Buying a rent-controlled building?

The tenants come with it.
By: Kevin Postema: latimes.com
Question: I am considering buying a rent-controlled apartment building in L.A. The seller of the property wants to make the sale contingent on keeping the existing tenants in the building, probably to avoid having to pay them any relocation fees.

Does the buyer or seller pay those fees in this kind of a transaction? Also, if I buy the building, can I eventually give the tenants 30-day notices and get new tenants in at market rents?

Answer: As of Jan. 1, the state law is changing to require owners to give renters at least 60 days' notice to move if the tenants have occupied their units for more than one year.

For tenancies of less than one year, 30-day notices will still suffice.

However, neither the seller nor the buyer can give the tenant of a rent-controlled apartment a 60-day notice to move due to a sale.

The only time you can give tenants of rent-controlled apartments such notices to move are in no-fault evictions, where the tenant does nothing wrong. No-fault evictions can be due to an owner or a manager moving in, demolition of the property, if it is being converted into condos, an abandonment of the rental business in the building or an order from a governmental agency condemning the building.

Selling the building is not on the list, thus the seller cannot give any tenants a 60-day notice to move.

As the new owner, you can give a 60-day notice to tenants in one unit to move yourself, your parents or your children into the unit.

You can also move a property manager into the building.

If you choose to move someone in, you must pay the displaced tenants relocation fees, which under the Los Angeles rent-control law are $8,200 for senior citizens, the disabled or renters with children who are under age 18, and $3,300 for others.

Also, you can raise the rents of tenants who follow those you evict for these purposes only by the amount of the annual rent increases since the evictions. You cannot raise them to market value in these situations.

Sue, but it could go in owner's favor

Question: You advised a tenant who did not get his security deposit refunded to sue the owner in Small Claims Court.

Here's what happened when I tried going to Small Claims Court: Despite strong evidence that I was in the right, including a witness who testified about how clean the apartment was, the judge ruled against me and allowed the owner to keep the entire deposit.

Apparently, judges can ignore the law and decide these cases however they want.

Please advise your readers that if they go to Small Claims Court, they may lose and be out not only their security deposits, but also time off from work to attend the hearing.

Answer: Consider them advised. You can lose a case any time you go to court, no matter how much evidence you have or how right you may be.

Small Claims Court judges tend to have a little more sympathy for tenants, but that doesn't mean tenants always win. Also, Small Claims Court judges have far more latitude in interpreting the law than those in other courts.

Interest due on renters' deposits

Question: I read that apartment owners are required to pay interest on security deposits annually to tenants under the Los Angeles rent-control law, and that the rates of interest change every year. How much are those rates for 2006 and 2007?

Answer: The rate for 2006 is 1.74%. For 2007, it rises to 2.39%.

If you don't want to write your tenants checks for the interest payments, you may give them one-time rent decreases as payment.