Q: I have a rent-controlled apartment with two tenants. They recently asked me if they could bring in a third roommate, but I'm wary because my utility bills will likely go up once again, and I can't afford those costs. Can I ask them to void their old lease and sign a new one at market rate? If I can't do that, can I reject their request to bring in a third person?
A: The answer varies depending on the location of the apartment and the terms of the lease. In most rent-controlled cities, such as Oakland and Berkeley, tenants are generally allowed to replace absent roommates with new roommates, and there are few grounds to object (increased utility costs would not be valid.)
On the other hand, if there were originally only two tenants on the lease, then the proposed third roommate should be a subtenant of the other tenants. Again, tenants are permitted to do this, unless the lease prohibits subletting, requires landlord approval, or both. Review your rental agreement to determine what restrictions, if any, it imposes on subletting. Even if the lease absolutely prohibits subleasing, some cities, such as Berkeley, will allow it, so long as the number of occupants does not exceed the city’s regulations for the type and size of unit, and the landlord “has not articulated a well-founded reason in writing for refusing consent.” (Emphasis added.) In this case, unaffordable utility costs may indeed be a well-founded reason for refusing a subtenant.
If the tenants sublease without your permission, or more than what the law permits, it can be grounds to terminate the tenancy. Make sure you refer to any applicable eviction control ordinances in your city and consult with an attorney. If you find an unknown or unapproved person living in the unit, do not accept rent or repair requests from them, and avoid communication with them as much as possible, until you are willing to accept them as a permanent tenant or subtenant. Also, do not hesitate if you intend to remove the unapproved subtenant. The longer they remain in the unit, especially after they are discovered, the more likely it is a court will allow them to stay as tenants indefinitely. If you acquiesce at first, but later change your mind, it may be too late.
Asking for a new lease is possible but is generally not advisable. The lease cannot be voided unilaterally; it would require the tenants to agree and cooperate. In addition, under rent control, creating a new lease for existing tenants just to add a third tenant at market rate would generally be viewed as an improper rent increase if it is later challenged. Furthermore, the new person would be considered an “original occupant” for the purposes of a Costa-Hawkins rent increase, meaning that if the first two tenants eventually vacated, there could be no rent increase to the third tenant, except as allowed under rent control (if applicable.)
In summary, review your rental agreement to determine what authority you have to prohibit subleasing, and consult with an attorney to ensure that you are following all subleasing laws and regulations for your city -- especially if you discover your tenants subleasing without your knowledge or permission.
Copyright © 2018 by Fried & Williams LLP. All Rights Reserved. The information in this article is general in nature and should not be considered legal advice. For any specific matter, please consult with an attorney.