Court Finds that Notices of Rent Increase Are Not Necessary for Resident Property Managers


Law Offices of Peter N. Brewer

by Law Offices of Peter N. Brewer on July 21, 2014

in Landlord/Tenant Disputes, Litigation, Real Estate Law

Ceceilia Drumea (“Drumea”) was the resident property manager at an apartment building in Los Angeles for 18 years.  Prior to serving as the property manager, she was a tenant at the property for one year.  During that time, she was paying $850 per month in rent.  However, as the property manager, she paid no rent as she provided management services.  In 2011, the owners who had employed Drumea sold the unit to 1300 N. Curson Investors, LLC (“Investors”).  The day before the sale was completed, Drumea’s service as the property manager was terminated.  Upon taking possession of the property, the Investors notified that Drumea’s rent was being increased to $1,522.03 which was calculated as a 3% increase per year since Drumea last paid rent.  Drumea refused to pay the increased rent but instead offered to pay $850.  The Investors rejected the payment and moved to evict her.

Before the case was filed, the parties first sought clarification about the permissible rent increases from the Los Angeles Housing Department (“Department”).  There, the Department stated that permissible rent was 3 percent above the $850 level.  At the trial court level, the Investors moved for summary judgment stating that the proper amount of rent was $1,552.03.  The court denied the motion and the parties agreed to enter a judgment in favor of Drumea at the $850 price so that the case could be appealed.

THE DECISION:

The Second Appellate District overturned the trial court’s judgment and held in favor of the Investors.  In 1300 N. Curson Investors, LLC, v. Cecilia Drumea, the appellate court held that because Drumea paid no rent, her landlord was not required to notify her yearly of the rent increases in order to preserve those increases when she eventually started paying rent.  Unlike other property managers who pay some rent and are required to receive yearly notices of rent increases, property managers who pay no rent do not need the notices since there is no actual increase to their yearly payment.  Further, in reading the Los Angeles Rent Control Statutes, other areas specifically note that the increases can only be for the previous year.  The part of the statute relating to resident landlords has no such limitation.

WHY THIS DECISION IS IMPORTANT:

This case is one of the rare cases where there is an appellate decision in favor of the landlord on a rent control ordinance.  Unsurprisingly, given the nature of rent control ordinances, much of the law and the decisions lay in favor of protecting tenants.  Here, the court decided the other way and issued a well reasoned decision that was based on what seemed to be a relatively clear reading of the statute.  However, even given the numerous grounds for the decision stated by the appellate court, both the trial court and the Housing Department reached different conclusions that were both far more favorable to the tenant/property manager.  Given this decision and others like it, it is possible that more landlords will appeal unfavorable trial court decisions of rent control ordinances.

COMMENT:

This case was procedurally interesting because it seemed that the parties worked together to get this matter to the appellate court.  After the original summary judgment motion was denied, the parties reached a stipulation that the rent would be at the $850 amount until the appellate decision became final.  Also, the Investors agreed not to seek any damages if rent was paid on time, even though they could have been entitled to almost twice as much rent per month.  Finally, the parties and the appellate court noted that this decision would not lead to the eviction of Drumea as long as she paid the new rent once this decision was final.  While not necessarily the basis of the decision, it was clear that the Investors were strategic in reducing any equities argument by agreeing to not evict the tenant and agreeing to the lower rent amount pending the appeal.

As always, give us a call at (650) 327-2900 if you think you have a real estate matter and need legal representation or visit us on the web at www.BrewerFirm.com.

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