budget for both purchasing and maintaining a commercial property, among many other factors. Consider the current uses of these properties, and whether they fit your intended use or could be adapted to that use. Determine whether there are any uses that are prohibited for a property because of zoning or deed restrictions. Find out what permits you will need from multiple levels of government. Investigate each property’s potential for rent income, and the economic conditions of the surrounding areas. Above all else, find out why the owner is selling.
Continue reading

December 24, 2018

San Diego Vacation Rental Limitations: What Happened and What Will Happen Next?

by Bona Law PC

San-Diego-Vacation-rental-300x168

Author: Staff

San Diego’s City Council spent much of 2018 arguing over proposed vacation rental regulations. In July, the City Council passed two ordinances imposing strict limits on “short term residential occupancy” (STRO). Opponents of the ordinances circulated a petition that received enough signatures to put the matter before voters. The City Council repealed the ordinances in October. Arguments for and against the ordinances brought up the interests of homeowners who live among STRO properties, homeowners who use their homes as STROs for income, investors who own STRO properties but do not live in them, and lodging businesses (hotels and motels) that view STROs as competition. Even though the ordinances have been repealed, the issue is currently under debate in Los Angeles, and is likely to come up again in San Diego. California real estate investors should be aware of new developments.

Short-Term Rental, Defined

The city defines STRO as occupancy of a residential-zoned property for less than one month. The ordinances made a distinction between short-term rental of a property by an homeowner who also lives at the property, known as “home sharing,” and “whole home STRO,” in which the owner makes the entire property available for rent and does not reside there. It specifically targeted whole home STRO, declaring it to have the “most negative impacts to neighborhood communities.”

The Ordinances

The City Council adopted two ordinances in mid-July, and formalized them on August 2. The first ordinance, O-20977, addressed enforcement STRO restrictions. The second ordinance, O-20978, established the actual restrictions.
Continue reading

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

October 9, 2018

Due Diligence Tips for Commercial Property Purchases in California

by Bona Law PC

Author: Staff

Investing in California commercial real estate requires extensive planning and research. A prospective buyer must consider potential legal, financial, structural, and environmental issues. This process of research and review is commonly known as “due diligence.” Since every real estate investment is unique, the precise due diligence process will be different each time. The following is a very general checklist, which may apply to a wide range of properties.

1. Investigate both the property and the seller

Due diligence for a commercial real estate investment is about more than the property itself. An investor should also look into the seller’s reputation and their track record for similar transactions. Even if the property is spotless, an investment might not be worth the risk of an unscrupulous seller.

2. Title and Survey

Inaccurate identification of a property is a common complication. An investor should obtain the full legal description of the property, to compare to official real estate records.
Continue reading

September 12, 2018

What Are a California Landlord’s Remedies for a Tenant’s Breach of a Commercial Lease?

by Bona Law PC

Author: Staff

For California real estate investors, rental property can produce reliable revenue streams, but these come with responsibilities. Landlords leasing residential properties in California have numerous obligations under various implied warranties. Leases for commercial property have far fewer built-in obligations for landlords. A commercial landlord’s obligations are often limited to the specific terms of the lease contract. Commercial tenants, on the other hand, may have many additional obligations beyond paying rent. While this might appear to benefit landlords, it can also mean significant losses if a commercial tenant breaches their lease. California investors should know the remedies available to them.

Commercial vs. Residential Leases

As mentioned earlier, commercial leases are subject to fewer requirements under California law than residential leases. A commercial lease, for example, does not include the implied warranty of habitability, which obligates a landlord to maintain leased premises in liveable condition for the benefit of tenants. By contrast, maintenance of the property, or even construction of improvements on the property, could be a tenant’s obligation under a commercial lease. Commercial landlords could lease a property on an “as is” basis, as long as the tenant has given informed consent to this arrangement.

Commercial landlords in California are usually bound by the covenant of quiet enjoyment, which protects the tenant’s right to use the property for the purposes expressed in the lease. Unlike residential leases, this covenant can be waived in commercial leases, with the agreement of both parties.
Continue reading

June 23, 2018

How the California Coastal Commission Regulates Vacation Rentals

by Bona Law PC

Author: Staff

California’s coastline is one of the state’s greatest assets. It offers some of the best scenery in the world, draws countless tourists, and boasts some of the highest property values in the state. Coastal property offers many opportunities for California real estate investors, but a unique set of rules may apply. The California Coastal Act (CCA) regulates an area known as the Coastal Zone. Back in the 1970’s, the state created the California Coastal Commission (CCC) to enforce the CCA. An issue that has caused controversy recently in cities and towns up and down the coast involves vacation rental homes, commonly known as short-term rentals (STRs). The CCC must approve municipal regulations affecting coastal STRs. It recently rejected an ordinance in Del Mar that would have limited the duration of time STRs could be rented to the public.

A voter initiative in 1972 first established the CCC, and it became a permanent part of the state government when the California Legislature enacted the CCA in 1976. It has jurisdiction over the Coastal Zone, and a significant part of its purpose is to preserve access to the coastline and public beaches. According to state law, the Coastal Zone extends from the U.S.-Mexico border to the California-Oregon state line. It begins at the “state’s outer limit of jurisdiction” in the Pacific Ocean, and extends inland “generally 1,000 yards from the mean high tide line of the sea.” The inland extent may be less than one thousand yards in urban areas, and more in undeveloped areas. Beachfront properties almost everywhere in the state are located within the Coastal Zone. Continue reading

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?