MacFarlane Real Estate, Inc.

Recently, I had an email exchange where basically, the investor was trying to get around rent control.

Initial Question:
Hi Mark

I found your blog, which is great, while looking for an answer to a LA rent control question. Am hoping you can help me:

My partners and I own a rent controlled apartment building in Silverlake.

We are paying tenants to move out.

One tenant has offered to move out at the end of the month, but wants all of the money ($11,500!) up-front.

My building manager thinks this is ok, so long as the tenant signs a receipt and an “intention to vacate” form.

I am worried the tenant will keep the money and not move, and that I will then have to evict.

If I have to go to court and I can show the payment and the signed intention to vacate form, will a judge evict? In other words, does an intention to vacate form plus proof of payment have any legal standing?

Happy for you to use my question on your blog - but pls don’t use my name!

Separately: Would love to get to know you and your team. We currently own two 16 unit buildings and will probably buy two more in the next six months.

Kind regards,

Annonymous

My Initial Response:

Thanks for emailing. RSO (Rent Control) only allows a landlord to recover possession legally if the landlord seeks in good faith to occupy the unit (Immediate family and Resident Manager qualify) or if the landlord seeks to perform at least $10,000 of work per unit. Even then, there are requirements of returning the unit to market at the same rent controlled rental amount.

If the conditions above are not in “good faith,” LAHD may get involved and force you to allow the tenant to stay.

I need more information about the specific situation. But, from what you told me… No judge would proceed with an eviction as the relocation is in violation of the RSO.

If you want to proceed with a cash for keys type negotiation, you are probably just rolling the dice on whether you will get caught. A qualified tenant (Elderly, Minors or Handicapped) is entitled to $17,000 relocation. LAHD seems to easily find that the grandmother lived with the tenant (or some other person) and thus, the unit is “qualified.” The penalty if caught is 150% of the relocation. It seems as though LAHD always says a landlord has to pay $25,500 per unit if the landlord tried to get around RSO.

I always advise people to catch tenants on 3 days. That is a sure fire way to evict and you don’t pay relocation. However, you have to be prepared. Registered with RSO, etc… Otherwise, you will lose the unlawful detainer case. I have some other approaches.

I won’t use your name but, I will certainly post your question and my response.

As far as purchasing more properties, my suggestion is to look at smaller buildings right now. There are gold mines out there right now at the 4-8 unit size. No resident manager unit. Section 8 is paying great money for these units. Do you work with a broker? Are you a broker?

Let me know how I can help.

Thanks for the email.

Mark E. MacFarlane, Esq.
MacFarlane Real Estate, Inc.
2500 E. Foothill Blvd., Suite 205A
Pasadena, CA 91107
(P) (626) 578-1948
(F) (626)389-0563

Clarification Requested:

Thanks for responding.

I think I wasn’t clear:

The tenants in this unit have agreed in good faith to move out for $11,500 - so I can’t see how RSO is involved.

We’re not forcing them out and we haven’t told them they have to take the deal.

We want to hand them $11,500 in exchange for them signing a contract saying they will leave by a certain date.

I’m trying to figure out if that contract is enforceable or not.

Is that clearer?

Anonymous

My Final Response:

I can’t give legal advice without seeing the full file, having a signed engagement letter, etc…. But, courts will not enforce an illegal contract. From what I have heard… Your contract may violate the RSO and thus, be illegal and unenforceable.

Mark E. MacFarlane, Esq.
MacFarlane Real Estate, Inc.
2500 E. Foothill Blvd., Suite 205A
Pasadena, CA 91107
(P) (626) 578-1948
(F) (626)389-0563