Q&A Regarding Subtenants

August 1, 2017

 Q:  I had two tenants sign a rental agreement and now one of the two is moving and wants his friend to take his place. What should an owner do when an original occupant who took possession under the rental agreement with the owner moves out, no longer permanently resides in the unit, and a replacement roommate takes the place of the departing original occupant? My property is in Oakland and is subject to the Rent Adjustment Ordinance.

A:  The Costa Hawkins Rental Housing Act permits an owner to raise the rent to market to a subtenant or assignee, when the last original occupant who took possession pursuant to the rental agreement no longer permanently resides in the unit. This law doesn’t apply to partial changes in occupancy. All original occupants must vacate before the owner can raise the rent to market.

Costa Hawkins isn’t clear about what constitutes an original occupant who took possession pursuant to the rental agreement. Some published decisions seem to say that an original occupant is a person who moved in with, and at the same time as, the tenant who signed the original rental agreement. Other decisions seem to say that if the original rental agreement permits subleasing, then a subtenant can be an original occupant who took possession pursuant to the rental agreement.

Some rent boards take the position that if the owner treats the subsequent occupant as a tenant, they become an original occupant under Costa Hawkins. An owner does this by either entering into an agreement with the subtenant, taking rent from the subtenant, or communicating with the subtenant as if they were the original occupant who signed the rental agreement.

Because of the uncertainty in the law, and the position taken by the rent boards, it is recommended that owners:

1.  NEVER TAKE RENT from a subsequent occupant, subtenant, guest or anyone who didn’t sign the rental agreement. Return such rent payments and ask that the tenant on the lease make the payment.

2.  NEVER SIGN AN AGREEMENT with a subsequent occupant, subtenant, guest or anyone who didn’t sign the original rental agreement. If the owner consents to the substitution, allow it to happen, don’t object, but don’t sign anything with the new occupant. If the departing tenant insists on something in writing, write them a note saying “goodbye”. Signing an agreement with the subsequent occupant arguably creates a new tenancy for purposes of Costa Hawkins.

3.  AVOID COMMUNICATING WITH a subsequent occupant, subtenant, guest or anyone who didn’t sign the rental agreement. Don’t exchange emails or letters with these people.

4.  AVOID SERVING NOTICES on a subsequent occupant, subtenant, guest or anyone who didn’t sign the rental agreement. Since they are not your tenants, don’t increase their rent or change the terms of their tenancy. They have no tenancy with you.

One of the difficulties landlords have in not waiving their rights under Costa Hawkins is that most local rent laws define “tenant” to include subtenants. Sometimes, these local laws will require you to provide a benefit to a subtenant which would not be required under State law.

Some attorneys recommend that when a a subsequent occupant, subtenant, guest or anyone who didn’t sign the rental agreement moves in, a notice should be served stating that they are not considered an original occupant pursuant to the rental agreement and that when the last original occupant vacates, the rent will increase under Costa Hawkins. There is no harm to serving such a notice, but it isn’t required by law. But this notice should not be an agreement!

 

​​© 2017 by Fried & Williams LLP.  All Rights Reserved.  The information contained in this article is general in nature.  For advice on any particular matter, please consult with our attorneys because the facts of your situation may be unique and the law changes from time to time.​

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