Norris Bruce
Jun 16, 2016

California Real Estate Eviction Trends for Real Estate Investors and Landlords with Dennis Block #491

Dennis Block

Bruce Norris is joined again this week by Dennis Block. Dennis has exclusively represented landlords for the past 40 years. His firm is the leading eviction and collection firm in the state of California. His firm is comprised of 15 attorneys, all specializing in this area of law. His clients range from bother commercial and residential property-owners to federal government, municipalities, and banking institutions. To date, his firm has handled over 200,000 evictions to date.

Episode Highlights

  • What is the challenge with tenants converting single-story homes into duplexes?
  • Is this kind of behavior prevalent only in L.A. or in other cities as well?
  • Are most of the properties managed by the owner or other companies?
  • What right does the landlord have if the tenant starts either a daycare or dog center in their home?
  • What is the easiest eviction process, and what kinds of things could complicate it?
  • How would you handle the eviction of a tenant in a rent-controlled area who poses a threat?

Episode Notes

They were just talking about the challenges in LA, and Dennis had brought up the fact that sometimes one will convert something that looks like a single-family that you buy at a trustee sale. They will then put a wall up the middle and create a duplex out of it. They created a nightmare for the landlord because they now have a property under a different set of laws and could be under rent control even though it is deeded as a single-family. This is something they would not have known having bought it at a trustee sale. At a trustee sale you don’t really have an opportunity to look at the condition of the house since they won’t really let you in, so you are basically buying it on sight.

In this “single-family home,” you look at the county assessor and building and safety, and you see it is a single-family home but they put a wall down the center and created a duplex. Now you have a problem with rent control. Rent control will say you have an illegal unit, and your position is that you did not sign up for this. This could have been done by the tenants or by the previous owner. Rent control for the city of Los Angeles will say they don’t care and that you are the owner of an illegal unit. Now you will be under an order to comply to be rid of the tenants.

At first blush you’ll thank the city because this is exactly what you wanted to do. What you do not understand is the city has requirements to get rid of them. The first thing you do is file an application process with the city. They would then fill out the paperwork and pay a city filing fee. This could be anywhere from $600 to $742. Then, they will review and approve it. Now, once you get it back they have the right to serve both the units in the single-family residence with a 60-day notice to get off the property. The only small thing is the city will now require you to pay relocation money. This can be anywhere from $7,800 to up to $19,500. If the tenants in both units have children, are over the age of 62, or are handicapped and been there longer than 3 years, then you could be paying the $19,500. Whatever great deal you thought you were getting on the single-family residence is costing $40,000 more.

For the investors out there buying foreclosure properties in a rent-controlled area, you have to be very careful with multiple units or a single-family home somebody bootlegged. In LA this is not uncommon. Dennis has spoken at seminars about how they will not only have artful sales of how to invest in real estate, but he also talks about how people are making a lot of money quick without having to invest anything. To do this, they will go to, for example, the city of Los Angeles and go online to Craigslist. In Craigslist, they will look for a rental. In looking for the rental, they will then use these key terms: rear guest house. Invariably, these are illegal units. Next, they call the person to tell them they will take it. But, when they go over to look at the rear guest house, they ring with them their minor children or mother who is over 62.

Once they tell them they will take it, they will then pay him the first month’s rent. They will then pay the security deposit and get his signature on the rental agreement. After this, they will never pay again. In this scenario, they will be entitled to $16,800. Their next phone call will be to the Los Angeles Housing Department, and they will file a complaint. If they went online to the tax assessor’s guide they will see it says the address is a single-family residence. People are doing this. Dennis is seeing people come to his office who are on fixed retirements and needed a little extra money, so they figured they would rent out the rear guest house, put in an illegal kitchen, and now they have shot themselves in the foot. This is a terrible scenario created by the city counsel of Los Angeles.

Bruce asked if this is prevalent in any other Southern California cities besides LA. Dennis said this is certainly true in places like Santa Monica and West Hollywood. These places are called uncivilized by real estate because there is that scourge called rent control. In any other civilized places to buy property like Orange County or Burbank, then you do not have this issue. Rents have increased a lot in California, so Bruce wondered if there is a lot of pressure to make other areas have rent control and what the process would be. Dennis said the answer is the state law called Costa Hawkins. Under this law, municipality cannot institute rent control if the city did not have rent control back in 1995.

For example, Glendale is a want to be rent control city. Their city council was desperate to start rent control. However, since they did not have it in, then they could not do it. They instituted eviction protection that you have to have good cause to evict. However, if you would raise the rent to whatever you like you don’t really care about good cause to evict. Rent control being instituted into new municipalities cannot be unless they change that state law.

Bruce asked about advertising for rentals and if people will likely make errors without a manager. Dennis said you have to use due diligence when leasing out to applicants. You obviously cannot discriminate on the base of race, religion, sex, marital status, age, or handicap nature. If you had, for example, you had adults only housing, you would have Fair Housing sitting on your head in 12 seconds and sued immediately. You cannot request in any ads you put forth any specific quality of the person coming into the home. Tell them what the unit is, where it is located, the rent per month, the configuration of the unit, and then screen them from the phone call to you. This should be right on the phone call, even prior to having them fill out an application. Star the screening process right on the phone.

Bruce asked if most of the properties are managed by owner or other companies. Dennis said most of his clients are mom and pop owners. They deal with a lot of management companies as well, but a majority of mom and pop owners come to them on a regular basis. Bruce asked if the product type they have is typically four units or four units or less. Dennis said the majority of his clients have more than four units. He has seen every kind of eviction you could possibly imagine from evicting airplanes from airport hangers to boat docks. In the latter, the landlord is told to pay rent or sink. Bruce said he took a 60-foot boat in trade one time and had it leased. It never occurred to him he may have to do an eviction to the boat, but thankfully he never had to do this.

Bruce has on occasion rented out a single-family home only to discover in a couple months there was a business operating. This happened about 3 months ago where the city levied an instant threat of a fine of thousands of dollars. The funny part is these municipalities, the federal government, and the state government all do the same thing that he does not understand. With the person growing the marijuana, shouldn’t the threat come to the guy growing it and violating both state and federal laws? For some reason, the people in charge do not care about the guy doing the bad thing but rather go after the homeowner. Bruce said this happens because they can lien something and be paid for it. Bruce has been involved so little in litigation that the few times he has been involved he continues to be naïve thinking it is about right and wrong. However, he is then reminded every time he is involved that this is not the case. It is really about an agenda by the do-gooders. This is their agenda they are going to push, and they are very naïve in terms of how they think society will work.

Bruce asked if somebody starts a business like a daycare business that was not expected. Would the landlord have a right to say he cannot let this happen? Dennis said he just had a client talk to him about this since it was under the health and safety codes. The tenant in fact has an absolute right under California health and safety code to start a daycare center in your single-family residence. All they have to do is get a license, and you can demand that they have insurance. They have the right to set up a daycare center in your house that you lease for residential purposes only. This is not considered a violation of the rental agreement because it would be considered in contrary to the health and codes section dealing with the fact they have a right to have a daycare center in your home.

Bruce asked if they have the right to have a dog care center, which Dennis said they have the right under the do-gooder situation even if it says to have no pets in the property. Now under the “comfort pets,” if anyone has a note from a medical professional saying the person emotionally needs a dog they can have it. It used to be limited to service dogs where it would be a seeing-eye dog or service dog to fetch the paper. They were also allowed to alert the owner if the door bell was ringing should they be hearing impaired. Now, they are a comfort animal so any time anybody wants an animal they just need a note from a medical professional.

He has seen it where they have had crazy things like rats or pot-bellied pigs. One person even had a dog, then suddenly she had three dogs in her apartment. She was told she had the right to have one dog, but could not have the other two. In response, she gets another letter from a medical professional saying those dogs were also necessary. Now she has a letter she can have all three dogs for emotional support. If the landlord sees this is not true and wants to fight it, they will start the case and a discriminatory action will be filed against the landlord. They will defend the action and get their own expert witnesses to prove this is not true, and you will win. Unfortunately, by the time your litigation bills are over you will be spending $50,000. It is insane we have these kinds of laws on the books since it is the property owner getting hurt. This is due to them being the last one on the totem pole.

Bruce complimented Dennis on his website since he learned more there in an hour than he has ever learned prior. It is broken down very well with Q & As and common questions, even new laws. This was a big asset for him, although scary at first since he was selling everything he owned that afternoon. Real estate is a wonderful vehicle and a wealth vehicle, but you have to be savvy when dealing with income property. You do not just jump into it. He has had clients who will come in and tell him they bought a five-unit place in a city where rents are really low. They will go in and ask Dennis to help them raise the rents to market value. Dennis will look at them like they had no clue the property was under rent control. They just spent $3 million on a place with very low rent, and they are basically stuck. When you are buying property in a rent-controlled area, you have to know what the rules are. When dealing with tenants, you also have to know the rules. You can come out to the seminars that he and Bruce do for the AOA, and there are a lot of good things online including on his website. They even have things you can download from the state of California that deal with landlord/tenant relationships. If you play the game well, it is a wealth-builder.

One question that has come up for Bruce personally is if he owns a property and his tenant occasionally disturbs neighbors because of health issues, like mental challenges. Would the landlord have liability for what he does as a tenant? Dennis said he would have an obligation to maintain the quiet enjoyment of the premise, so once you are put on notice you should send a warning letter. However, this would mainly apply to people throwing wild parties for several days. If the person has mental issues and the people feel threatened by him, the first thing you would need to do is ask what he is actually doing to the other tenants. Then it would depend the extent of what he does and how often he does it. If it is bad and he is on a month-to-month tenancy, then you can serve him with a 60-day notice if he has been there long enough. Then it will be a no-problem eviction.

The problem would be in a rent-controlled area. Other family members may have the type of thing where you are dealing with a family member you are trying to help not live in a certain situation that would not be pleasant. You do not want to cross the line and end up with liability yourself. You are not going to have liability if you have a tenant there creating a disturbance. If you are in a non-rent controlled area, you have the easiest situation in the world. You will serve a notice to quit. If the person is on a lease, that is a different story and you will need to have other residents come forward and testify about the improper conduct of the tenant.

Bruce asked about the eviction process, what the easiest process is, and how it could typically become more complicated. The typical process for a non-payment of rent case they will serve a 3-day notice to pay rent or quit. This will give the tenant three days to pay. At the end of the third day, if the tenant has not paid they will file something called an unlawful attainment. This is a lawsuit he will be served and will have a certain amount of time to contest the proceedings. If he does not file paperwork in his behalf, they will file a default or second set of paperwork with the court. They will then review this and grant a judgement. Once they get the judge, they will then have a writ of possession. This is synonymous with the word “order” in that it orders somebody to do something. In this case it orders the sheriff to put the landlord in peaceful possession of the premises. On that basis, they would have to vacate the unit, or they will be ushered off the property by a sheriff.

The other scenario once you serve with the lawsuit they will contest the proceeding. Now you would have to request a trial, and if you request this you would have to go with the landlord and the tenant would show up to have a trial in front of the judge. If Lord willing they win they case they will then receive a judgement and in the same scenario they will have a writ of possession. They will then have the sheriff enforce that writ by escorting the tenant off the property.

This has been Dennis Block with www.evict123.com.

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