Tenant is Down Because Monthly Payment is Up

Tenant is Down Because Monthly Payment is Up

Robert Griswold | Steven R. Kellman | Ted Smith
14-Feb-1999 Sunday

This column on issues confronting renters and landlords is written by Counselor of Real Estate and Certified Property Manager Robert Griswold, host of Real Estate Today! with Robert Griswold (10 a.m. Saturdays on AM1130 - KSDO radio, or on the Internet at www.retodayradio.com) and by attorneys Steven R. Kellman, director of the Tenants' Legal Center, and Ted Smith, principal in a law firm representing landlords.

Q: In the last 12 months I have seen my rent go from $850 to $1,025 per month. What is the maximum a landlord can raise my rent in San Diego? Is it legal to raise the rent to more than the tenant can afford?

A: Griswold: The unfortunate news for you is that the owner can raise the rent to any level unless you are on a lease with a fixed rent.

Theoretically, the owner cannot raise the rent higher than the market will bear or the property will quickly vacate. Since the rental housing market is a "free market," naturally the concept of charging more than one can afford is unfortunately not relevant.

The rental market in San Diego has been in the favor of the tenants for the majority of the last five to seven years with actual rental rates (including concessions -- free rent, giveaways, etc.) flat to down 5 to 10 percent in many areas.

Obviously, this was great for tenants. However, many owners lost their rental properties as operating costs increased and rent collections dropped (due to lower rents, but also poor economy and more rent collections losses).

I draw this picture after the courts appointed me nearly 150 times during this period as the receiver on properties from four to over 550 units that defaulted on their mortgage payments and the lenders foreclosed, wiping out all of the equity of the owners.

Now the rental housing market has turned and turned quickly. There has been no new construction of affordable rental housing for many years. Also, many owners of rental homes are selling now that they can get what they paid for the home in the late 1980s.

The recent return to a pattern of significant job and population growth is leading to an imbalance in supply and demand -- remember the old Economics 101 class in which the allocation of scarce resources was accomplished by raising the price. Well, that is exactly what is happening with record low apartment vacancies in most areas. The coastal areas were the first to see an elimination of the rent concessions and beginning 12 to 18 months ago came rent increases.

My advice is to lock in a rental rate by signing a fixed-rent, fixed-term lease. The longer, the better! But don't lock in if you think you may need to move for any reason or you may be stuck until the owner can re-rent your unit. Maybe you would be more comfortable moving somewhere else and signing a lease with a different owner -- possibly one that is not aware of how significantly rents have increased at most apartment communities. However, you will need good luck or persistence as my experience tells me that you will not be the only one looking for a bargain.

The other thought (although not that comforting) is that the increase in the last 12 months is highly unlikely to be representative of what will happen to your rent in the next 12 months. The $175 increase really was the result of the five to seven years of virtually flat to slightly declining
rents. Now that the gap between flat rents and significant increases in operating expenses has been addressed, I would anticipate that you may see annual rent increases over the next few years of from 4 to 8 percent, depending upon your location and the features and condition of your
property.

Q: We live in a house that we have been renting for the last four years. Two years ago we approached the owner/landlord to buy it. He asked us to wait one year, which we did. Well, last year after six months of being ignored, we finally got a selling price from him. Since the landlord didn't want to use an agent, and the house is in "as is" condition, the sales price to us was very good. After getting an offer letter together and making sure we could get a loan we were ready to buy.

We sent our offer letter, a copy of all house inspection reports and a copy of our mortgage approval to the owner as he instructed us. The owner does not return our calls. When we do track him down, he says he will approve and immediately return our agreement letter. He also indicates that he will
come down and talk to us, but nothing.

We are very frustrated by his actions and behavior. We asked if he wants more money for the house, but he says that he will honor his original sales price, even in this escalating market. Do we have any recourse to make him sell to us or at the very least go into escrow? All we have ever gotten from him is an oral agreement to sell to us, no written agreement.

A: Kellman: Under California law, agreements for the sale of real property (or of an interest in real property) must be in writing to be valid. Therefore, no matter how you view the situation, the broken promises, the unreturned calls, etc., an oral agreement alone will not sell you the
house.

Your offer-to-buy letter will not help unless the landlord (seller) had accepted the offer with his signature. Being deceived about buying the house and spending time and money preparing for the sale is unfortunate and frustrating. It does not, however, change the law about oral contracts.

Despite this, you may still have rights in the matter. You may be the victim of a fraud. This is basically where someone lies to you about an important fact causing you to rely on that lie and lose money. Sound familiar?

Also, you may have a claim for the breach of a contract to make a contract. Huh? Really, it is possible to have an oral agreement to make a written contract as long as the written one is to be signed within one year. This may cause some problems in this part of such a claim since he asked you to wait a year. Very clever.

While you cannot enforce an oral agreement to sell you the house, you may have a claim for breaking his agreement to make a contract that will sell the house. While the claims for fraud and breach of contract (to make a contract) will not get you the house, they may get you reimbursed for your losses. For your next home purchase attempt, you should enlist the assistance of a real estate professional to properly document your agreements.

Smith: Based on these facts, you are going to have a tough time convincing me that you have a legally binding contract to purchase the house. California law requires real estate sales contracts to be in writing. The telephone calls and other verbal discussions between you and a landlord/owner won't be enough to give the court something it could sink its teeth into to force a sale of the house. Everything is verbal and too vague. Escrow will not recognize the verbal agreement. You may want to sit down with the owner and hash out something in writing that would be legally binding. Until then, you remain a tenant only, and not a buyer.

Q: I am new to San Diego and have been residing in one of those long-term stay establishments. I have been here two months already and plan to stay two to three months more on a month-to-month basis until I decide where I want to live. Are the laws for long-term hotel/motel stays (more than 30 days) the same as apartment rentals? And when does an extended stay become subject to tenant/landlord laws?

A: Kellman: The laws that cover short-term residencies in hotels and motels vary and are different from general landlord-tenant law. In a hotel or motel, you can be locked out of your room if you do not pay the daily rate or if you violate some law or rule of the establishment. The situation changes after a resident in a hotel or motel stays for over 30 days.

After that time, residents become tenants with all the rights of any other tenant. They are then entitled to a habitable dwelling and the lessor can not simply lock them out anymore. Any eviction must then be filed in the court as if it was a normal type of residential rental. Some hotel-motels
try to avoid this tenant's rights transformation by forcing the resident to check out prior to 30 days and then check them back in as a new resident.

Unfortunately for the hotel-motels, there is a law that prohibits this activity. In fact, the hotel-motel operator could be liable to pay a fine of $500 plus the tenant's attorneys' fees for each time the operator is found to have violated this law.

IF YOU'RE A TENANT OR LANDLORD, the authors stand ready to answer your questions in this column, although letters cannot be answered individually. Write them at: Rental Roundtable, Homes Section, San Diego Union-Tribune, P.O. Box 120191, San Diego, CA, 92112-0191. Or you may e-mail them at rgriswold.ret@retodayradio.com.

Back to 1999 Rental Roundtable Index

Robert Griswold and the Real Estate Today! radio show strongly support the intent and the letter of all federal and state fair housing laws. As a reminder to all owners and managers of real estate, note that all real estate advertised is subject to the Federal Fair Housing Act, which makes it illegal to advertise "any preference, limitation, discrimination because of race, color, national origin or ancestry, religion, sex, physical disability, or familial status, or intention to make any such preference, limitation or discrimination." Additional state and/or local fair housing laws may also apply. Be sure to inform all persons that all dwellings offered or advertised are on an equal opportunity basis.

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Revised and Updated - Wednesday, April 26, 2006

Robert S. Griswold, CRE, CPM, CCIM, PCAM, GRI, ARM
Griswold Corporate Center
Griswold Real Estate Management, Inc.
5703 Oberlin Drive, Suite 300
San Diego, CA 92121-1743
Phone: (858) 597-6100
Fax: (858) 597-6161
Email: rgriswold.ret@retodayradio.com