New Bill Allows Tenants to Withhold Rent

New Bill Allows Tenants to Withhold Rent

Just when you ask yourself how much further Sacramento legislators will go passing anti-landlord laws which make owning residential rental properties in California painful and costly, a bill comes out with, yet again, a new level of attacks on private property ownership. Senator Durazo (who represents the 24th State Senate district encompassing Central Los Angeles and East Los Angeles) recently introduced a bill (SB529) that has the potential to devastate landlords economically while exposing them to frivolous lawsuits for punitive damages from tenants.

Existing law makes it unlawful for a landlord to engage in specified activities for the purpose of influencing a tenant to vacate a dwelling or interfering with the tenant’s quiet enjoyment. It also prohibits landlords from retaliating against tenants because the tenant has exercised a lawful right or participated in a “tenants’ association” or organization advocating tenants’ rights. The word “retaliation” includes, for example, increasing rent, decreasing services, (e.g., taking away their parking or requiring them to pay the utilities) or terminating the tenancy, (except for cause). However, SB529 would require landlords who attempt to terminate a tenancy to provide the tenant a written notice of termination that recites the grounds on which the landlord is proceeding. Additionally, the bill authorizes members of a tenant association, by a majority vote, to withhold rent payments for up to 30 days where they have “grievances or complaints” with or about the landlord.

While the bill requires a tenant who exercises the right to withhold rent to purchase a money order or cashier’s check to pay the withheld rent and to provide the landlord a written notice containing specified information, it does not require the tenant to deposit the amount into a bank or escrow account. Instead, the bill requires a landlord, within a specified time period, to provide the tenant association with a written response to the tenants’ grievances and “meet and confer in good faith” with representatives of the association. Thereafter, it requires a landlord to provide a written statement of what, if any, changes the landlord will make in response to those grievances or complaints. If the landlord fails to strictly comply with the requirements of the bill, the payment of the withheld rent will be waived. In other words, the slightest misstep by a landlord who attempts to comply with the bill’s requirements will allow the tenants to keep the withheld rent and raise the landlord’s noncompliance as an affirmative defense in any action by a landlord to recover possession of a rental unit.

While the bill limits the amount of times a tenant association could initiate proceedings to withhold payment of rent under per calendar year, the loss to the landlord will remain significant. Imagine, for example, an entire building decides to withhold rent and the landlord’s attempts to come to a resolution are deemed to be “not” in good faith, (i.e., the landlord didn’t simply capitulate to the tenants’ demands). Furthermore, how will the process play out where a new tenant enters the building and then joins the association after the association has already exercised its allotted amount of times it may withhold rent for a given year. Would the new tenant, theoretically, be entitled to withhold their rent, notwithstanding the fact that the association already met the limitation on the number of times it can use this remedy?

If the details above seem unbelievable, just wait; they get better. The bill provides that a landlord who retaliates against a tenant for exercising the tenant’s right to join, form, or participate in the activities of a tenant association, or who otherwise violates any of the above-described provisions of the bill, is liable to the tenant in a separate civil action for actual damages, injunctive relief, and, in specified circumstances, even punitive damages. Significantly, the bill requires the court to award reasonable attorney’s fees to the prevailing party if either party requests attorney’s fees upon the initiation of the action. The bill would specify that these remedies are in addition to any other remedies available by law. When you look at the bottom line on this bill, it is inescapable; California does not want you owning residential rental units. They want you out of the picture. Tenant associations already exist; just Goggle or search YouTube for “Tenant Unions” or “Tenant Associations”.

Tenants’ rights advocates have been slowly developing this movement and this bill for quite some time. If this bill passes and becomes law, you can expect tenants to utilize this avenue to withhold rent for even the slightest grievance, including aesthetic issues that otherwise do not rise to the level of a breach of warranty of habitability. And should the landlord stand their ground and move forward with terminating the tenancy, you can bet that landlord will be sued in a separate civil action for damages that will include punitive damages and attorney fees. Notwithstanding any cap on attorneys’ fees which exists in most residential leases these days, this statute specifically provides for attorney fees and, by doing so, the tenants’ rights advocates will easily be able to circumvent the attorney’s fee cap, making you a target for unscrupulous tenants and their attorneys. This bill is not a “tenant protection” as many claim but, rather, an all out “attack” on California landlords.



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