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California laws let ‘professional tenants’ avoid rent, punt costs to owners

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(The Center Square) – A “professional tenant” in Los Angeles with four evictions over 12 years who was finally evicted from her apartment after accumulating over $100,000 in unpaid rent and driving the landlord to engage in 9 months of litigation, highlighting the current balance of tenant-owner relations in California.

When one roommate in a three-bedroom apartment in Santa Monica 10 blocks from the beach departed, the remaining tenants took to Craigslist to find a third roommate without having the individual vetted and approved by their landlord. This new tenant paid for the first month’s rent and security deposit, then never paid another penny, driving out the other two tenants with her “very rude” behavior, leaving her as the only occupant as she accumulated over $100,000 in unpaid rent, filling up the entire apartment with her possessions, from high-end groceries to heaps of clothes.

After nine months of litigation initiated after the end of the local COVID-19 era eviction moratorium, the tenant was finally evicted and ordered to pay $25,000 — money that Los Angeles real estate and business lawyer Avi Sinai, who represented the apartment owner in the eviction case, said there will be “zero chance to collect” given she has “no assets, no income, no family, and no career prospects.”

With 4 evictions over 12 years, Sinai said her actions appear to have been “100% premeditated,” and that with current tenant protection laws, “there are zero consequences for not paying rent in LA.” According to Sinai, this case is representative of broader challenges California landlords face, which are driving out mom-and-pop landlords as major financial institutions swoop in to buy properties from owners who simply have had enough.

“There seems to be a pattern of creating a tenancy through the backdoor through a sublease then stopping paying the rent and going into the eviction process in which they’re well versed and doing it over and over again,” Sinai said in an interview with The Center Square.

Sinai says the the biggest hurdle landlords face in California is the right to a jury trial in eviction cases, which adds “two or three months” to the eviction process and tend to result in two week trials that cost small and medium size landlords $20,000 to $35,000, or more than is often awarded. But before a case can even get to trial, if the owner’s attorneys make even one mistake on any of the paperwork, the lawsuit will be dismissed and the lawyers have to start all over again, driving up the costs of eviction even higher. That’s why many owners turn to “cash for keys” agreements where, even in the face of tens of thousands of dollars of accumulated rent, it can still be cheaper and faster to offer a problematic tenant cash to move out immediately.

“In other states you go in front of a commissioner, you get a hearing date in two weeks, and it’s over. The sheriff comes in a couple of days. But here, even with a bench trial, it just takes forever,” Sinai said.

Sinai also noted that the state’s policies of making it more difficult to build new housing while simultaneously weakening property rights for owners are driving consolidation of property ownership under private equity firms and real estate syndicators.

Amid these challenges, Sinai warned a new statewide ballot measure could make matters even worse. If voters decide to pass the “California Prohibit State Limitations on Local Rent Control Initiative” in November 2024, cities will be allowed to significantly expand rent control and prevent units currently under rent control from being able to charge new tenants market rent, as currently allowed. Cities could use the previous tenant’s rent as the baseline for allowable rent for a new tenant, which could cause many properties to become deeply unprofitable to own as rising property taxes, utilities, and maintenance costs outpace rent-control-defined rent increases.

“If Los Angeles wants only ruthless private equity landlords, this is a surefire way to get there,” Sinai said.

In addition to likely reductions in housing supply and consolidation of housing under private equity firms, the California government estimates the measure would reduce state and local revenues through declines in rental property values and landlord income taxes, and increase spending on enforcement and bureaucracies.

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