A recent California decision highlighted the issues that emerge when a landlord releases a resident manager from employment but the resident manager continues to the live on the property. In particular, how the Los Angeles Rent Stabilization Ordinance provides guidance on this situation is important for Los Angeles landlords subject to rent control to understand. 1300 N. Curson Investors, LLC v. Drumea provides some guidance on this issue that is relevant to Los Angeles landlords, property managers, and resident managers.
Landlord, 1300 N. Curson Investors, LLC (“Landlord”) sued its former resident manager, Cecilia Drumea (“Resident Manager”), and her mother (collectively “Tenants”) seeking declaratory relief, ejectment, and damages. On July 1, 2011, the Landlord had purchased an apartment building in the City of Los Angeles that was subject to the Los Angeles Rent Stabilization. The day prior to the close of escrow, the former owner removed Resident Manager from her duties as the resident manager. The Resident Manager had moved into the building December 13, 1992. Her written lease agreement dated from 1992 indicated her rent was $850/month. In December 1993, she became the resident manager, and was not required to pay her rent. In compensation for her services, she lived rent free.
Landlord, after purchasing the building, served Tenants with a Notice of Rent Increase, increasing the rent to $1,552.03 commencing March 1, 2012. Landlord claims it is entitled to all the rent increases from 1993 to 2012 allowed under the Los Angeles Rent Stabilization Ordinance. In response, tenants still only paid $850/month, but each payment was rejected by the Landlord. Tenants also filed a complaint with the Los Angeles Housing Department.
Landlord filed a lawsuit seeking adjudication on whether or not it could increase Tenants rent to $1,552.03. The trial court found that it could not, and Landlord appealed.
On appeal, the Court found that the Landlord could increase the rent for all the years a tenant also worked as the resident manager. If a tenant becomes a resident manager and is then relieved of her duties, a landlord has a right to increase the tenant’s rent by each annual adjustment while the tenant was acting as resident manager. However, a landlord cannot simply charge market rent, so in the Court’s eyes, the tenant is still protected. The Resident Manager argued that she was never served with the annual registration statement and notices of rent increases during the time she also worked as the resident manager. The Court did not agree that this was required, and found it would be impractical for a landlord to do so.
It is important to note that there is a major difference if a resident manager pays a partial rent payment. An annual rent increase notice and the rental registration certificate must be served, and the rent can only be raised on the partial amount actually paid. The situation would also have been different if the tenant had moved in as the resident manager, and not originally as a tenant who was hired as the resident manager.
A tenant who is also a resident manager has many of the same rights under the Los Angeles Stabilization Ordinance that all tenants have; however, this is a major difference. Generally, landlords cannot “bank” annual increases, so it is a “use it or lose it” policy. If a landlord does not increase the rent during the year, he loses the annual adjustment allowed under the Los Angeles Rent Stabilization Ordinance.
The legal issues between landlords, property managers, and resident managers can be tricky because they involve both landlord-tenant and employment law. It is important to the note the differences how the Los Angeles Rent Stabilization Ordinance treats resident managers. The Los Angeles Housing Department provides a handout highlighting some the information landlords should know.
