It is no secret that the COVID-19 pandemic had a huge impact on the rental market. By far the biggest impact was related to the timely and regular payment of rent for residential units. For most tenants during the pandemic, many local and statewide protections offered relief from the burden of paying rent if they had been affected by COVID-19 financially. Since then, most of those protections have ended, and full rent is owed by tenants in most cities and counties in California. When a residential tenant has not paid rent as agreed per the rental agreement, a landlord is once again permitted to serve a notice to pay or quit. The notice to pay or quit leaves no room for error and is arguably the most important document related to a landlord’s right to evict a tenant for nonpayment. In this article, we will review the most common mistakes we see in these notices, as well as some tips we’ve learned along the way.
In almost every residential lease that we see come through our firm, as well as the most common form leases available to landlords, a late fee is assessed if the tenant(s) fail to pay the rent within five (5) days from when the rent is due. The most common amount charged as a late fee is anywhere from 2%-5% of the monthly rent amount. Unfortunately, in Three-Day Notices to Pay or Quit, late fees are not allowed to be factored into the total amount of rent due in the notice. If anything besides the rent is included, including lates fees, bounced check fees, etc., the notice will be deemed invalid, and the landlord will not prevail in an eviction action based on the notice served.
Additionally, the 2004 California Appellate Case Orozco v. Casimiro discusses the overall illegality of liquidated damages (“late fees”). The Court in Orozco determined that late fees were considered “liquidated damages” within the meaning of Civil Code Section 1671, and declared them to be illegal and void, absent extraordinary circumstances. In any action to recover late fees in an action against the tenant, the landlord will have to prove the late fee clause is valid under the law.
“Person” to Receive Rent
A common mistake we see in notices is that the notice provides for an entity to physically receive the rent without any specific person designated. For example, if rent is to be delivered to “123 Property Management, 123 Main St, San Jose, CA”, technically, that notice to pay could be contested. California Code of Civil Procedure Section 1161(2) states in relevant part: “…stating the amount that is due, the name, telephone number, and address of the person to whom the rent payment shall be made”. CCP 1161(2) requires strict compliance, including providing an actual person to receive the rent. To comply with CCP 1161(2), we would recommend that you have an actual person be listed, receiving the rent “in c/o” the entity and address.
Assembly Bill 2343, which went into effect on September 1, 2019, changed the way days are counted in notices to pay. Per the bill, Saturdays, Sundays and Holidays are excluded from days in which a tenant is permitted to pay the rent to cure the notice. Additionally, the notice must include this information, meaning that it must state clearly that the tenant has 3 days to pay the rent “excluding Saturdays, Sundays, and Holidays”. Without this language, a tenant can contest the validity of the notice by claiming it was unclear just how long the tenant had to pay the amount described in the notice. This is another example of how notices to pay in California require strict compliance with the law to be valid and actionable.
Tips in Drafting/Serving Notices
Personal Delivery Required?
In CCP Section 1161(2), the code makes mention of personal delivery of rent by the tenant. It is important for landlords to know and understand that personal delivery is optional and not required to be permitted in the notice to pay. Mailing of rent is typically the standard, but you can also allow electronic deposit/delivery of rent if that is the normal course of payment between the parties. If you do allow personal delivery, please be sure to provide available days/hours for receipt of rent in person by the landlord and/or their agent.
Risks with Electronic Deposit
There are some risks in permitted electronic payment of rent by a tenant related to a Three-Day Notice to Pay. Should the tenant attempt to pay the rent in the notice after expiration of the three-day period, the landlord has no obligation to accept the rent and can proceed to evict the tenant. However, if electronic payment is allowed, it’s possible the payment can be transferred after the expiration of the three days. In this instance, we would recommend that the landlord return the rent as soon as possible to avoid any argument that the landlord ‘accepted’ the payment and thus the notice was cured by the tenant. Whether or not the landlord returned the rent quickly enough is up for discretion, and we would recommend you do not permit electronic delivery of the past due rent for this reason.
Registered Process Servers
When serving notices to pay, or any notice associated with evictions, our firm uses registered process servers. California Evidence Code Section 647 gives a proof of service signed by a register process server a rebuttable presumption status, shifting the burden of proving evidence of the service away from the landlord, requiring the tenant to show that they were not property served. When a Three-Day Notice to Pay is served by a registered server, service is presumed valid until proven otherwise by the tenant. This can be extremely useful if one of the tenant’s defenses in an eviction action relates to service of the underlying notice to pay, which is commonly presented by tenants. The service of eviction related notices requires very specific actions. Many times, a landlord serves notice themselves, but did not comply with all the requirements to make service valid.
If you have any questions or concerns about notices to pay or evictions in general, we would be happy to assist. We handle these types of cases on a daily basis and are well versed in the laws surrounding these issues.