Mercedes Shaffer l Published in AOA Magazine
It's difficult to keep up with all the changing rent control laws, and politicians have structured many of the laws so that tenants have the advantage, even if they have violated their rental agreement. While there are lots of local rent control laws that vary by city, one law that is consistent across the state of California is that when you purchase a residential income property, you must serve the tenants with the proper change of ownership notice, otherwise, you technically do not have the right to collect rent.
In most instances, if you haven’t served proper notice, it won’t be an issue and the tenants will pay you rent regardless, but should something happen and a tenant does not pay rent and you want to move forward with an eviction case, if you haven’t served the proper change of ownership notice, you will likely lose your case. Tenant attorneys know the laws and are adept at using them to have cases thrown out.
This also applies if you change from individual ownership to an LLC or a corporation. That kind of change requires its own specific notice that needs to be sent to the tenant. If you don’t give the proper notice, again you are likely to lose a case to collect unpaid rent.
Even when tenants violate their rental agreements, the legislative landscape often favors them, which makes it imperative to be well-informed. Ensuring a strong legal position in an eviction case is crucial for property owners and adhering to proper procedural requirements is essential for safeguarding your rights. I find an ounce of prevention is worth a pound of cure, so when I represent a buyer who is purchasing a rental property, I always make sure to include all of this information for the buyer at the close of escrow.
In addition to the notice, and most property owners don’t like this, but under the law you must identify who the owner is, or who is an authorized agent for the property, and you must have a physical address where the tenants can serve you with notices or legal processes. You cannot have a P.O. box. You must have the name of a person, their telephone number, and a specific address.
There have been many instances where the owner has lost the case, even though the tenant had been paying them for years, they know the owner’s name, address and phone number, but this notice wasn’t served. This kind of legal outcome has become so common, and the laws so complicated, and often specific, that I provide annual compliance audits to all of my clients to minimize their risk and ensure a sound legal footing. In some cases this has meant preparing notices and serving them to current tenants as a courtesy notice to update their records. If you would like a brochure with more detailed information regarding specifically what information needs to be included in the notice, and a sample notice, contact me.
If you’re considering buying, selling, doing a 1031 exchange, or cashing-out while prices are high AND deferring taxes, I have partnered with a tax attorney who has done over $100B in closed transaction using a proprietary strategy helping sellers to cash-out and defer taxes. To learn about your options call 714.330.9999 or email InvestingInTheOC@gmail.com. I’m Mercedes Shaffer, a commercial real estate broker with Coldwell Banker, helping you build wealth one door at a time. DRE 02114448 This article is for information purposes only. For legal advice, always consult with an attorney.